What is the S&P 500 meant for then? It was created in 1957 as a benchmark of US equity performance. That's S&P Global's own stated purpose. If it's systematically excluding companies that represent significant chunks of total US market cap, the index isn't doing its job.
Investment funds are for making money. Nobody cares about 'accurately reflecting the state of the market' if that's objectionably high-risk. You invest in an investment fund to make money.
There is no way you can commit to holding big quantities of these methane bubble swamp gas companies and claim it isn't high risk. You'd have to be certain you could bail at the right moment, and that doing so would not obliterate the market through your giant market move… or commit to being a giant bubble of fraud that can never possibly blow up, forever.
These are not responsible ways to make vast sums of money, not because they're unethical but because they're gambles at very high stakes.
You are confused what the S&P 500 actually is. It is a benchmark, not a managed fund. Investment funds that track the S&P 500 do not have a say on which stocks to buy. They copy what the index allocates. Whether these companies allocated are risky or not, has no relevance to if the benchmark accurately represents the US equity market. If three of the top 10 largest companies in the U.S. are excluded from the index, which may be the situation this year, then the benchmark is wrong. The benchmark is failing to achieve its stated function.
Your risk argument applies to actively managed funds, not to an index whose entire purpose is to represent the U.S. large-cap market.
Nobody cares whether the benchmark is no longer accurate (or whether it was accurate in the first place). People are furious because their investment allocation is tied to this rule change. If you or anyone wants an orignalist SnP number that accurately (by whatever standard you want it to be) benchmarks the market, you are free to do so very easily.
If they are methane swamp bubble giant frauds (there can be others: for instance, Enron, historically) then they don't count as companies for the purposes of the S&P 500. Methods for determining this might include the metrics the S&P 500 elected not to waive…