If there’s any company that socially responsible investors should love, it would probably be Elon Musk’s Tesla, the clean-energy electric-car maker.
But turns out green credentials go only so far. Just 86 of about 1,200 do-gooder investment funds tracked by Bloomberg own Tesla shares. And of those, only seven count Musk’s company as a top-10 holding.
That’s much less of a warm reception than these investors have given even to Facebook Inc., which, despite a data-privacy scandal and the founder’s super-voting power, is held by 126 of those funds.
Tesla represents a quandary for the responsible investing set, which looks for companies that they deem supportive of environmental, social and governance issues, or ESG. Musk’s vision for Tesla, laid out a decade ago, was impeccable on at least one score: “to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.”
But ESG investors now worry the company’s performance on social and governance issues doesn’t justify its lofty valuation.
Investors say the board is missing expertise on manufacturing -- evident in recent production delays -- and has too many Musk cronies on the board. The company doesn’t publish a sustainability report, which investors say makes it hard to keep tabs on workforce issues such as safety. And they are concerned that Tesla can’t manage infrastructure changes ahead involving electric-vehicles and autonomous-driving cars.
The issues will move to the fore at Tesla’s annual meeting on Tuesday. State pension funds with strong socially responsible mandates, including those in Oregon and New York City, will be pushing for a governance overhaul, including opposing the reappointments of three directors.
The vote will be largely symbolic. Musk owns more than 20 per cent of the shares. That means just a handful of investors including T. Rowe Price, Fidelity and technology investor Baillie Gifford & Co. control about 50 per cent of the stock.
Tesla “is appealing to many investors because of its role in the transition toward a low-carbon economy,” said Dieter Waizenegger, executive director at CtW Investment Group, an activist group that has led a campaign against the directors. “You also need to have really good governance to fulfill your promise in the long term, and this company has massive problems living up to its promises.”