Adani-Hindenburg row: JPMorgan Chase's investment arm offloads ESG funds of Adani Group stocks

A fresh batch of bad news has hit the embattled Adani Group. JPMorgan Chase & Co.’s asset management unit has offloaded shares of the group, following the brutal share selloff after US short seller Hindenburg Research released a report accusing the conglomerate of stock manipulation and accounting fraud, a report in Bloomberg stated.

As per the report, JPMorgan Global Emerging Markets Research Enhanced Index Equity ESG UCITS ETF got rid of 70,000 shares in cement manufacturer ACC Ltd., exiting a stake it has held since May 2021 following the January 24 publication of the Hindenburg report.

The move comes even as a number of major investment firms, like BlackRock Inc. and the fund management unit of Deutsche Bank AG, DWS Group, continue to stay invested in Adani stakes in ESG funds that track indexes offered by MSCI Inc.

According to Bloomberg data, another fund, the JPMorgan AC Asia Pacific ex Japan Research Enhanced Index Equity ESG UCITS ETF too sold around 1,350 shares it had held in ACC since July last year. The combined data by Bloomberg shows that JPMorgan, which once held 0.04 per cent in ACC, now has no further exposure to any parts of the Adani conglomerate via ESG funds.

The JP Morgan ESG Global Corporate Index (JESG GCI) is an integrated environmental, social, and governance (ESG) corporate benchmark covering Investment Grade and High Yield markets.

But JPMorgan continues to hold Adani stocks in non-ESG funds.

Three weeks ago, JP Morgan in a note had said the Adani Group is eligible for the CEMBI, JACI and JESG indices despite the allegations in the report.

"Per current index rules, Adani Group companies remain eligible for inclusion in CEMBI, JACI and JESG indices," JP Morgan said in the note.

"We continue to monitor publicly available information and liquidity of the securities, and in case of market disruption or confirmed default event," the note added.

Adani Group's businesses include ports, power generation, transmission and renewable energy, among others, with a total notional of S$7.7 billion in the CEMBI and JACI indexes.

MSCI still holds Adani stocks in its ESG indexes, but asset managers like BlackRock have reduced their exposure to the Adani Group through other indexes.

MSCI, so far, has retained its ESG ratings of Adani companies since the Hindenburg report was released last month. Adani Total Gas Ltd. and Adani Green Energy Ltd. both hold an A rating. While three entities — Adani Enterprises Ltd., Adani Power Ltd., and Adani Ports & Special Economic Zone Ltd. — hold MSCI’s lowest ESG rating, CCC.

Earlier this month, S&P Global Inc. said that it would remove Adani Enterprises from its Dow Jones Sustainability Indexes.

ESG exposure to Adani funds

The report claimed that around 500 ESG funds in Europe have exposure to Adani Group stocks. The holdings are registered under Article 8 of the European Union rules, which states that the companies, whose stocks are listed, should “promote” environmental, social, and governance goals. A handful of so-called Article 9 funds, which are required to target 100 per cent sustainable investments, also have exposure to Adani stocks.

Norway’s largest pension fund KLP too dumped its entire holding of shares in Adani Green Energy Ltd. after the Hindenburg report led to a massive stock selloff. As per a February 10 public filing, the fund has said that Adani is using stock from companies marketed as “green” as collateral in a credit facility that’s helping to finance the Carmichael coal mine in Australia, via Adani Enterprises Ltd.
Also Read | Adani Enterprises, Adani Green, Adani Power shares extend fall; Adani group m-cap drops below Rs 7 lakh crore mark

Also read: Adani Enterprises, Adani Green, Adani Power shares extend fall; Adani group m-cap drops below Rs 7 lakh crore mark

Also read: Adani group stock: Adani Ports shares rise for 3rd day; here's why