Malaysian Petronas and Indonesia’s Pertamina are likely to be excluded from JPMorgan’s ESG EMBI index, Reuters reported on June 15 citing in a statement from the bank. 

JPMorgan said both state-owned companies are expected to exit the JESG suite at the June month-end rebalance as their scores fell below a required threshold and they are no longer eligible for inclusion. 

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Sustainalytics, an outside firm that assesses ESG score for JPMorgan, said some of Petronas’ or its affiliates' activities in "high-risk regions" may be viewed as a violation of a UN arms embargo, Reuters reported. The decline in the score is also related to "ongoing exposure to multiple incidents related to human rights" and "the ongoing political situation in Myanmar." The military deposed Myanmar's democratically-elected government during a coup in February.

Pertamina’s score decline was partly due to a refinery fire in West Java that forced the evacuation of close to 1,000 people as well as discussions with the government regarding a settlement over historical oil spills where cleanup is ongoing, JPMorgan said. Petronas currently has a 121 basis points weight in the index, while Pertamina's stands at 49.

The JPMorgan ESG EMBI Global Diversified Index tracks liquid, US dollar emerging market fixed and floating-rate debt instruments issued by sovereign and quasi-sovereign entities. The index applies an ESG scoring and screening methodology to tilt toward issuers ranked higher on ESG criteria and green bond issues, and to underweight and remove issuers that rank lower.