Amidst the rising resource intensity of data centres, the Mag 7 are embracing renewable energy, carbon credits and venture capitalism, Atharva Deshmukh takes a closer look at their environmental footprint.
A group of seven companies; Amazon, Alphabet, Apple, the Meta Platforms, Microsoft, Nvidia, and Tesla collectively known as the “Magnificent Seven” or "Mag 7" have come to dominate stock market returns fuelled by optimism over AI. In 2023, the group represented about a third of the S&P500’s market capitalization and almost half of its growth.
Given the scale of their operations and their hefty position in institutional investor portfolios – how, when and at what pace these companies decarbonise is likely to be on investors’ radars.
So, what is the environmental footprint of the Mag 7? Data extracted from their latest disclosures, holds insights about where things stand and where they are headed.
The Mag 7 is a mixed bunch that includes technology behemoths operating extensive electronic equipment supply chains, a social media conglomerate, the inventor of the graphics processing unit, an electric vehicle pioneer and the world’s most powerful search engine.
Yet, they share a common denominator: computing power. If computing power is to proliferate in accordance with Moore’s law (a doubling of ability in every two years), so will the infrastructure that houses it, most notably data centres.
Data centres depend on two key resources – electricity and water.
Take the example of Meta which built its first data centre in 2010 and currently operates 26 data centres across Asia, Europe and the US. In recent years, Meta’s electricity use has increased, propelled by its data centres.
“We are designing our data centres to be future-flexible while considering the short- and long-term impacts on our decarbonization efforts”, writes Rachel Peterson, Meta’s vice president for infrastructure data centres.
Powering data centres with renewable electricity seems to be the default strategy. By 2025, Nvidia expects to run all data centres under its operational control on renewable energy, a strategy that explains its renewable electricity shopping spree. In 2024, for the first time, the company purchased more renewable energy than non-renewable.
Water is the other resource used extensively in data centres. If the worrying instance of an overheating laptop sounds familiar, so will the fact that computing within a laptop generates heat and consequently requires cooling. Data centres are no different, which is why they requires a significant amount of water for cooling. 96% of Google’s water consumption in 2023 was attributable to its fleet of data centres.
For a scale reference, Google reports its data centre water use in “golf course equivalents”. It takes 150 million gallons of water, on average, to irrigate a golf course in the south-west United States. Google’s data centre in Mayes Country, Oklahoma uses the 5.4 golf course equivalents of water, its facility in Belgium needs 1.6.
For Meta too, water use in data centres has been on the rise not only in absolute terms but also relative to its total water consumption.
Mag 7 sustainability reports are rife with pat-on-the-back messaging of achieving emissions reduction and energy transition targets sooner than expected. These statements, highlight the pace with which these companies claim to have accelerated their decarbonisation efforts.
“We set an ambitious goal to match 100% of the electricity consumed by our global operations with renewable energy by 2030, and we reached that goal in 2023—seven years early”, says Kara Hurst, Amazon’s chief sustainability officer. The company’s aim is to be net zero by 2040 and by 2025 to purchase enough renewable energy to power its entire global operation.
For several of the Mag 7, the pursuit of emissions reduction includes an ardent defence of carbon credits.
“We are paving the way for a future where carbon credits are a quantifiable, real, permanent, and socially beneficial method by which to reduce and remove carbon from the atmosphere”, reads Amazon’s 2024 sustainability report.
Apple too, has outlined its commitment to “high-quality” nature-based carbon credits. “Transparency and integrity are critical to the carbon projects that we fund. The credits from these investments must be additional, permanent, measurable, and quantified”, the company says in its latest environmental progress report. The company’s use of credits has risen in recent years.
Apple’s use of carbon credits is hardly a recent turn of events. For instance, between 2019 and 2021 Apple retired 255,000 metric tons CO2e in an afforestation project in the Guizhou Province of China aimed at planting trees across 46,000 hectares in a bid to conserve biodiversity.
Some of the magnificent seven are turning into investors intent on financing early-stage climate technologies. In 2020, Microsoft launched the Climate Innovation Fund and capitalised it with $1 bn.
The fund invests in climate solutions that satisfy a set of criteria ranging from the technology being aligned with Microsoft’s core business to evidence of “underfunded” markets for the technology in question. So far, the fund has invested in companies in sustainable aviation, green hydrogen, energy storage and carbon removal.
The fund’s mandate prohibits investments in public companies and explicitly avoids a majority ownership stake.
Amazon’s $2 bn venture capital fund – the climate pledge fund – is designed along similar lines. Thus far, it has invested in 28 companies across six countries. Amazon’s funding, which takes the form of either preferred equity or convertible debt, comes with an additional caveat – to be eligible, the technology must be able to support Amazon’s own net zero by 2040 target.
For the Magnificent Seven, their technological and commercial footprint is tied at the hip with their environmental one. As computing becomes more resource intensive, their net zero strategies rest on three pillars - renewable energy purchases, a venture capital-style financing of early stage climate technologies and a discernible confidence in carbon credits.