The world’s third-richest man sells the world a green dream built on coal

Early one evening in April, Asia's newly minted richest person strode onto the stage of the National Centre for the Performing Arts, in Mumbai. Stocky and mustachioed, Gautam Adani was there to deliver a speech at the India Economic Conclave, a gathering of the country's financial elite. Historically media shy, Adani's become more prominent in recent months, and not just because of the meteoric surge in his wealth. A rapid diversification spree has pushed his vast, largely fossil-fuel driven conglomerate into a raft of new sectors in and outside of India, and Adani is seeking to reinvent himself for the global stage. His public appearances now have renewed purpose: to persuade the world — especially the gatekeepers of global capital markets needed to fund his grand ambitions — that a coal tycoon is now a champion of green energy.

Though Adani isn't the only coal baron attempting such a pivot, he's by far the richest and one of the most influential, with close ties to Prime Minister Narendra Modi, India's most powerful leader in decades. Surging energy prices and a breathtaking jump in the shares of his listed companies have pushed Adani's fortune to an estimated $143 billion — only Elon Musk and Jeff Bezos are wealthier. But it's his alignment with Modi, who like Adani hails from the prosperous coastal state of Gujarat, that has been the foundation of the tycoon's empire. It's also what could become Adani's Achilles heel, as he seeks to move into a world that increasingly values environmental considerations over Modi's mantra of economic development.

Adani's speech to the India Economic Conclave, then, was careful to pay homage to both camps.

"India is on the cusp of decades of growth that the world will want to tap into. Therefore, there can be no better defense of our interests at this time than atmanirbhar," Adani said in the Mumbai address, using the Hindi term for self-reliance — the same nationalist theme that Modi often emphasizes in his speeches. Rising global demand for green energy, he went on, will be a "game changer" for the country. "For India, the combination of solar and wind power coupled with green hydrogen opens up unprecedented possibilities."

Seen as closer to the prime minister than any other billionaire, Adani's central business strategy over the past decade has been to bolster Modi's efforts to develop India's $3.2 trillion economy. He has synchronized his corporate ambitions with government priorities, most significantly by doubling down on coal as Modi promised to bring reliable electricity to more Indians. The alignment extends to foreign affairs. In 2021, Adani began construction on a major port facility in Sri Lanka; according to officials from both countries, the plan was encouraged by the Modi government, which wants to curb Chinese influence on the nearby island. Whether building expressways or upgrading data centers, Adani can be counted on to provide money, infrastructure, or expertise, whatever the policy priority.

While Adani, 60, has said he doesn't receive or expect special treatment from the government, that alignment has served him well. Shares of his seven listed firms have seen eyebrow-raising gains this year, lifting their combined market value to some $255 billion, about 7% of the overall Indian market. Among the top 10 billionaires tracked by Bloomberg globally, Adani is one of only two whose fortune hasn't declined in 2022 — and the only one that's primarily been fueled by coal.

Adani's now using those financial resources to supercharge his ambitions, the centerpiece of which is a commitment to invest $70 billion by 2030 in green energy infrastructure. Last month, his group also unveiled $7.2 billion of investment in alumina and iron-ore projects and recently acquired the Indian operations of cement-maker Holcim Ltd. for $10.5 billion. Other forays include moves into media and digital services, airports, data centers and telecommunications.

As long as Modi remains in charge, and Adani's companies keep generating enough cash to offset the significant debt he's accumulated to fund expansion, his position appears robust — at least within India, according to Tim Buckley, the director of the Sydney-based Climate Energy Finance think tank and a long-time observer of the billionaire. "His political power, his ability to understand the lay of the land in India, is second to none," Buckley said. "The organization works very, very effectively, unlike a lot of Indian competitors, and they get things done."

Beyond India, however, Adani's power is less assured. And that's where his grandiose bet on renewables comes in. The $70 billion pledge is the blueprint that Adani hopes will make his empire the world's largest producer of clean power by the end of the decade. Yet his green investments so far still pale in comparison to his fossil-fuel exposure, a dichotomy that risks undermining Adani's quest to be taken seriously on the world stage.

According to SumOfUs — an activist organization that runs digital campaigns intended to apply pressure on powerful corporations — Adani's mining operations account for at least 3% of global carbon-dioxide emissions from coal. The Adani Group declined to comment on this figure, and for this story more broadly. "It's hard not to see Adani's green investments as anything but cover for his company's coal expansion," said Nick Haines, a SumOfUs campaign manager in Melbourne, "or at best having his cake and eating it too." 

