Chart of the Week: June 29, 2026: SpaceX assigned ESG rating of CCC by MSCI

Observations:  

• On June 11, one day prior to SpaceX’s IPO, MSCI assigned an ESG Rating of CCC to SpaceX, placing the company in the lowest category of the index provider’s ESG scale. MSCI said the rating reflected high exposure to ESG risks and weak management of those risks. The company also received a score of one out of 10 in MSCI’s controversies assessment and an “orange flag”, indicating involvement in one or more severe ongoing controversies. Its governance score was 3.2 out of 10. As a result, there will be limited exposure, if any, to SpaceX in the 42 labeled sustainable index funds (44 share classes) that seek to replicate the performance of various MSCI indices. Unrelated to MSCI’s SpaceX ESG rating, SpaceX will also not join any S&P Dow Jones indices at this time because of its index inclusion rule that remains unchanged.

• The 42 labeled sustainable index funds are dominated by 19 iShares ETFs advised by BlackRock Fund Advisors, or 43%, along with seven other firms, including Nuveen, DWS Group (Xtrackers), Invesco, State Street, Green Century, Fidelity and Krane Fund Advisors.

• MSCI’s ESG Ratings are designed to measure companies’ resilience to financially relevant, industry-specific sustainability risks and opportunities. The firm uses a rules-based methodology to identify industry leaders and laggards, assigning each company an industry-relative letter rating along a seven-point scale that runs from AAA to CCC based on how well they manage these risks and opportunities relative to peers. Firms rated AA and AAA are considered leaders in their industry in managing the most significant sustainability risks and opportunities. Firms rated BB, BBB and A possess a mixed or unexceptional record of managing the most significant sustainability risks and opportunities. Firms rated CCC and B are considered laggards in their industries based on their high exposure and failure to manage significant sustainable risks.

• A review of the 42 MSCI’s indices tracked by an equivalent number of labeled sustainable mutual funds and ETFs that track sustainable MSCI indices reveals that at least 23 funds will not be admitting SpaceX into their indices any time soon. The table below lists the 42 funds (44 share classes) tracking MSCI indices.  

• These 23 funds have confirmed ESG rating minimum requirements (precluding a CCC-rated company like SpaceX), representing some $27.5 billion in assets under management across five index families. These include MSCI SRI — most stringent: A or above required (2 funds), Choice ESG Screened — BBB or above (3 funds), ESG Leaders / Selection — BB or above (6 funds, includes the renamed Selection Indexes), KLD 400 Social — above BB for additions, above B for existing (3 funds), and TIAA ESG — explicitly excludes CCC-rated companies (9 Nuveen funds).

• The remaining funds, 21 in total, have no ESG rating minimum requirement, or reliance on ESG Ratings ($59.5B AUM). These are the optimization/climate-focused families (Extended ESG Focus/Aware, Climate Action, PAB, Low Carbon Target, Select Climate 500, and thematic indices) where SpaceX’s CCC rating alone would not preclude addition. For example, iShares Low Carbon Optimized MSCI ACWI ETF seeks out companies with lower carbon exposures than that of the broad market but does not rely on ESG Ratings to screen companies. That said, companies that make up these indices may be excluded based on their involved with controversial weapons, companies involved in very severe environmental, social and governance controversies and companies involved in the business of thermal coal mining and extraction of oil sands. Any of these considerations might exclude SpaceX from being added to the index.

• For sustainable investors who are comfortable with SpaceX’s exclusion or potential exclusion from their universe, the position is clear: the index methodologies are doing precisely what they were designed to do. For those who are not, the SpaceX listing provides a sharper-than-usual illustration of the active decisions embedded in every passive ESG strategy. Notwithstanding SpaceX’s ESG challenges, sustainable investors who still wish to gain exposure to the company through a mutual fund or ETF while still preserving some principle of sustainability may wish to consider one or more of the options set out in an article entitled: One IPO, Two Universes: What SpaceX Means for Sustainable Index Fund Investors.