ESG Performance and Cost of Capital in India's Renewable Energy Transition: A DCF Valuation Analysis of Adani Green Energy Limited Under India's Net-Zero 2070 Policy Framework

To conclude, this study shows that in a highly leveraged renewable energy firm such as AGEL, ESG represents a financially material variable with significant implications for the cost of capital and enterprise value. It has been shown that the high equity risk premium of AGEL does not result from any risk characteristics intrinsic to the renewable energy business model but from financial leverage and governance overhang. By analyzing the green bond spreads, it is apparent that while the environmental benefit is offset by the governance penalty, it is demonstrated that the "G" component of ESG is more financially material than the "E" component.  In comparing scenarios, there emerges a surprising conclusion that while the accelerated adoption of India's Net-Zero policy does not create value via higher cash flows due to the requirement of increased capital investment necessary for greater capacity generation, it only creates value through lower costs of capital resulting from better governance credibility and ESG signals. This supports the three channels of ESG effect to corporate value transmission identified in the theory - risk management, access to green finance, and alignment with climate policies. This research's main contribution is an operational approach to pricing climate transition risk in renewables.

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