The ESG effect: Asia’s richest man is going ‘green’

Synopsis: Reliance Industries Ltd. (Reliance) held its 2021 annual general meeting (AGM) on Thursday, June 24th. Although the company’s Chairman and Managing Director, Mr. Mukesh Ambani made several important announcements during the AGM, such as Google and Jio’s partnership for a smartphone catering to masses and the induction of Saudi Aramco Chairman on the company’s board, what attracted the maximum attention was Reliance’s foray into the renewables business. Its real significance lay in the time devoted for the ‘New Energy’ facet in Mr. Ambani’s AGM speech. Reliance may still be earning majority of its profits from the refining and petrochemicals business, but the big bet on telecom and retail is a part of the plan to reduce that dependence. Where does the renewables business fit in this? Reliance has always been investor savvy and considering the speed that ESG has picked up in the global investment management ecosystem, is the company making a conscious effort to project its seriousness about environmental issues? Has Reliance understood the fact that while their O2C (Oil to Chemicals) business may be generating cash, they need something else for continued investor interest? And in today’s world, what better than ESG.

Reliance Industries Limited: History and Background

Reliance Industries Limited (Reliance) is the largest private sector corporation in India. Its perfect ‘rags-to-riches’ story, considering how it was started by a first-generation entrepreneur and how it went on to become the dominant force in the Indian industry in a matter of few decades, is stuff of legend. It started from textiles and then ventured into Oil refining and Petrochemicals. The size and scale of business, efficiency of operations and a strong focus on stock markets were always the defining characteristics of Reliance. For example, Reliance set up one of the largest and most advanced crude oil refineries in Jamnagar, very close to India’s western border in the state of Gujarat and it also played a crucial role in popularising equities among retail Indian investors.

There were also controversies around political connections of Reliance and its excessive interference in determining the Govt policy to ensure that while Reliance benefited, its competitors suffered. But this was the story of the twentieth century. After the demise of its founder, Mr. Dhirubhai Ambani, around twenty years ago, the bitter struggle of succession between his elder son, Mr. Mukesh Ambani and his younger son, Mr. Anil Ambani became a media and public spectacle. This, naturally, had a negative impact on the stock price. Eventually, the business empire was divided between the brothers through an arrangement which although was not amicable, but was something that both brothers agreed upon. The core business went to the elder brother and he became the true inheritor of his father’s legacy. And he is now the richest person in Asia.

Figure 1: Reliance Industries Ltd. Stock price over last twenty years

Source: Google

Reliance is the largest company by market cap in India

In around forty years’ time, Reliance has evolved from being a textiles and polyester company to a conglomerate across energy, retail and telecom sectors. As of today, the company is a Fortune 500 company and also the largest by market cap in India (INR 13.34 trillion or around USD 185 billion) and it holds this distinction by quite some margin. It is followed by Tata Consultancy Services Ltd. (INR 12.50 trillion or around USD 170 billion), HDFC Bank Ltd. (INR 8.36 trillion or around USD 110 billion), Infosys (INR 6.71 trillion or around USD 90 billion) and Hindustan Unilever Ltd. (INR 5.75 trillion or around USD 75 billion).

If you take a look at the stock price movement over the last twenty years, the 2007-2017 phase was ‘the lost decade’ for the company. It was considered a conglomerate which had become too big too fast. Reliance Jio was incurring heavy capex with no visibility on future returns or cash flows. Retail was being seen as an ‘also-ran’. All of this changed when Jio opened to enrol customers in 2016 and started its pan-India operations, thus ushering in the new age. As the tariff war ensued in the telecom sector and as Jio began to set the rules, it became apparent that in spite of investors not believing the Jio story for many years, the consumers were eager to migrate from other telecom service providers like Bharti Airtel and Vodafone Idea. Naturally, the markets could not ignore Reliance any longer.

Figure 2: Reliance Industries Ltd. Stock price over last five years

Source: Google

The Jio-Facebook deal

For three years, from 2017 to 2019, the Reliance stock continued to inch up. Then the pandemic struck in the first quarter of 2020 and as it happened with other markets and other stocks, Reliance had a very bad March 2020. After the sharp correction, the recovery came in April 2020. While for the first few weeks, the stock price recovery was broadly aligned with other stocks, the game changer was the fourth week of April. It was when the Facebook-Jio deal was announced and that completely changed the investor outlook on the stock.

