ESG Rating System: A Case Study in How Numbers Lie

Elon Musk just called out one of the most absurd metrics in investing today—ESG scores. His evidence? Tobacco giant Philip Morris scored 84/100 while Tesla only got 37/100. Yeah, you read that right.

Let’s break down the ridiculousness:

The scorecard nobody asked for:

• Tesla (pushing EV revolution): 37/100
• Shell (fossil fuel company): Higher than Tesla
• Exxon (oil giant): Higher than Tesla
• Philip Morris (kills millions annually): 84/100

Why this matters for investors: Billions of dollars flow into high-ESG stocks thanks to asset managers like BlackRock treating these scores like gospel. Higher ESG = more inflows = artificially inflated valuations. But here’s the catch: the rating system is fundamentally broken.

The defense (and why it’s weak): ESG advocates claim Tesla scores well on environmental but tanks on social/governance metrics. Fine. But that weighted system still makes tobacco companies look better than the company literally accelerating the world’s transition to clean energy. That’s not analysis—that’s theater.

What’s really happening: Companies are gaming the system through greenwashing and corporate theater. Meanwhile, ESG funds keep flowing while the fundamental premise—that higher ESG = better returns AND better world—remains unproven and increasingly questionable.

This isn’t Musk being contrarian for clicks. This is pointing out that one of Wall Street’s biggest trending metrics might be solving for the wrong problem entirely.