Adani Group’s troubles are a warning against investment in fossil fuels

(This op-ed first appeared in South China Morning Post)

The stock meltdown of Indian conglomerate Adani Group in the wake of the release of a report by short-seller Hindenburg Research has prompted many of its financial backers to re-examine their exposure to the group. Meanwhile, Citi and Credit Suisse have reportedly stopped extending margin loans to clients against Adani securities.

That said, Adani – as with most companies propping up coal, oil and gas – was always a bad investment. Companies investing in fossil fuel expansion are playing a game where nobody wins.

The world’s biggest financial institutions have funded Adani, including its rapid coal expansion. JPMorgan Chase, Mitsubishi UFJ Financial Group, Citi and Bank of America are just a few bond underwriters that must explain how they assessed Adani Group companies’ worth before the shady practices detailed in the Hindenburg report were made public.

The Wangan and Jagalingou indigenous people, who live near the Carmichael coal mine in Queensland, Australia, persuaded 55 financial institutions not to invest in the mine. More than 100 companies – from ANZ bank to insurer Zurich – have ruled out involvement or distanced themselves from all or part of the Adani Carmichael project. Avoiding direct investments protected them from this company and project.

In August last year, Wangan and Jagalingou custodians warned investors against indirectly funding the project through Adani’s many shell companies. Now these indirect investments are in trouble.

For panicking investors, the first order of business should be to stop all funding to the Adani Carmichael coal mine, whether direct or indirect. They need to set up policies to restrict financing of new coal, oil and gas or other projects that violate human rights.

The science is clear. To maintain a liveable planet and prevent the global average temperature from increasing more than 1.5 degrees Celsius, we must halve greenhouse gas emissions by 2030. That requires phasing out production of some oil, coal and gas reserves before they are fully exploited.

Banks, asset managers, insurers and financial institutions should not finance new energy infrastructure that relies on fossil fuels. Adani’s troubles demonstrate the huge financial risks of continuing to invest in fossil fuel expansion. Now is the time for companies to invest in an energy economy that enables us all to thrive by taking risks for a better future.

Aditi Sen, programme director, climate and energy, Rainforest Action Network, San Francisco