About 200 people with banners and megaphones protested against the agreement to supply signaling technology outside the Munich arena where the German engineering company was holding its annual general meeting.
Inside, a procession of shareholders queued up to support their call, worried about the environmental impact and carbon emissions from the project.
As the company announced weaker-than-expected earnings, Kaeser said Siemens would become climate neutral by 2030 and it was "almost grotesque" that it had been singled out by environmentalists for criticism.
"The claims raised are legitimate ones, but they don't bring about solutions right away," Kaeser told reporters.
Under the contract agreed last year, Siemens will provide signals technology for a railway line to transport coal from a remote coal mine run by India’s Adani Group (ADEL.NS) in Queensland.
Before Wednesday's meeting, protesters unfurled a banner on Siemens' Munich headquarters that declared: "Bushfires start here - stop Adani".
Murrawah Johnson, from an Australian indigenous group, told the AGM that Siemens had not checked properly whether the traditional owners supported the coal mine project.
"We have said time and again in a clear voice no to this project," he said.
Helena Marschall, a 17-year-old member of environmental group Fridays for Future, accused Siemens of hypocrisy by posing as a climate protection company while taking on environmentally damaging contracts.
"A company that is truly sustainable can no longer afford to support fossil-fuel projects. Contracts will have to be broken not just in Australia, but all over the world," she said.
Shareholders also expressed concern about the impact of the 18-million-euro (15.17 million pounds) contract and the damage it could do to Siemens' reputation.
"With a careful examination of all environmental and reputational risks, Siemens should never have signed this contract," said Vera Diehl, a portfolio manager from Union Investment, which owns a 0.6% stake.
Siemens reported first-quarter results that missed forecasts after a slowdown in its industrial automation business and problems in its power and gas and wind power operations.
Siemens' industrial operating profit fell 30% to 1.43 billion euros ($1.58 billion), missing analyst forecasts for 1.88 billion euros in a consensus gathered by the company.
Revenue rose slightly to 20.32 billion euros, undershooting estimates for 20.63 billion euros.
The company confirmed its guidance of full-year earnings per share in the range of 6.30 to 7.00 euros after posting 1.33 euros during the first quarter.
"We have had better quarters in the past," Kaeser said, but added that Siemens would make up ground in the second half and hit its targets after a slow start.
Despite the downturn, the company's plan to spin off its energy business and merge it with its wind power operations remained on track for September, he said.
On Tuesday Siemens said it would buy Iberdrola's IBE.MC 8.1% stake in Siemens Gamesa renewable energy for 1.1 billion euros and transfer the shares into its new Siemens Energy unit.
By John Revill