The Financial Times reported that MSCI (Morgan Stanley Capital International) rated SpaceX’s ESG as the lowest “CCC” on June 11—one day before SpaceX’s $7.5 billion IPO. MSCI said SpaceX is lagging behind the industry due to high-risk exposures and major failings in ESG risk management. SpaceX scored only 1 point in the “controversies” assessment.
MSCI’s explanation of SpaceX’s CCC rating: 1 point in controversies and an orange warning
Under MSCI’s ESG assessment framework, ratings break down environmental, social, and governance into 10 detailed themes. They evaluate a company’s risk exposure and management level for its specific industry, and score on a scale from AAA to CCC. The scores recorded for SpaceX include: controversies assessment: 1 point (out of 10); overall ESG rating: CCC (the lowest level); flag: orange warning.
MSCI’s orange warning label applies to companies that are indirectly involved in extremely severe ongoing sustainability controversies, or directly involved in severe controversies.
Ducoulombier and MSCI’s published remarks
Frédéric Ducoulombier told the Financial Times: “Any serious ESG data provider, or funds that apply their own ESG screening criteria, will find it difficult to ignore SpaceX’s major governance issues.”
He added: “The company’s poor controversies assessment, its extremely weak governance assessment, and its lower overall ESG rating are hardly surprising to anyone. For public-market investors, this is almost a governance-layer nightmare.”
Musk and historical friction with ESG rating agencies
This is not the first time a company owned by Musk has clashed with an ESG rating agency. In 2022, Tesla was removed from the S&P 500 ESG Index over alleged racial discrimination and a lack of information on a low-carbon strategy; Musk at the time criticized ESG ratings as a “con” used by “phony social justice warriors.”
FAQ
Does SpaceX’s CCC rating affect the pricing of its IPO or investor demand?
According to the report, the rating was granted only the day before the IPO. SpaceX’s IPO was still priced at $135 per share, completing the offering at $7.5 billion, and trading was active on day one. The report did not explain the specific mechanism by which the ESG rating directly affects IPO pricing, but Ducoulombier said that any fund using ESG screening criteria would find it hard to ignore this rating.
How does MSCI define “lowest” for a CCC rating?
Under MSCI’s rating framework, rating levels are ordered from high to low as AAA, AA, A, BBB, BB, B, and CCC, with CCC being the lowest. The Financial Times noted that CCC received the same rating as Russia after its 2022 invasion of Ukraine within MSCI’s country ESG rating framework, used to illustrate the severity of the rating.
What are the practical impacts of an ESG rating of CCC for institutional investors in SpaceX?
According to Ducoulombier’s remarks, any fund using ESG screening criteria would “find it difficult to ignore” this rating; however, the report did not explain that any specific institutions therefore refused to invest in SpaceX’s IPO. The practical impact depends on each institution’s ESG policy rules.
