Tesla has been kicked out of the S&P 500's ESG index even though it makes zero-emission products. Here's why.

Despite its focus on making electric vehicles, solar panels, and batter packs, the stock was kicked out of the S&P 500 ESG Index on Wednesday.

The portfolio looks similar to the plain-vanilla S&P 500 index, as S&P Global executed its fourth annual rebalance of the large-cap index this week. Apple, Microsoft, Amazon, and Alphabet are the top four holdings in the S&P 500 ESG Index.

According to S&P Global, the fifth largest holding in the S&P 500 was ineligible to be included in the ESG index due to its low S&P DJI ESG score. The score was in the bottom 25% of peers. The top mega-cap companies that have not been included in the index areTesla, Johnson & Johnson, and Meta Platforms.

ESDG is an outrageous scam. S&P Global is a shame, as Exxon is rated top ten best in the world for environment, social and governance. It is a scam. Musk said that it has been weaponised by social justice warriors.

According to S&P Global, there were multiple reasons why the stock was excluded from the index.

First and foremost, the GICS industry group in whichTesla is assessed experienced an increase in its average S&P DJI ESG score. S&P Global explained in a post that while the ESG score has remained fairly stable, it was pushed further down the ranks relative to its global industry group peers.

It makes sense since legacy automakers have been trying to jump into the electric vehicle space over the past year.

The company's exposure to risks stemming from its involvement in controversial incidents contributed to its downfall from the index.

A media and stakeholder analysis identified two separate events centered around claims of racial discrimination and poor working conditions at the factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles.

The events resulted in a lower ESG score forTesla, which resulted in it being removed from the index.

WhileTesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens.

In Wednesday trades, the stock fell about 5%.