Adani's wide-ranging group was built on a bedrock of coal, and it continues to be central to his business. The main Adani units that rely on the fuel account for 62% of his conglomerate's revenue. Coal is a domestic resource, one critical to Modi's ambitions for self-reliance, and Adani is India's largest private developer of coal mines. He's purchased eight new Indian coal blocks since 2020 alone, bringing the total to 17, according to SumOfUs. In a 2019 interview with Bloomberg News, Adani insisted that India's economic goals would be impossible to achieve without coal power, which must "play a big role" in expanding electricity generation capacity. The country is the world's third-largest carbon emitter, after China and the US, and while Modi has signed on to targeting net-zero emissions, his 2070 timeline lags China's by 10 years, and the US and UK by two decades.

While Adani says boosting India's energy security is behind his new green play, the billionaire's experience in Australia may at least partially explain the shift. Adani is developing a large mine in Queensland to augment Indian supplies, and the pushback he's seen there shows the challenge he'll likely face expanding his influence beyond India's borders. Lawsuits, protests, and government inquiries repeatedly delayed Carmichael, as the project is known, since it was proposed more than a decade ago; in 2020, Adani's Australian mining unit pleaded guilty to misleading environmental authorities over land-clearing at the site, drawing a fine of A$20,000 ($13,520). Banks such as Goldman Sachs Group Inc. ruled out providing loans for the project, forcing Adani to finance the mine himself.

Carmichael involves a major port expansion in environmentally sensitive waters, and activists believe it poses an unacceptable risk to wildlife as well as the Great Barrier Reef. They're also concerned about what a major investment in Australian coal production will mean for India's power mix. Carmichael began exporting coal earlier this year, feeding soaring demand for the fuel in India as temperatures soared this summer.

Yet during the 32-minute speech at the India Economic Conclave, Adani hardly mentioned coal at all. Part of his motivation for ramping up public appearances, people familiar with the billionaire's strategy say, is to change the perception of his business, better aligning himself with asset managers — and lenders — who are making green energy and ESG a priority. The Adani Group says it has a pipeline of 20.4 gigawatts of clean-power projects, equivalent to about 20% of current US solar capacity. But just over a quarter of that is currently operational, primarily in the form of solar and wind farms in Indian states including Karnataka in the south and Uttar Pradesh in the north. 

At the same time, the company is almost doubling its coal-fired power capacity to 26 gigawatts, according to environmental non-profit group Market Forces, and is still pursuing natural gas projects. The renewables ambitions are "by no means a pivot, since they are also simultaneously expanding investments in coal and natural gas," said Rachel Cleetus, the policy director for climate and energy at the Union of Concerned Scientists. "In fact, Adani is arguably the largest private investor in new coal projects worldwide."

For the immediate future, at least, that's where the money is. Energy-supply constraints caused by the war in Ukraine have pushed coal prices to multi-year highs, and the International Energy Agency expects global demand to set annual records through 2024. European countries including Germany and the Netherlands are reopening coal plants to make up for tighter stocks of natural gas. In late May, after attending the World Economic Forum in Davos, Switzerland, Adani couldn't resist something of an I-told-you-so. "Developed nations that were setting targets and giving stern lectures about climate change to the rest of the world now appear to be less censorious as their own energy security is threatened," he posted on LinkedIn.

Adani's current position — he went from 14th to the world's third-richest person in less than nine months — is a long way from his origins in Gujarat. Born into a family of middle-class textile merchants, Adani studied commerce at a local college but soon dropped out. He dabbled in the diamond business before setting up a trading firm in 1988 that later became Adani Enterprises Ltd.  

At the time, India had begun dismantling the "License Raj," the complex system of permits and regulations that previously governed commerce, and Adani was rapidly rising as a local businessman. At one point, his growing profile even made him a target for gangsters: He was kidnapped and allegedly held for a ransom of $1.5 million. In 1995, Adani started operating the port in Mundra, a remote town on the Gulf of Kutch, after winning a contract from the Gujarat government. The would-be tycoon started expanding the complex, which is situated on sensitive mangroves and creek systems. Later, his companies would receive a fine of 2 billion rupees ($25 million) for ignoring environmental rules, a penalty that was subsequently dropped. Adani has said the mangrove area increased by about 12% in Mundra between 2011 and 2017, a period that also saw major growth in the port.

Modi, a rising star in the Hindu-nationalist Bharatiya Janata Party at that time, was elected as Gujarat's chief minister, the equivalent of governor in the US, in 2001. Months later, more than 1,000 people, most of them Muslims, were killed in the state in one of India's worst periods of sectarian rioting. Critics accused Modi of doing little to stop the violence — an allegation denied by him and subsequently dismissed by the nation's top court. Adani defended him and created a biannual "Vibrant Gujarat" investment summit that let the ambitious politician burnish his pro-business credentials. From then on, "Adani and Modi enjoyed at least a marriage of convenience: the mega-project obsessed politician and the ambitious young industrialist, both gradually becoming indispensable to one another," the journalist James Crabtree wrote in "The Billionaire Raj," a book chronicling the rise of India's wealthiest tycoons.

