Text size

Facebook (ticker: FB) was removed from the S&P Index ESG Index, as the index providers deemed it had fallen short of meeting their criteria.

The index, launched earlier this year, introduces ESG—short for environmental, social and governance—criteria to the S&P 500 by periodically ranking companies within industries, and excluding those that have been underperforming. Facebook is now among the excluded.

Join Barron’s Live for ‘ETFs in Focus’—Part 3 How are advisors using ETFs to reach their clients’ investment goals? Join us and J.P. Morgan’s Byron Lake for a live call on Monday June 17. Register here.

It wasn’t always that way. Facebook had held a weight of 2.5% in the S&P 500 ESG Index, according to S&P Dow Jones Indices, even larger than its 1.9% weight in the S&P 500 at the time.

No longer. While Facebook had the first part of ESG down, earning an environmental sub score of 82, privacy concerns, including a lack of transparency as to why Facebook collects and shares certain user information, resulted in social and governance sub scores of 22 and 6, respectively.

In a blog post, S&P Dow Jones Indices cited the misuse of customer data by Cambridge Analytica and others, and the hacking of 50 million user accounts as among the reasons Facebook was found wanting in social and governance by its collaborator, RobecoSAM.

None of this is terribly surprising. Last year, the Federal Trade Commission began investigating Facebook on allegations that it inappropriately shared 87 million users’ information with Cambridge Analytica. And yesterday, Facebook stock dropped 2% on reports that Chief Executive Officer Mark Zuckerberg may have known about his company’s questionable privacy practices, potentially casting doubt on the founder’s commitment to user privacy.

Newsletter Sign-up Review & Preview Every weekday evening we highlight the consequential market news of the day and explain what's likely to matter tomorrow. PREVIEW

Facebook didn’t immediately respond to a request for comment.

Facebook will still have another shot at the S&P 500 ESG Index when the index rebalances next year, but if Facebook is serious about getting back on, it will need to step up its game.

“As Facebook’s peers raise the bar in their ESG performance, Facebook will need to do even more to rejoin the ranks of the S&P 500 ESG Index,” Reid Steadman, global head of ESG at S&P Dow Jones Indices, wrote in the blog post.

Wells Fargo (WFC), Oracle (ORCL), and International Business Machines (IBM) were also among the companies dropped from the ESG index, S&P Dow Jones Indices said.

Comments? E-mail us at editors@barrons.com