On the morning of 22nd April 2020, Reliance Industries Ltd. announced a deal with Facebook. Reliance announced that Facebook will invest ₹ 435.74 bn (or USD 5.6bn) in Jio Platforms for a 9.99% stake. This was big news as it was also the largest Foreign Direct Investment (FDI) for any minority investment in India, at the time. Naturally, the stock reacted. It gained more than 20% from the lows of the week and that meant more than USD 20 bn increase in market value. When you look at the daily stock prices for the week of 20th April 2020, there is no doubt that Facebook deal was the primary driver. The Reliance stock price on various days in the week beginning 20th April 2020 is as follows;

  • 20th April 2020 – Rs 1,244
  • 21st April 2020 – Rs 1,236
  • 22nd April 2020 – Rs 1,363
  • 23rd April 2020 – Rs 1,371
  • 24th April 2020 – Rs 1,417

FY21: The year when ‘Investor sentiment’ transformed for Reliance

The Facebook deal was just the beginning and the investments in Jio continued. Some of the major investments were as follows:

  • May 3, 2020: Silver Lake, the US private equity firm picked a 1.15% stake in Reliance Jio with an investment of Rs 56.56 bn in its platforms.
  • May 8, 2020: Vista Equity, another US-based private equity firm picked a 2.32% stake in RIL’s Jio platforms for Rs 113.67 bn.
  • May 17, 2020: General Atlantic, one of the largest global private equity firms announced an investment of Rs 65.98 bn in Reliance Jio for a 1.34% stake.
  • May 22, 2020: KKR, the US-based PE company picked a 2.32% stake in Reliance Jio platforms for Rs 113.67 bn.
  • June 5, 2020: Mubadala, the Abu Dhabi-based sovereign fund invested Rs 90.93 bn in Reliance Jio for a 1.85% stake.
  • June 13, 2020: TPG invested Rs 45.47 bn in Jio Platforms at an equity value of Rs 4.91 trillion and an enterprise value of Rs 5.16 trillion.
  • June 13, 2020: L Catterton, invested Rs 18.95 bn for a 0.39 per cent equity stake in the Reliance Jio Platforms.

Figure 3: Reliance Industries Ltd. Stock price in 2020 and 2021

Source: BSE India

After the deal flow dried up, the Reliance stock underperformed

Between touching the bottom in the second half of March 2020 and the broader recovery over the next one month after that, Reliance stock gained around 25-30%. The next four to five months were the best phase with the stock almost doubling as the news flow on fund raising continued. The market’s confidence on Jio platform’s value grew and investors started factoring it in. However, the news flow was a continuous trigger for that and as such in its absence, the stock has hardly done anything since July 2020. This also means that the stock has underperformed the broader market indices like BSE SENSEX and NIFTY 50.

Figure 4: Reliance Industries Ltd. Stock price over last twelve months

Source: Google

Mukesh Ambani has announced a massive ‘Renewables’ push

Reliance Industries (RIL) held its 2021 annual general meeting (AGM) on June 24th. Though the meeting was held virtually for the second time in two years, the media buzz remained strong in anticipation of what the company’s Chairman and Managing Director Mukesh Ambani would announce. Though he made some important announcements during the AGM, such as Google and Jio’s partnership in developing JIOPHONE, the cost competitive smartphone for the Indian markets and the induction of Saudi Aramco Chairman Yasir Al-Rumayyan on the company’s board, what attracted the maximum attention was Reliance’s foray into renewables business. In his speech at the AGM, Reliance Industries Chairman announced;

  • The strategy and roadmap for implementing the 15-year commitment to become net carbon zero by 2035.
  • The age of fossil fuels, which powered economic growth globally for nearly three centuries, cannot continue much longer.
  • The world has only one option: rapid transition to a new era of green, clean and renewable energy. The COVID pandemic has further put the climate issue in the crisis bucket.
  • The new energy business of Reliance Industries with the aim of bridging the green energy divide in India and globally.
  • A robust business model that catches the irreversible upward curve in the demand for green, clean and renewable energy and the downward curve in the cost of their production.
  • Reliance has started work on developing the Dhirubhai Ambani Green Energy Giga Complex on 5,000 acres in Jamnagar, amongst the largest integrated renewable energy manufacturing facilities in the world.
  • Reliance will build an integrated solar photovoltaic module factory, an advanced energy storage battery factory, for the production of green hydrogen, an electrolyser factory and for converting hydrogen into motive and stationary power, a fuel cell factory.
  • Over the next 3 years, Reliance will invest over Rs 600 bn in these initiatives and will create a fully integrated, end-to-end renewables energy ecosystem.
  • Reliance will establish and enable at least 100GW of solar energy by 2030. A significant part of this will come from rooftop solar and decentralised solar installations in villages.
  • Reliance will invest an additional Rs 150 bn crore in value chain, partnerships and future technologies, including upstream and downstream industries. So, overall initial investment in the New Energy business will be Rs 750 bn (more than USD 10bn) in the next three years.

