Norwegian pension fund divests from Adani over links to Myanmar military

On the 06/23/21 at 7:59AM


Tuba Raqshan

KLP, Norway’s largest pension company, has excluded Adani Ports and Special Economic Zone Limited, for its links with the Myanmar military, which goes against the fund’s responsible investment guidelines.
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After coming under the scanner for its Carmichael coal mine operations, Adani Group is one again in the limelight, this time for its links with the Myanmar military, which been accused of human rights abuses in the ongoing armed conflict in the country. Norwegian pension fund KLP announced that it would divest and exclude Adani Ports and Special Economic Zone Limited from June 2021, as its operations in Myanmar and its business partnership with the country’s armed forces violates the fund’s responsible investment guidelines. The pension fund’s divestment from the group amounted to NOK 9m ($1.05m), a KLP spokesperson confirmed to Asset News.

Listed on the Mumbai Stock Exchange, Adani, the commercial port operator, manages 12 ports in India. The company entered into a business partnership with Myanmar’s military-owned conglomerate Myanmar Economic Corporation (MEC), to construct a new container port in Yangon. According to the UN Human Rights Council’s Independent International Fact-Finding Mission on Myanmar (IFFMM), the MEC is controlled by Myanmar’s Ministry of Defence and is a direct source of revenue for the military. It is a holding company with businesses in mining, manufacturing, and telecommunication sectors as well as companies supplying natural resources to the military.

Adani has admitted that if the armed forces were to decide to use the port for military purposes, the company would not be able to prevent it.

- KLP's assessment document

The IFFMM urgently called for the termination of all economic cooperation with the Myanmar armed forces, which clearly Adani has not adhered to. In May 2019, Adani signed a development, operating and transfer agreement with the MEC, entailing the construction of Myanmar’s largest commercial container port, which will be built on land owned by the armed forces. This has been leased from the MEC for a period of 50 years and the first phase is scheduled for completion in 2021. Adani had publicly stated that it would “engage with the relevant authorities”, but firmly stated that it intends “to contribute towards the nation’s economic and social development goals”. Following this, it was removed from S&P Dow Jones Sustainability Indices for these commercial links.

Violations and risk factors:

KLP’s assessment pointed out that Adani’s partnership with MEC violates its guidelines, as well as contributes to serious violations of individuals in situations of war and conflict. In April this year, KLP met the company’s management. Adani has maintained that the agreement was with the Myanmar Investment Commission, and they had won the contract in a global tender competition, calling it a “major commercial activity”.

Adani confirmed that no due diligence assessments relating to human rights were performed before the agreement was signed, stated KLP’s assessment on the divestment. “Adani has admitted that if the armed forces were to decide to use the port for military purposes, the company would not be able to prevent it, nor are there any mechanisms that would enable it to do so. There is an imminent danger that the armed forces could use the port to import weapons and equipment, or as a naval base,” stated KLP’s document, adding that the port could be used by the army to continue its violations of human rights.

The divestment was also carried out due to imminent company risk, as information about Myanmar armed forces’ abuses was publicly available when Adani signed the agreement with MEC. “This should have given Adani reasonable grounds to act with particular prudence with respect to MEC, which owned the land,” added KLP’s due diligence document.

The Norwegian pension fund also pointed out that the company puts commercial considerations before the risk to human rights. Adani only took this matter seriously after MEC was sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) on 25 March 2021. This is because Adani has significant interests in the USA. If the OPAC confirms that its operations in Myanmar may be prone to sanctions, it is likely to terminate its agreement with MEC immediately, as its impact on access to capital in the USA would render it commercially untenable. “The agreement’s potential termination was conditional on the financial consequences following from sanctions imposed by the OFAK, and not on the behaviour of the armed forces,” added KLP’s assessment.

Divestment is not new to the Adani Group. In 2020, Axa IM and Amundi divested its green bond holdings from the State Bank of India (SBI), over its loan to Adani to fund the controversial Carmichael coal mine operations in Australia.

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