Industry Updates

ETF Wrap: Musk says ‘ESG is the devil’

ESG backlash, BlackRock bitcoin and Goldman’s ETF Accelerator made headlines this week

Jamie Gordon

ETF Wrap

Zany billionaire Elon Musk reiterated his stance on the once dominant conversation in modern investing, telling users of the social media platform he owns that ESG is “the devil”. 

Musk’s comments came in response to a tweet by a reporter at the conservative political outlet The Washington Free Beacon.  

The caption on the article read: “From S&P Global to the London Stock Exchange, tobacco companies are crushing Tesla in the ESG ratings. 

“How could cigarettes, which kill over eight million a year, be deemed a more ethical investment than electric cars?” 

To this, Musk responded: “Why ESG is the devil…” 

Last year, the Tesla, SpaceX and Boring Company founder said ESG was a “scam” after his electric car company was ejected from the S&P 500 ESG index after only a year. 

While Tesla is widely regarded as the figurehead of the shift to more efficient and capable electric vehicles – with transport being the largest contributor to US greenhouse gas emissions – the company’s internal processes and management have raised red flags with ESG ratings providers. 

Tesla previously made headlines for sourcing lithium from mines whose ecological impact management was deemed subpar, while also allegedly relying on child labour. 

However, what caught the attention of index providers such as S&P Dow Jones Indices was Tesla’s lack of explicit low carbon business strategy or codes of conduct, claims of “racial discrimination and poor working conditions” and its handling of an NHTSA investigation after “multiple deaths and injuries” linked to autopilot vehicles.  

This saw the company fall into the bottom quartile of companies from the automobiles and components sector according to a combination of the S&P Global ESG Research scoring and Arabesque UN Global Compact scoring. 

Musk responded by taking to Twitter and saying SPDJI “lost their integrity” after its decision to eject Tesla while awarding a top ten weighting to Exxon Mobil and adding oil refiner Philips 66 to the index.  

While a Tesla statement highlighted the fact ESG funds potentially invest in companies whose activities potentially exacerbate climate change, it is worth noting the environmental element is just one of three aspects of the metric framework. 

However, it remains a work in progress in its other segments, too. For instance in 2020, a number of ratings and index providers looked upon German payments company Wirecard favourably, even as the company’s €1.9bn of fraud was about to be uncovered – a clear abandonment of good corporate governance. 

ESG is an aircraft in flight while the engineers are still tweaking the engines. After back-and-forth over how ESG funds should be categorised in the EU’s regulatory framework, the European Commission this week proposed new rules preventing ESG rating providers from providing consulting services, credit ratings or benchmarks to avoid conflicts of interest. 

Investors are also seeking out more targeted approaches for their sustainable allocations. This week, Ilmarinen continued its run of rotating money out of ESG ETFs and into climate-specific strategies. It is now seeded three climate ETFs to the tune of €4.9bn since April. 

BlackRock files for bitcoin ETF 

The world’s largest asset manager surprised the market by filing for a bitcoin ETF with the Securities and Exchange Commission (SEC) on Thursday.  

The iShares Bitcoin Trust will store its bitcoin with the Coinbase Custody Trust, extending the two firms’ collaboration after BlackRock worked with Coinbase to offer its institutional access to bitcoin through its Aladdin platform last year. 

If approved, BlackRock’s product will be the first spot bitcoin ETF in the US, following ten years of rebutted launch filings from several other issuers. 

Goldman ETF Accelerator takes off 

Goldman Sachs ETF Accelerator launched its first four active ETF partnerships in the US while ETF Stream revealed it had hired Jürgen Blumberg as COO EMEA. 

Blumberg will lead on building the firm’s European business, communicating the ETF Accelerator offering and assisting in executing launches. He has been in the ETF industry for 13 years at firms including BlackRock and Invesco. 

Goldman’s ETF Accelerator now has around 75 staff, with seven job adverts for additional roles in Paris, New York, London and Bangalore. 

 ETF Wrap is a weekly digest of the top stories on ETF Stream

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