The numbers are huge but the real significance of this is in the tone and the time devoted for the ‘New Energy’ part in Mukesh Ambani’s AGM speech. Of the amount of time he spent talking on business activities, almost one third was spent on outlining the plan for the initiatives in the renewables space. Reliance is betting big and if the investors haven’t got the message yet, sample this: “Let me tell you, in all humility, that New Energy is the most exciting, most challenging and most purpose-driven mission I will be pursuing in my life. I seek your blessings and support for success in this mission.”, said Mukesh Ambani at the AGM.

Renewables vs. Telecom and Retail, the other big bets of Reliance

Reliance may still be earning majority of its profits and the free cash flows from the crude oil refining and petrochemicals business but for several years, it has been preparing for a world which would be much less dependent on fossil fuels. The big bet on telecom and retail is a part of that plan and it has persisted with this. However, the renewables business is characteristically different from the core oil refining, telecom and retail and it was surprising that Reliance was pushing so aggressively on this front.

  • Reliance has always bet on businesses that have an inherent scalability component attached to them. Compared to conventional energy sources, renewables are more about distributed generation and less dependency on very large plants. Superior project execution capabilities and cost control helps but renewables are a more scattered business as such.
  • In everything else Reliance has done so far, they have opted for the latest technology and the best possible equipment money could buy. But, more often, the technology was still at a late stage of development and hence, the choices were relatively simpler. This is not really the case with renewables as the technology is still evolving.
  • Despite huge Government push and a lot of positive news flow on the renewables sector, the actual delivery has not yet matched with the optimistic estimates the renewables sector had factored in. There are several challenges such as execution delays and a limited visibility on PPAs (Power Purchase Agreements).
  • One of the important points behind Reliance’s diversification into Telecom and Retail was driven by the company’s desire to enter more customer facing businesses and hence, reducing the dependence on Govt policy. The renewables in India as a sector is still heavily dependent on the Govt policy.
  • In India, this is certainly a new sector and hence, there are limited number of success stories in the renewables space. But having said this, the ecosystem is evolving so fast that there is still a long way to go before things stabilise. This is a challenge because the companies in this space are yet to deliver on operating and financial performance.
  • Reliance, in the last three years, has focused a lot on becoming debt free as new capex declined after Jio. Though in the renewables, the internal accruals is likely to be the source of funding, it is still not known what the investors think about this initiative. Hence, there would be some questions from investors before any new investment could be committed to.

ESG is huge in Asset Management and the pandemic made it even stronger

In 2021, almost 30% of global equity inflows have gone into ESG funds so far and the assets under management (AUM) in the global ESG funds were at a record $1.4 trillion in April—more than double the AUM of a year ago and growing at nearly 3x the pace of non-ESG assets. The space is growing very fast and according to Bloomberg Intelligence, global ESG AUM is on track to exceed US $ 53 trillion by 2025, which is more than one-third of the US $ 140.5 trillion in projected total AUM.

In India too, ESG has picked up very fast. In terms of environmental, social, and governance (ESG) as a theme for investing, seven funds and one ETF were launched in FY21 in India based on the theme. ESG and Sustainability are the latest buzzwords in the global financial services industry and in the capital market conversations, the frequency of ESG appearance has increased significantly. Overall, there have been examples which suggest that ignoring ESG could prove to be a major hindrance in generating investor interest.

ESG will be the theme for Reliance for years to come

We think that these developments are extremely important for the businesses to shift towards more environment friendly choices which look attractive to investors. Reliance has always been extremely investor savvy. As such, it was certain that they would not fall behind. Though Reliance may have been planning this shift for a while now, the Covid-19 pandemic has certainly provided additional major tailwinds for these initiatives as ESG became mainstream. Just like many other companies, Reliance is making a conscious effort to project itself as an entity that is serious about this challenge and is also making efforts along the direction. Reliance has also understood the fact that although the O2C (Oil to Chemicals) business may be generating cash, they need something else to maintain investor interest. And in today’s world, that something is ESG.

