It's been a while since I installed MSFS 2020, and I don't recall any specific installation procedures, but to generally answer your question, yes, you can install Steam to any other drive other than C. You can also choose to install Steam on C drive and Steam games on another drive. When installing MSFS 2020, it will place some configuration files on C drive in your users directory, regardless of which drive 2020 is installed on.
I have Steam, MSFS 2020, and all my Steam games on a separate SSD.