Modi's 2014 election as prime minister coincided with a new period of success for Adani. The following year, Adani Enterprises executed a complex restructuring, spinning off its ports, power, and transmission businesses into separate listed companies. All benefited from the new Indian leader's ambitious economic development plans, which included heavy investments in transportation infrastructure as well as energy. Across his sprawling operations, Adani remained a hands-on manager, according to people who have worked with him. In meetings, he's happy to get into detailed discussions on cash flows in individual businesses, said the people, who asked not to be identified discussing the tycoon.

Building this empire has required borrowing on a scale rarely seen in India. The Adani Group has about $8 billion of foreign-currency bonds outstanding, the most of any Indian business, according to data compiled by Bloomberg. The group's combined net debt was 1.6 trillion rupees ($20 billion) as of end-March, according to company data. CreditSights, a unit of Fitch Group, has said the conglomerate's leverage ratios and capital structures are a "matter of concern," even after equity investments by overseas partners. The Adani Group, however, says it's deleveraged consistently over the past few years and its metrics are healthy.

This enormous scale has raised some questions about the group's activities in India — and its relationship to power. Without any experience in aviation, Adani won bids to operate a raft of airport facilities through a federal government tender about three years ago. The finance minister of the state of Kerala, where one of the airports is located, called the award "brazen cronyism." Indian media reported bureaucrats' concerns over Adani securing multiple management contracts. In court filings, responding to legal challenges, the group has rejected those allegations and maintained it won the bid through a competitive process. 

More recently, lawmakers sought an investigation into whether a series of Mauritius-based funds, which were some of the largest investors in Adani companies, were being used to stoke the astonishing share surges that have propelled them to among the highest multiples in India. The Indian department overseeing import and export regulations is probing the matter, and the capital markets regulator is examining compliance with securities rules, India's junior finance minister told parliament last year. Still, he said that the firms aren't being looked at by the Enforcement Directorate, which investigates serious financial crimes like money laundering. Representatives of Adani have said the group complies with all regulatory requirements and has made required disclosures. 

Outside of India, Adani faces a different experience, as the situation in Australia showed. Though he has made other forays overseas, and partnered with French oil giant TotalEnergies SE — which pledged to invest $7.3 billion in Adani businesses, including his renewable energy and green hydrogen units — expansion will expose Adani to a level of scrutiny he's never seen before. 

A few years ago, Adani approached the Science Museum, one of London's most venerable cultural institutions, about possible sponsorship. The museum was concerned about the Indian billionaire as a benefactor and consulted the Transition Pathway Initiative, a non-profit group that analyses corporate compliance with climate targets, according to documents obtained by a Freedom of Information request. The group ranks Adani Enterprises on its second-lowest tier, below Saudi Aramco and Exxon-Mobil Corp. The museum's reports noted a "range of public concerns" and devoted considerable space to the Carmichael project. But museum managers decided to proceed with a partnership anyway, underwritten by a donation of undisclosed size. In October 2021, the institution announced a new exhibition hall called "Energy Revolution: The Adani Green Energy Gallery." 

The irony was too much for some. Two of the Science Museum's trustees resigned, and activists took over part of its interior in protest. The museum recognizes "some people would prefer to see us sever all links with companies from carbon intensive sectors, and we respect that perspective," a spokesperson told Bloomberg, adding it believes the right approach is to challenge companies to do more to ease emissions. Adani Green Energy Ltd. is an independent entity within the Adani Group and is investing "at the enormous scale required to deliver meaningful change toward a low-carbon economy," they said.

The biggest question for Adani now is whether custodians of the capital he needs to expand will take a similar view. While global lenders including Standard Chartered Plc and Barclays Plc, among others, have funded his fledgling green energy unit, Pacific Investment Management Co., one of the world's largest fixed-income investors, declined to participate in a debt offering by Adani's ports unit last year over concerns about coal. As global asset managers move to decarbonize their portfolios, speeches extolling the ambition of Adani's green-energy plans may not be enough to keep the money flowing.

Right now, shares in Adani companies are able to command a premium "because they are the only green energy and infrastructure-focused group in India that offers global investors access to these businesses through their listed companies," said Deven Choksey, managing director at Mumbai-based brokerage KRChoksey Holdings Pvt., who has been tracking the Indian stock market for more than three decades. The conglomerate offers "ready-to-invest and ready-to-earn-returns from already built-up projects."

Yet as global investors become more sensitive to what makes a viable green investment, they're more likely to ask hard questions. Like why Adani is already expanding production at Carmichael, aiming to raise its annual output by 50% more than originally approved by its board in 2019. ​​The tycoon may have to commit to exiting coal in order to realize his empire-building ambitions, says Buckley at the Climate Energy Finance think tank. "He's no mug, he will totally roll with the punch," he said. "ESG 2.0 is coming and that doesn't mean green-wash, it means you've actually got to walk the walk."

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.