For companies like Reliance Industries, which are more at risk after the latest developments in this sector (ExxonMobil and Engine No. 1 battle for board seats, the Dutch court ruling against Royal Dutch Shell, more pressure on Chevron for emission disclosure), ESG has become even more important. This is also a sign that while oil refining business can’t be done away with overnight, its mention will gradually diminish. In other words, the focus on where Reliance sees new opportunities will be driven more by ESG considerations. The New Energy fits in perfectly in the plan because investors will see this as a step which will be helpful in the transformation from fossil fuels to renewables, for Reliance Industries.

We also think that the AGM announcement was hardly a surprise after Mukesh Ambani’s statement earlier in the week. Mr. Ambani had said that there is no option for businesses but to go green and every unit of Reliance Industries would have to pivot as the conglomerate moves towards net-zero. “We have no option as a society, as a business but to really adopt a sustainable business model” he said while speaking at the Qatar Economic Forum. He also highlighted that Reliance had set a 2035 deadline for the company to turn net carbon zero and every unit of the company would have to pivot as it moves towards net-zero. The impact will take a while to reflect in the stock price but the media glaringly picked up Mukesh Ambani’s speech on both the occasions and clearly, Reliance has already started giving investors what they want to hear on ESG.

How EMAlpha can help the Investors

As the ESG filter gets more important in investment decisions for the asset managers globally, the investors are not ignoring ESG related developments. In the Oil & Gas companies, they are even more relevant. The ESG factors will be an important influence on stock prices in this sector and the companies will be required to proactively address the same. How can this be achieved and how EMAlpha can help the investors in this process:

  • There is no sector in which all companies are good or all the companies are bad and this applies to Oil & Gas industry too. There needs to be a formal objective evaluation of the companies in a sector and this exercise will help investors in figuring out what will work as an investment and what will not. Over next three to five years, ESG performance will lead to significant divergence in stock price returns in the Oil & Gas space.
  • The local news flow collection picks up several important issues, much faster than English media. How are investigations and cases going, will be material for many stocks. The local language along with English news analysis can be tracked for such issues. The potential fallout of such events is usually better predicted using local news analysis.
  • Some of the global investors have become more vocal on ESG issues and predicting the behaviour of large institutional investors on the basis of where they stand on issues like climate change and emissions is useful because it can help forecast the stock price impact. EMAlpha product combines technology with domain expertise. The analysis by EMAlpha is useful in picking up signals on the views of institutional investors.


  1. (Accessed on 26th June 2021)
  2. 10 deals in 53 days! Jio Platforms rakes in whopping Rs 1.04 lakh Cr — A timeline (Accessed on 26th June 2021)
  3. Reliance Jio gets Rs 87,655 crore investment in 6 weeks. Here’s a timeline (Accessed on 26th June 2021)
  4. Mukesh Ambani’s Jio platform gets Rs 87,655 crore investment in 6 weeks
  5. Reliance Industries Ltd. Annual General Meeting 2021: Here’s the full text of Chairman Mukesh Dhirubhai Ambani’s speech (Accessed on 26th June 2021)
  6. (Accessed on 26th June 2021)
  7. (Accessed on 26th June 2021)
  8. (Accessed on 26th June 2021)
  9. (Accessed on 26th June 2021)
  11. (Accessed on 26th June 2021)
  12. No option for businesses but to go green: Mukesh Ambani (Accessed on 26th June 2021)

EMAlpha Products and Services

In most Emerging Markets, information discovery is a major challenge. For example, even if global investors do show interest, how do they solve the problem of timely access to information? The world’s largest capital allocators hold USD 60 trillion and they include GPIF (Japan), GPF (Norway), ADIA (Abu Dhabi), GIC (Singapore) etc. However, only 10% of the capital gets allocated to EMs and ~90% goes to G10. The big hurdle for EMs is: Foreign investors cannot access relevant local information in a timely fashion.

Most market participants and investors from across the world realise that the low rates in G10 makes EM attractive for investors. But, a) Information access is usually a cost and time intensive process for investors, and b) In many EMs, language is a big barrier and because of multiple regional languages, there is a significant delay before news makes it to the mainstream English language. To address these issues, you need solutions like, a) Real time news collection from multiple languages and, b) Instantaneous machine translation and text analytics leading to actionable recommendations for investors.

