Adani Group’s credit facilities raise eyebrows, should investors be worried?

New Delhi: Adani Green Energy, the biggest player in country’s renewable energy segment has been growing by leaps & bounds in past few years and its recently commissioned solar-wind hybrid plant gained global spotlight, as this was one-of-its kind initiative in its ambitious green energy drive.

However, the company has lately come under ‘increased scrutiny’ over its Environmental, social & governance (ESG) rating. It is said to be losing favour with ESG markets over links with coal-based enterprises.

Adani Green Energy’s shares were used as enhanced collateral towards a credit facility for the controversial Carmichael coal mine in Australia and this is making investors a ‘worried lot’, reports a leading portal Morning Context.

Embattled Adani Green Energy’s shares being used as collateral for extending credit facility to the coal mine left a wide array of foreign investors disappointed and also sent a chill across the ESG markets. The ESG watchdogs saw a new risk emerging due to green firm’s alignment with coal based company and also raised red-flags over it.

This resulted in significant setbacks for the company too. In February this year, Norway’s pension fund KLP sold its entire holding in Adani Green while Goldman Sachs, JPMorgan and Northern Investment Trust reduced their exposure in the company.

Another big blow came when UN-backed Science Based Targets Initiative dropped the Adani Green Energy from its list of endorsements, in April this year. In the ESG markets, this endorsement is considered as a major hallmark, as this validates company’s commitment & alignment with Paris climate agreement.

The portal, quoting some reputed ESG analysts, said that Adani Green’s investments are not ring-fenced from its coal mining & thermal power operations and hence its indirect support to polluting modes of power could continue.

The business behemoth though admitted to Adani Green’s share transactions for ‘meeting company’s cash flow mismatches’ but has now declared not to use collateral arrangement in future, apparently over protests by climate activists not to fund the coal mines.

Adani Green Energy spokesperson also said that it was committed to upholding highest standards of business ethics and also maintaining best-in-class ESG ratings.

Months ago, the flagship company of Adani Group couldn’t stay unscathed from Hindenburg’s damning report. All leading firms of billionaire Gautam Adani went into a tailspin after report became public on January 24 and the conglomerate saw its market valuation wiped out by almost $120 billion.