The ESG Review: Elon Musk: entrepreneur, media baron, activist and ESG posterchild?

Business news headlines have leaned heavily towards Elon Musk’s $44 billion Twitter takeover this week.

That’s hardly surprising, given the size and nature of the deal, and the consequent debate about freedom of speech and media regulation.

But it’s a move that has drawn further scrutiny of Musk’s role as a figurehead of a clean automotive transition, of a self-styled activist CEO ready to test the boundaries of conventional leadership, and of what his disruptive approach to business means for ESG investing.

Framing him as a “loudmouth proponent”, the Financial Times outlined why more companies that underperform or struggle to demonstrate ESG-led change in key criteria are subject to bold activist moves.

Yet Musk’s assertion post-deal, with all eyes on his other business interests, that short-selling of Tesla stock was in direct opposition to environmental goals has been roundly criticised by ESG investors as missing the point about market forces.

As EuroNews put it: “While Musk’s antipathy towards short-sellers is long-standing, his argument that investors who care about ESG should not short a company like Tesla is novel and out of kilter with how many investors approach short-selling.” That’s because asset managers who track and act on ESG performance are not necessarily worried about bets against a company viewed as helping to tackle climate change if they deem its valuation to be unjustifiably high. And short-selling can sometimes help to rein in market “exuberance”.

Meanwhile, Twitter’s new owner has been on the offensive against ESG ratings methods this week too, saying it “makes no sense that Shell has a higher rating than Tesla”.

What does this all mean for how ESG performance is applied to corporate (stakeholder) valuation and the surrounding market mechanics? Not a lot, you might argue. He’s just one CEO, though now of course with the added twist of being a media baron.

But the outspoken and activist CEO of one of the world’s highest-profile companies is now at the helm of two of its highest-profile companies. And given the Twitter takeover and his past behaviour on the platform, transparency is a topic that is likely to be in the limelight frequently.

Expect what Musk says and does to be held up as context in analysis of ESG performance, the road to better reporting standards, and debates about the virtues and vices of transformation. And if nothing else, for him to be the prime example of how the reputation of the CEO shapes the reputation, the ESG-driven materiality and the stakeholder value of the business.

The ESG News Review is written by Steve Earl, a Partner at BOLDT

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