The ESG Ratings Paradox: Why Tobacco Stocks Outrank Tesla

The electric vehicle industry faces an unexpected challenge in the world of sustainable investing. Recent ESG score comparisons have sparked significant debate after it was revealed that major tobacco manufacturers and fossil fuel producers are receiving higher environmental, social, and governance ratings than Tesla—the company leading the EV revolution.

The Numbers Behind the Controversy

Tesla’s ESG score stands at 37 out of 100, placing it well below competitors in the ESG rankings. Meanwhile, Philip Morris, a tobacco giant responsible for products linked to millions of global deaths annually, received an 84. The disparity doesn’t end there: major oil companies Shell and Exxon also achieved higher ESG scores than the automaker known for accelerating the transition to clean energy vehicles.

This contradiction has drawn criticism from industry figures like Elon Musk, who has repeatedly questioned the validity of the ESG rating system. The inconsistency highlights a fundamental problem in how these scores are calculated and applied across industries.

Why ESG Investing Influence Matters

The implications of these ratings extend far beyond individual companies. With massive inflows of capital directed toward high-ESG-scoring stocks by major asset managers like BlackRock, the system’s influence on market dynamics has become impossible to ignore. Higher ESG scores increasingly correlate with investor preference, creating incentives for corporations to optimize their ratings—regardless of their actual environmental or social impact.

Gaming the System: Greenwashing and Manipulation

Critics argue that companies have learned to “greenwash” their operations, adopting superficial practices designed specifically to improve their ESG score rather than implement genuine change. This behavior has given rise to accusations that corporations are strategically manipulating the rating system to artificially inflate their scores.

The skepticism toward ESG investing grows as observers point out that a tobacco producer—an industry with one of the highest human costs globally—receives better marks than a company actively transforming transportation toward sustainability.

The Defense: ESG Proponents Explain the Gap

Supporters of ESG ratings maintain that the system is more nuanced than surface-level comparisons suggest. They argue that while Tesla performs strongly on environmental metrics, the company falls short in social and governance categories, which explains its lower composite score. This multidimensional approach, they contend, provides a more complete picture of corporate responsibility than focusing on environmental factors alone.

The Broader Question

As debates over ESG scoring methodology intensify, the fundamental question remains: Is the current system truly measuring what matters for long-term value creation and societal benefit? Or has it become another tool for corporations to navigate investor expectations without delivering meaningful change? The answer may determine the future trajectory of sustainable investing.