Hindenburg-hit Adani Group's credit facilities sending a chill across ESG markets: Report

Financing arrangements across the embattled Adani Group are exposing a collateral web full of red flags across ESG (environmental, social and governance) markets as investors see a new risk emerging, said a report on Sunday.

Norway’s largest pension fund, KLP, recently sold its entire holding of shares in Adani Green Energy Ltd., the renewables part of the conglomerate, amid concerns that it might inadvertently have helped finance some of the world’s most polluting activities via the stake, reported Bloomberg.

A public filing earlier this month has made it clear that Adani is using stock from its green companies as collateral in a credit facility that’s helping to finance the Carmichael coal mine in Australia, via Adani Enterprises Ltd, which has become a lightning rod for climate activists.

Seven listed firms of the billionaire Gautam Adani-led Adani Group have shed some $125 billion in market value since US short seller Hindenburg Research's report which alleged improper use of tax havens and stock manipulation by the ports-to-energy conglomerate. The Adani Group has denied any wrongdoing.

“Investments in other parts of the Adani Group are leaking into the funding of Carmichael,” said Ulf Erlandsson, chief executive of Anthropocene Fixed Income Institute, which has been tracking the Adani Group since mid-2020. “Investors who have restrictions on funding greenfield thermal coal mining should revisit potential exposures across the whole of Adani Group," Erlandsson told Bloomberg.

More than 500 funds registered in the European Union as 'promoting' ESG goals hold Adani stocks, either directly or indirectly, according to data compiled by Bloomberg.

Sustainalytics recently downgraded corporate governance-related scores for three of Adani Group companies on ethics concerns, including Adani Green.

Adani Green Energy has a refinancing plan which the company will disclose after the fiscal year ends, an executive of the embattled Adani group told bondholders on a call on Thursday, reported Reuters.

Adani Group had hired banks to arrange calls with bond investors after it was caught up in the short-selling storm in recent weeks.

One of its subsidiaries, Adani Green Energy Limited Restricted Group, will refinance existing bonds through a 15-year amortising private placement, the executive said, according to the sources.

MSCI Inc gives Adani Green a rating of A, and the entity is included in several of its ESG and Climate indexes. S&P Global Inc. said this month it was removing Adani Enterprises from its Dow Jones Sustainability Indexes.

Meanwhile, Hindenburg Research fired another salvo at Adani Group on Friday and it involved Vinod Adani, the elder brother of Gautam Adani.

"Forbes is out with a major article evidencing hidden Adani promoter pledges: A private Vinod Adani-controlled Singaporean entity pledged Adani promoter stakes for $240 million in loans from a Russian bank. Zero disclosure of these pledges to Indian exchanges," tweeted Hindenburg on Friday.

"Vinod Adani, the longtime Indian expat, is at the heart of a global web of offshore companies with ties to the Adani Group. Just don’t call him a related party," said the Forbes article.

The article claimed that Pinnacle Trade and Investment Pte. Lte., a Singapore company indirectly controlled by Vinod Adani, had in 2020 entered into a loan agreement with Russia’s state-owned VTB Bank, which was sanctioned by US last year due to Ukraine war. By April 2021, Pinnacle had borrowed $263 million and lent out $258 million to an unnamed related party.

With inputs from agencies

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