Morgan Stanley index gave SpaceX 'CCC' rating day before IPO

Firm cited risk management failures, bottom-of-industry standing

Elon Musk, CEO of SpaceX. [AP]
Elon Musk, CEO of SpaceX. [AP]

SpaceX, the aerospace company led by Elon Musk, received the lowest possible ESG rating from MSCI — one of the world's largest index providers — just before its initial public offering, it has emerged.

According to the Financial Times, MSCI assigned SpaceX a CCC rating — its lowest ESG grade — on June 11, one day before the company's $75 billion IPO. The FT noted that the rating matches the score MSCI gave Russia after its invasion of Ukraine in 2022 under the firm's country-level ESG assessment framework.

MSCI's ESG ratings break down environmental, social and governance performance across 10 themes and assign companies one of seven grades ranging from AAA to CCC, based on their industry-specific risk exposure and management quality. The stakes are considerable: assets tracking MSCI's ESG-focused indexes total around $1.27 trillion (about 1,947 trillion won). MSCI said SpaceX "lags" its industry peers "due to high risk exposure and significant failures in managing ESG risks."

The assessment comes amid growing concern among investors and market analysts over SpaceX's governance structure. Key issues cited in the market include a dual-class share structure that concentrates 85.1 percent of voting rights with Musk, provisions limiting shareholder litigation, and a lack of board independence. A representative from the Edhec Climate and Finance Institute said any serious ESG rating agency — or investment fund applying its own ESG screening criteria — would find it hard to miss SpaceX's significant governance problems.

SpaceX also scored just 1 out of 10 on MSCI's controversies assessment, earning an "orange flag" designation. The orange flag is a caution-level rating assigned when a company is indirectly linked to a very serious ongoing controversy or directly involved in a serious ongoing one.

Companies led by Musk have clashed with major index providers before. Tesla was dropped from the S&P 500 ESG index in 2022 over racial discrimination allegations and insufficient disclosure of its low-carbon strategy. At the time, Musk lashed out at ESG rating systems, calling them "a scam" weaponized by "fake social justice warriors."


hwshin@heraldcorp.com