Elon Musk’s SpaceX has reportedly received the lowest ESG rating from Morgan Stanley Capital International (MSCI) ahead of its initial public offering (IPO).
ESG, standing for Environmental, Social, and Governance, is a holistic, non-financial framework used by businesses and investors to measure an organisation’s ethical impact, sustainability, and risk-management practices.
According to the Financial Times, on 21st, SpaceX received the lowest ‘CCC’ rating from MSCI’s ESG assessment on the 11th, a day before its $75 billion (about 115 trillion won) IPO.
The medium reported that this rating is at the same level as the rating assigned to Russia after the 2022 invasion of Ukraine under MSCI’s country ESG rating framework.
MSCI’s ESG assessment divides the three institutional sectors — environment, society, and governance — into 10 detailed topics, evaluates corporations’ industry-specific risk exposure and management level, and assigns ratings across seven tiers from AAA to CCC.
MSCI said SpaceX is “lagging the industry due to high risk exposure and significant failures in Elon Musk managing ESG risks.” The aerospace corporation also scored 1 out of 10 in MSCI’s “controversies” assessment and received an “orange flag” designation.
MSCI assigns an orange flag when a corporations is indirectly involved in very severe ongoing controversies or directly involved in severe controversies.
Programme director at the EDHEC-Risk Climate Impact Institute, Frederic Ducoulombier told Financial Times that “any serious ESG data provider or a fund applying its own ESG screening standards would be hard-pressed to miss SpaceX’s major governance issues.”
Meanwhile, this is not the first time corporations led by Musk have clashed with ESG ratings. Tesla was removed from the S&P 500 ESG Index in 2022 over alleged racial discrimination and a lack of information on low-carbon strategy. At the time, Musk criticised ESG ratings as “a scam weaponised by fake social justice warriors.”
