Adani credit amenities send chill in ESG markets
Date
2/20/2023 2:43:46 AM
(MENAFN) The Adani Group conglomerate's financing arrangements have sent shockwaves through the ESG (environment, social and governance) markets, leaving investors facing new risks. The group has been under intense scrutiny and criticism from investors and activists for its involvement in the controversial Carmichael coal mine in Australia, one of the world's largest coal mines, which has been the subject of protests and legal challenges for years.
Norway's largest pension fund, KLP, recently sold its entire holding of shares in Adani Green Energy, the renewable energy arm of the Adani Group, over concerns that its investment could inadvertently help finance some of the world's most polluting activities via the stake. KLP has blacklisted coal from its portfolio, and any indirect financing of the Carmichael project would represent a "breach of our commitments," said Kiran Aziz, KLP's head of responsible investing, in an interview.
A February 10 public filing has revealed that Adani is using stock from its green companies as collateral in a credit facility that is helping to finance the Carmichael coal mine in Australia through Adani Enterprises. The revelation has alarmed investors with ESG mandates, who are now grappling with the fact that their green dollars were indirectly supporting the dirtiest of fossil fuels.
Investors have been selling Adani shares since Hindenburg Research, a short-seller, published its critical report on January 24, accusing the company of fraud and market manipulation. However, for investors with ESG mandates, the situation is particularly painful as they realize their investments in other parts of the Adani Group are leaking into the funding of Carmichael.
"Investments in other parts of the Adani Group are leaking into the funding of Carmichael," said Ulf Erlandsson, CEO of the Anthropocene Fixed Income Institute, which has been tracking the Adani Group since mid-2020.
The Adani Group's involvement in the Carmichael coal mine has been the subject of numerous legal challenges and protests, with environmentalists and climate activists urging investors to divest from the company. The mine has been criticized for its potential to significantly increase greenhouse gas emissions, as well as its impact on indigenous communities and wildlife.
The situation underscores the need for investors to carefully evaluate the environmental, social, and governance risks associated with their investments.
The Adani Group's financing arrangements have demonstrated that even companies that appear to be committed to sustainability and environmental responsibility can have indirect ties to polluting industries. As investors become more aware of these risks, they are likely to demand greater transparency and accountability from the companies in which they invest.
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