A titan of global investing just booted Facebook from its do-good index as a direct result of privacy concerns

Associated Press

S&P Dow Jones Indices is removing Facebook from its S&P 500 ESG Index, which tracks companies that score well in its environmental, social, and corporate governance rankings.
The index provider said it came to that decision after privacy concerns surrounding the company, "including a lack of transparency," led Facebook to fall short of its ESG standards.
The move underscores not only the pressure on Facebook amid a string of privacy scandals, but the rise of firms incorporating ESG metrics into their investment decisions.
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S&P Dow Jones Indices is removing Facebook‘s stock from its S&P 500 ESG Index, which tracks companies that score well in its environmental, social, and corporate governance rankings, the global index provider said this week.

The company said it dropped Facebook from the index amid a regular rebalancing on April 30, as privacy concerns had depressed its ESG score according to S&P DJI’s standards. Other components including Wells Fargo, Oracle, and IBM were dropped, but Facebook was the largest name removed.

"The specific issues resulting in these scores had to do with various privacy concerns, including a lack of transparency as to why Facebook collects and shares certain user information," Reid Steadman, S&P’s global head of ESG, wrote in a release.

The social network has come under immense pressure for more than a year as various privacy issues have included access to more of users’ personal data than it had disclosed, the misuse of personal information, and the hacking into millions of users’ accounts.

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All of those issues created "uncertainty about Facebook’s diligence regarding privacy protection, and the effectiveness of the company risk management processes and how the company enforces them," Steadman said, which led to the company’s ESG performance lagging behind its peers. Facebook did not immediately respond to Markets Insider’s request for comment.

S&P DJI’s decision is symbolic of trends on Wall Street that extend beyond Facebook’s idiosyncratic issues.

The move highlights not only the mounting pressure on Facebook and CEO Mark Zuckerberg, particularly as regulatory scrutiny builds, but the rise of firms incorporating ESG metrics into their investment decisions.

At the time of Facebook’s removal, it scored a weak 21 out of 100 according to S&P DJI’s ESG rating. Specifically, while its environmental score came in at a strong 82, its social and governance scores had fallen to 22 and 6, respectively.

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For all of Facebook’s scandals and the stock’s volatility, Wall Street analysts are sanguine on the social network’s future. Among those polled by Bloomberg, 45 carry "buy" ratings, six carry "hold" ratings, and two carry "sell" ratings. The average price target of $219.64 implies a rally of 24% from current levels.

S&P DJI said that while the index’s composition is rebalanced annually, so there is a chance the component could once again join, the company would have to push to fix various issues.

"As Facebook’s peers raise the bar in their ESG performance," Steadman wrote, "Facebook will need to do even more to rejoin the ranks of the S&P 500 ESG Index."

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