UPDATE 1-JPMorgan to exclude Petronas, Pertamina from EM ESG index

(Adds comment from Pertamina)

NEW YORK, June 15 (Reuters) - Malaysian state-owned energy company Petronas and Indonesian counterpart Pertamina are on a watchlist for removal from JPMorgan’s ESG EMBI index, the bank said in a statement on Tuesday.

JPMorgan said both oil majors "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.

The bank uses outside firms to assess the ESG score required for inclusion in the index. Sustainalytics, one of them, said some of Petronas’ or its affiliates' activities in "high-risk regions" may be viewed as a violation of a United Nations arms embargo, according to the bank's statement.

The decline in score is also related to "ongoing exposure to multiple incidents related to human rights" and "the ongoing political situation in Myanmar."

Petronas did not immediately respond to a request for comment.

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's statement said.

"We value analysis from financial institutions that are carried out based on reliable data and information," Pertamina spokeswoman Fajriyah Usman said.

"In February 2021, the global bonds issued by Pertamina were oversubscribed by up to 2.5 times, showing market interest and high levels of trust in the company," she added.

Petronas currently has a 121 basis points weight in the index, while Pertamina's stands at 49 bps. (Reporting by Rodrigo Campos in New York, A. Ananthalakshmi in Kuala Lumpur and Bernadette Christina Munthe in Jakarta; Editing by Leslie Adler and Ed Davies)