20 Apr 2021
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 concerns.
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 company is.
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 pull back.
“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.
By Dieter Holger, The Wall Street Journal, 19 April 2021
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