Norway’s Kommunal Landspensjonskasse (KLP) has announced it is divesting Adani Ports and Special Economic Zone, India’s largest commercial port operator, on the grounds that its partnership with the Myanmar military breaches the pension fund’s responsible investment policy.
The NOK805bn (€79bn) municipal pension fund said this was the first time it was exercising a due diligence-based divestment, under new criteria in its guidelines for responsible investments that were added last year.
Kiran Aziz, senior analyst at the provider’s investment management arm, KLP Kapitalforvaltning, said: “Adani’s operations in Myanmar and its business partnership with that country’s armed forces constitutes an unacceptable risk of contributing to the violation of KLP’s guidelines for responsible investment.”
The municipal pension provider, Norway’s largest, said Adani Ports had been under scrutiny from international investors over its project to build a container terminal in the city of Yangon on land leased from a Myanmar military-owned conglomerate.
February’s military coup in the country and an ensuing crackdown on mass protests in which hundreds had been killed, KLP said, had drawn international condemnation and sanctions on military figures and military-controlled entities.
The firm said it had sold off its NOK9m of assets in the company because there was an “imminent danger” the armed forces could use the container terminal to import weapons and equipment, or as a naval base.
IPE has contacted Adani Ports requesting a comment on the matter. In a letter to the National Stock Exchange of India yesterday it said it would abandon the project and write-down in full the related investments if Myanmar was classified as a sanctioned country by the US government. Adani was responding to a request for clarification from the stock exchange following media reports of KLP’s divestment, on which it said it was unable to comment.
A year ago, KLP made changes to its guidelines for assessing investment risk, and whether a company should be excluded.
KLP, which manages a significant portion of its investments passively, said in June 2020 that the new framework enabled it to avoid investments where the risk of contributing to violations of international norms was high, and where firms in question could not provide assurances that they had guidelines and practices that reduced this risk.
The wording in the new guidelines that KLP has used to assess Adani Ports is the statement that the pension fund “can decide due diligence-based divestments from companies if there is an unacceptable risk to contribute to the violation of KLP’s guidelines based on a combination of country, sector or company risk.”
Aziz told IPE that the value of due-diligence divestment was that risks related to country and sector could be taken into account in addition to company’s practice.
KLP was part of a group of European pension investors last week – including Sweden’s AP7, the Dutch architects’ pension fund, Velliv and others – signing a joint declaration urging companies with business in Myanmar to take action, given the risk of human rights violations under the military dictatorship.