MSCI continues to include Adani Group companies in its mainstream and ESG indexes despite mounting evidence of its corruption, insider trading and violation of India’s free float laws. This raises serious questions about whether MSCI’s methodologies are effectively ensuring its indexes integrity and “powering better investment decisions” for its clients.
Removing all Adani Group companies from MSCI’s indexes is essential to safeguard the integrity of financial markets and protect the interests of investors.
The Adani Situation: A Closer Look
The Hindenburg Report’s exposure of Adani’s “brazen stock manipulation and accounting fraud,” combined with long-standing concerns over coal expansion, climate destruction and human rights abuses, marked a turning point in the scrutiny faced by the conglomerate. Six months later, documents obtained by the Organised Crime and Corruption Reporting Project (OCCRP) and published by The Guardian and Financial Times confirm Hindenburg’s allegations and expose a trail of deception involving hundreds of millions of dollars invested in publicly traded Adani stock through opaque shell companies based in Mauritius.
This shocking news implicates Adani in a web of stock manipulation and illegal financial maneuvers. Notably, it reveals two individuals, Nasse Shaban Ahli and Chang Chung-Ling, as long-time business partners of the Adani family and previous directors and shareholders in Adani Group companies. The proximity of these individuals to Adani’s senior members, including CEO Gautam Adani’s brother Vinod Adani, is alarming. Even more troubling is the evidence that Ahli and Chang’s stock trading was coordinated with the Adani family. This revelation implies illegal insider trading, violating India’s free float laws around insider stock ownership.
But it doesn’t stop there. Vinod Adani himself used one of the same Mauritius funds to make his own investments. Reporters traced the flow of $100 million that was syphoned out of India as part of an alleged over-invoicing scheme investigated by the Directorate of Revenue Intelligence. The funds, it is alleged, found their way to stock markets in India for investment and disinvestment in the Adani Group.
MSCI’s Role in the Controversy
MSCI’s inclusion of Adani Group companies in its indexes has come under scrutiny due to the mounting evidence of its brazen fraud and stock price manipulation. Adani companies’ potential breach of India’s free float rules, which require listed companies to maintain a minimum public holding of 25%, raises questions about the investability of Adani Group firms.
In response, Eko launched a petition calling on MSCI to remove Adani from its mainstream indexes which has received over 16,000 signatures. This call stems from concerns about financial risks, potential legal violations, and the ethical implications of Adani’s actions. It’s a call for MSCI to uphold the integrity of financial markets and fulfil its responsibility as a gatekeeper for responsible investing.
The consequences of MSCI’s decision cannot be overstated. Removing Adani from MSCI’s ESG funds alone would result in approximately $63 million USD being divested from Adani Group companies. Expanding this action to all MSCI indexes could lead to the removal of roughly $600 million USD divested from passively managed equities and bonds.
A Call for Financial Integrity
As professionals dedicated to the integrity of financial markets and the values underpinning responsible investing, we urge MSCI to critically scrutinise its index inclusion decisions. The inclusion of Adani Group companies in MSCI’s indexes stands in stark contradiction to this responsibility. MSCI’s methodologies and indexes hold tremendous sway in guiding investors worldwide. Your actions should reflect the highest standards of ethical responsibility, ensuring that investors are not unwittingly led toward fraudulent, corrupt, and criminal companies that violate financial laws.