Technology Industry Playing a Bigger Role in ESG Advances

ESG technology

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by | Feb 24, 2022

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ESG technology

(Credit: Pixabay)

The technology industry is seen as a key player in ESG moving forward, especially with the amount of connectivity needed to power smart applications, electric vehicles, microgrids and more.

With that focus, greenhouse gas emissions, product design and management, and business operations resiliency were some of the key environmental, social and governance (ESG) issues addressed by tech industry analysts in a report by Jefferies. The tech subsectors that addressed the tech ESG topics were in internet and interactive entertainment, software, semiconductor equipment, and data networking and wireline and wireless equipment.

Jefferies says the ESG issues brought up in the conversation are some of the most prevalent at the moment and can be the foundation of making improvements.

Data centers alone can use a lot of energy and the market of providing that power continues to grow. The implementation of technology such as 5G connectivity is also seen as a driver toward efficiency and sustainability across sectors like buildings, transportation and manufacturing.

As Jefferies addresses key ESG components for businesses and investments, the  semiconductors and semicap equipment segment focused the most on sustainability issues as companies are delivering equipment that is intended to reduce energy consumption and reduce operating costs. That makes the product design and lifecycle management of those products important, according to analyst Mark Lipacis.

He brings up the power and management subsector specifically, saying there is a new class of semiconductors called wide bandgap semiconductors that make power management and switching more efficient. That can reduce the amount of power needed to charge devices and power data centers.

With that Jefferies will be monitoring regulations that require improved efficiency for those areas as well as power management products like of electric vehicles.

Additionally, Lipacis says business model resilience is another significant ESG issue in the semiconductor space. The sector has trended toward becoming “fab-light” or “fabless,” meaning companies are shifting to low-cost models, eliminating their own plants and outsourcing manufacturing. By using their own facilities, for example, companies can be more resilient, he says.

Regarding the Internet and interactive entertainment subsector, greenhouse gas emissions was the biggest topic brought up. Brent Thill, who addressed the area, says e-commerce companies carbon footprints are driven by package deliveries and the waste associated with them.

Cloud data and going digital is helping reduce those emissions, he says. Jefferies will be monitoring efforts in companies reducing their emissions footprints, especially with an implementation of a public cloud and less actual physical business space.

In terms of the data networking segment, Jefferies sees it as a key to reducing emissions as people can be connected anywhere. That reduces emissions impacts such as car and air travel.

Analyst George Notter says the United States government has launched several broadband stimulus programs worth nearly $100 billion, which will happen over the next five to seven years and help bridge digital divides in the country. He says they view this area as an important investment in a traditional sense, but also as an ESG investment opportunity.

Software focused mainly on the social aspect of ESG, with employment engagement, diversity and inclusion being its top issue. Privacy is another factor, according to the discussion, with potential regulations and financial penalties involved.

The report follows a ESG series Jefferies did in the fall of 2021 that included breakouts on all the tech industry segments.

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