There are further challenges such as ensuring that companies behave responsibly and that they adopt sustainable business practices. There is a need to ensure that the investors are contributing towards making the world a better place by making investment decisions which reward responsible behaviour of companies. Case in point, ESG (Environmental, Social & Governance) which is increasingly being used as a filter for investment decisions. There are other issues as well such as which data to use and a lack of a standardized framework for evaluation.

Some of these issues are too important to be postponed to a later date and it is in this regard that EMAlpha is making its contribution. EMAlpha has developed a Flexible ESG Framework Management System which is a proprietary technology that makes ESG scores framework agnostic, thus allowing for quick adaptation. In addition, the users decide what matters to them and the EMAlpha system does a classification into E, S, G and more granular categories.

EMAlpha also has solutions for Multilingual data collection and real time targeted information which are based on proprietary processes to collect relevant data across multiple markets. The coverage expands across emerging market equity, currencies and commodities and the work has also been very successful in testing the signals in some key markets for live trading strategies. This is a continuous cycle and a virtuous loop that allows for iterative improvement through AI-human feedback.

With developments in AI and technology in areas like NLP, there are considerable new possibilities to bridge the gap in information between Emerging Markets and the more Developed Markets. This is an area which is turning out to be very exciting because some of the tools mentioned were not available even a couple of years ago. This implies that the evolution in the field will only get faster as time goes on. While the Emerging Markets and the Capital Flow Conundrum is a complex one, there is now much more hope and optimism that with the usage of technology, things will only get better.

At EMAlpha, the ESG team is doing further research on why some issues like Social get more prominence as compared to others like Environmental or Governance issues. To look at specific cases in the context of ESG is a very intense yet interesting exercise and this has been an incredible learning experience for the EMAlpha Research team. The data, information and ratings are a humongous challenge for ESG and it takes time to reach to the depth of the issues as the field is evolving very quickly.

EMAlpha is making a solid contribution in tackling these challenges. EMAlpha has solutions for ESG which are practical, user friendly and although not too simplistic yet easy to use. EMAlpha has developed a Flexible ESG Framework Management System which is a proprietary technology that makes ESG scores framework agnostic, thus allowing for quick adaptation. In addition, the users decide what matters to them and the EMAlpha system does a classification into E, S, G and more granular categories.

We strongly believe that the entire ESG ecosystem requires multiple stakeholders to pull in the right direction in order to make it operational and that will be the most critically determining factor for ESG’s success in making the corporate responsibility actually work. Most importantly, the investors should view ‘E’, ‘S’ and ‘G’ individually and should not confound issues when it comes to the comprehensive ESG evaluation. It is important to understand the right reasons behind ESG investing because this bias could hurt their investment decision making and portfolio performance.

Research Team
EM Alpha LLC

For more EMAlpha Insights on Emerging Markets, please visit To know how you can use EMAlpha’s unstructured data and ESG (Environmental, Social and Governance) solutions for better investment decisions, please email us at [email protected].

About EMAlpha:

EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) more accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. EMAlpha works on information discovery and ESG solutions for Investors in Emerging Markets, using AI and NLP tech. Our mission is: “To help increase capital flow, in terms of FDI and FPI, to Emerging Markets by lowering information barriers using AI/NLP”. EMAlpha Products help achieve both alpha and ESG solutions and the idea is to help asset allocators, asset managers, banks and hedge funds along with companies with cost and time efficient access to relevant information. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious. Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.

This insight article is provided for informational purposes only. The information included in this article should not be used as the sole basis for making a decision as to whether or not to invest in any particular security. In making an investment decision, you must rely on your own examination of the securities and the terms of the offering. You should not construe the contents of these materials as legal, tax, investment or other advice, or a recommendation to purchase or sell any particular security. The information included in this article is based upon information reasonably available to EMAlpha as of the date noted herein. Furthermore, the information included in this site has been obtained from sources that EMAlpha believes to be reliable; however, these sources cannot be guaranteed as to their accuracy or completeness. Information contained in this insight article does not purport to be complete, nor does EMAlpha undertake any duty to update the information set forth herein. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information contained herein, by EMAlpha, its members, partners or employees, and no liability is accepted by such persons for the accuracy or completeness of any such information. This article contains certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” “outlook,” “forecast,” “plan” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of certain investment strategy. All are subject to various factors, including, but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting the operations of the companies identified herein, any or all of which could cause actual results to differ materially from projected results.