Thirst for power complicates ESG investors’ love affair with tech stocks

Investors press tech giants for AI power usage data to ensure sustainability in funds, impacting tech stock investments.

Investors who manage hundreds of billions of dollars are pressing Microsoft, Alphabet and others for more information on the power needed for artificial intelligence and advanced computing, to help decide whether the sector should stay heavily represented in sustainable funds, investors said.

While these conversations are at an early stage, six fund industry executives in Europe and the United States said they are looking more closely at the environmental impact of the AI boom, which Goldman Sachs estimates will boost data center power demand 160% by 2030.

None of the investors contacted by Reuters said they were considering divesting.

Some of the biggest tech companies leading the AI race that requires building and powering data centers have started reporting increased greenhouse gas emissions, raising questions from asset managers who want to show their portfolios do well not only financially but also by the environment.

Tech’s thirst for power is likely to go unabated because AI and cloud computing are important drivers of growth, although many expect data center efficiency to increase greatly. Tech stocks became go-to picks for many such funds, because they made outsized market gains while producing fewer greenhouse gases than stocks in other sectors like manufacturing and energy.

Investments marketed with environmental, social and governance concerns in mind have lost some favour since a pandemic era boom. But there are still some $2.24 trillion in equity in one of the strictest ESG categories: funds that come under Article 8 and 9 funds under the European Union’s financial law, according to data firm Morningstar Direct.

There was almost $30 trillion in global equity funds held as of last year.