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Adani credit facilities expose mortgage website full of red flags


(Bloomberg) — Financing arrangements across the Adani Group have sent a breath of fresh air to the ESG markets as investors awaken to a new risk.

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Norway’s largest pension fund, KLP, recently sold its entire stake in Adani Green Energy Ltd., the empire’s renewable energy arm, amid concerns it could inadvertently help funds some of the world’s most polluting practices through equities. Since then, public filings dated February 10 have made it clear that Adani is using shares from his Green companies as collateral in a credit facility that helps finance the Carmichael coal mine in Australia, through Adani Enterprises Ltd.

Kiran Aziz, KLP’s head of responsible investing, said in an interview that KLP has blacklisted coal from its portfolio, so any indirect funding for the Carmichael project would represent “a breach of our commitments”.

Since short-selling firm Hindenburg Research released its key report on January 24, investors have responded to their allegations of fraud and market manipulation by selling Adani shares. . But for investors with environmental, social and governance mandates, it is all the more painful to realize that their green dollars are indirectly supporting the dirtiest fossil fuels.

“Investments in other parts of the Adani Group are leaking into sources,” said Ulf Erlandsson, chief executive of the Anthropocene Fixed Income Institute, which has been tracking the Adani Group since mid-2020. capital of Carmichael. “Investors with limited funding for greenfield thermal coal mining should reconsider the potential risks across the Adani Group as a whole.”

More than 500 funds have registered in the European Union as “boosting” ESG targets holding Adani stock, either directly or indirectly, according to data compiled by Bloomberg.

A spokesperson for Adani did not respond to a request for comment. The group has repeatedly denied the allegations in the Hindenburg report and threatened legal action.

Erlandsson at AFII says an equity investor pledging shares as collateral does not necessarily contaminate other shareholders. However, the “high concentration of stock ownership and other mutualities” within the Adani group represents an additional layer of risk, he said. A higher Adani Green share price would increase the value of the collateral, reduce the credit risk of SBI financing the coal project, then “hypothetically, the bank could offer a high lower rates for Carmichael,” he said.

Adani Green’s share price has fallen nearly 70% this year, while the company’s debt has also fallen. On February 7, the company said it had won investor support after it reported third-quarter net income that more than doubled from a year earlier. Adani Green Vneet CEO S. Jaain said the results proved the company had a “robust capital management program with leverage that aligns well with the business model”.

On February 16, it was reported that the group was in talks with potential investors to raise up to $1.5 billion through the bond sale of Adani Green, Adani Transmission Ltd. and Adani Ports & Special Economic Zone Ltd., according to people familiar with the group. progress.

Read more: Who is Adani and what are Hindenburg’s allegations?: QuickTake

The Hindenburg report shows that “The companies of the Adani Group are intricately and clearly linked and dependent on each other. None of the listed entities is isolated from the activity or failure of the other companies in the group.

The Carmichael Coal Mine, located inland from Australia’s iconic Great Barrier Reef in Queensland, has become a lightning rod for climate activists over the environmental destruction the facility causes. Responses have also come from banks, insurers and investors, amid alarms over the mine’s carbon footprint.

MSCI Inc. An A rating for Adani Green and this entity is included in some of its ESG and Climate metrics. S&P Global Inc. said this month it had removed Adani Enterprises from the Dow Jones Sustainability Index. Sustainalytics has downgraded the ESG scores of several Adani companies. MSCI said it will begin reviewing holdings in the ESG indexes more frequently, to answer questions about its approach.

Norway’s KLP, which manages about 765 billion Norwegian kroner ($75 billion), divested in Adani Green on January 30, adding five other Adani companies it had previously excluded from the top list. his private.

“Adani’s corporate structure creates an unacceptably high risk that ‘clean’ investment could be drained into coal mining,” Aziz said.

Adani Green’s largest outside shareholder is TotalEnergies SE, which acquired a 20% stake in 2021. The French energy giant confirmed its withdrawal from coal production and marketing in 2015. Director Executive Patrick Pouyanne said earlier this month that Adani Green and Adani Total Gas Ltd., in which it has also invested, are “healthy” companies.

“The shares owned by TotalEnergies in AGEL are neither pledged nor used as collateral for any funding or any other project,” a company spokesperson said. “TotalEnergies is not involved in the use of shares held by other AGEL shareholders for collateral or other purposes.”

–With support from Gina Turner, PR Sanjai and Saikat Das.

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