By Dieter Holger
A major index provider and some investors are distancing
themselves from the marine-ports operator controlled by Indian
conglomerate Adani Group over past business transactions with a
company linked to the military regime in Myanmar.
Financial data firm S&P Global Inc. last week said it would
remove Adani Ports & Special Economic Zone Ltd. from its Dow
Jones Sustainability Indices, which consists of various different
regional indexes holding companies that rank highly on
environmental and social affairs. Adani Ports was among around 100
indexed companies in the emerging markets category.
"We are committed to ensuring that our activities in Myanmar
don't provide economic support to sustain the [military regime],"
Adani Group said in a statement. The company didn't comment on the
removal of the ports unit from the S&P index or on investor
The removal of Adani Ports from the S&P sustainability
indexes could serve as a cautionary tale for other socially
conscious companies who do business with countries that are in
political turmoil. Benchmarks like S&P's -- which score
information beyond a company's earnings and balance sheet -- are
among the tools investors increasingly use to gauge how risky a
S&P's decision to remove the company from its sustainability
indexes means that any index funds tracking those benchmarks will
cut out Adani Ports. These include the London-listed iShares Dow
Jones Global Sustainability Screened UCITS ETF, an index fund with
some $475 million under management. S&P's sustainability
indexes hold companies based in large part on public disclosures
and private questionnaires filled out by corporations.
The decision came after "recent news events pointing to
heightened risks to the company regarding their commercial
relationship with Myanmar's military, who are alleged to have
committed serious human rights abuses under international law,"
S&P said in a statement.
Some investors also pulled back from Adani Ports in recent
weeks. Norwegian bank DNB ASA sold off shares it held in the
company at the end of March, citing human rights concerns.
Finland's Nordea Bank Abp completed its divestment earlier this
month and said that a recent United Nations report on the
military's activity in Myanmar "confirms" its earlier decision to
"We have been aware of controversies surrounding human rights
violations in Myanmar for some time and have had the company under
observation," said Janicke Scheele, head of responsible investments
DNB Asset Management AS.
Adani Group is a sprawling conglomerate with businesses in
sectors such as energy, mining, real estate and agriculture.
Various companies bearing the Adani name listed on the National
Stock Exchange of India, including Adani Ports, have a combined
market value of more than $90 billion.
The moves against Adani Ports come weeks after the U.S.
government placed sanctions on Myanmar Economic Corp., which the
U.S. says is a military holding company that supports the regime
that overthrew Myanmar's civilian government in February. The
United Nations in 2018 advised companies to avoid doing business
with the Myanmar military or companies controlled by it after a
fact-finding mission documented alleged human-rights abuses.
Adani Group has made payments to the MEC in the past, including
transactions to secure development rights for a terminal project in
the Myanmar city of Yangon, the company said in a statement.
The company said it hasn't conducted transactions with the MEC
since last year. "In light of the current situation, all
transactions with and payments to MEC and its subsidiaries have
been terminated," Adani Group said.
Adani Group, whose ports arm won the terminal project in 2019,
said its operation of the terminal doesn't violate current U.S.
sanctions. "As Adani Group isn't a U.S. person, we are not subject
to the prohibitions of U.S. sanctions," the company said.
The company, however, said it hired law firm Morrison &
Foerster LLP to advise the company on compliance with U.S.
sanctions. "We are considering outreach to the U.S. government to
discuss the Yangon project and the benefits we expect it will have
for the people of Myanmar," Adani Group said.
MEC couldn't be reached for comment. Myanmar's embassies in the
U.S. and Singapore, and its foreign affairs ministry didn't respond
to requests for comment.
The U.S. Treasury Department's Office of Foreign Assets Control,
which enforces U.S. sanctions, declined to comment.
Shares of Adani Ports, which closed at a high of 837.45 Indian
rupees (equivalent to about $11.17) per share on April 6, have
since fallen 9.8%, closing at INR755.35 on Friday. Over that
period, India's bellwether BSE Sensex market index was down
Adani Ports, which has a market value of nearly $20 billion, has
earned placement from indexers and raters S&P and MSCI Inc.,
which still holds Adani Ports in an ESG index. At least 10 funds
with "ESG," "sustainable" or "sustainability" in their name hold or
held stakes in the company this year, according to FactSet. The
company aims for net-zero emissions by 2025, an aggressive time
frame compared with many other companies.
MSCI Inc. declined to comment.
Investors are paying closer attention to Myanmar in the wake of
the February coup, and other companies have faced scrutiny for
possible ties to the country's military.
Norges Bank Investment Management, the manager of Norway's
sovereign-wealth fund, last month put Japanese beer maker Kirin
Holdings Co. on notice for possible exclusion for a brewery joint
venture with Myanma Economic Holdings Public Co. The U.S. Treasury
placed Myanma under sanctions last month, describing the company as
"a vast and secretive military conglomerate" with business
interests spanning the Myanmar economy.
Russell Roll, a spokesman for Kirin, said the company was aware
of the notice from Norges Bank and remained focused on ending its
relationship with the military-linked business, which it had
previously pledged to do.
Fabiana Negrin Ochoa contributed to this article.
Write to Dieter Holger at firstname.lastname@example.org
(END) Dow Jones Newswires
April 19, 2021 05:44 ET (09:44 GMT)
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