By Simon Jessop

LONDON (Reuters) – Elon Musk may not like it, but environmental credentials still come second to profit and loss for the world’s sustainability-minded investors – even if that means “short-selling” shares to bet on a price drop.

Over the weekend, the chief executive at Tesla Inc (NASDAQ:) Inc posted in support of Twitter users that a bet by Bill Gates against Tesla’s shares was not compatible with saving the environment. Argument is Tesla’s electric cars are helping the planet to get rid of fossil fuels that contribute to climate change.

Musk, Tesla and Gates did not immediately respond to a request for comment. Musk signed a contract to buy Tesla on Monday. Twitter Inc (NYSE) for $44 Billon

Short sellers placed large bets on Musk’s capacity to increase electric car production. Tesla had been a target of short sellers for many years. These bets proved to be a failure as Tesla’s stock soared over 1,200% in the past three years. The stock’s market capitalization now surpasses $900billion and there is very little demand for shorting it, as only 1.1% of its shares are available on loan. Data from FIS Analytics shows.

Musk is well-known for his antipathy toward short-sellers. But, Musk’s claim that only investors who care about the environment, social, and corporate governance of Tesla should short it is a novel argument and is out of step with other short-selling strategies.

Data from the Global Sustainable Investment Alliance http://www.gsi-alliance.org/wp-content/uploads/2021/08/GSIR-20201.pdf shows most ESG-minded asset managers invest based on return and risk calculations, and are not necessarily worried about bets against a company viewed as helping tackle climate change if they deem its valuation to be unjustifiably high.

ESG may be a part of many of our strategies, but that is not all they are looking at as they assess a company. They may also be looking at the company’s valuation, quality, momentum or growth characteristics,” Rob Furdak (chief investment officer for ESG asset manager Man Group) said.

Furdak stated that even though a product might have certain benefits, this does not necessarily make it a worthwhile investment.

Companies with low ESG ratings are not targeted more by short-sellers. Reuters analyzed 228 short positions within British companies. 113 were against companies with a Refinitiv rating “B” or higher, while 105 positions were against companies with a “C” or lower. “A+” stands for the highest and “D” the lowest.

Given the fact that ESG funds flows have increased dramatically in recent years, it is clear that short sellers can be helpful in reining market exuberance. Louise Dudley is a Federated Hermes portfolio manager, who oversees global equity markets.

Dudley said that short positions may lead to buying opportunities.