Here’s an eye opening stat: US-located data centers powering AI are predicted to consume up to 12% of the total national electricity supply by 2028. That’s a possible 6X increase in power usage and carbon pollution from 2018 levels at a time when runaway climate change is already creating economic havoc.
AI leaders like Alphabet, Microsoft, and Amazon have set aggressive climate goals to address the monumental challenge of climate change, even as they race ahead with the biggest build-out of power-hungry data centers in history. The question is, can they do both?
What’s a tech giant to do when short term growth threatens its longstanding climate commitments? It’s a thorny question with no easy answers, but that’s no excuse to ignore it. In fact, finding solutions to AI data centers’ seemingly endless demand for power is also one of today’s biggest business opportunities. And if there’s a group of folks who understand the power of innovation, efficiency, and transformative change, it’s the Silicon Valley pioneers who reinvented our world.
I come to the conversation around climate change and AI from the investor perspective. As a director of shareholder advocacy at Trillium Asset Management, I’ve been on the front lines of engaging big tech management teams on exactly how they plan to meet their climate goals and still achieve the kind of growth and profits we wish to see from AI. What I’ve heard so far has been both eye-opening and, frankly, a little disturbing. I’ll give you an example.
Alphabet, better known as Google, now uses AI microchips that far outstrip the speed of their predecessors — able to instantly perform millions, and even billions, of complex calculations.
But as important as AI is for society and the economy, this new computing superpower has serious risks. Leaving aside potential social impacts, it’s critical to acknowledge that it takes a mind-boggling amount of juice to fire the latest AI chips at these new, massive, i.e. “hyperscale,” data centers, whose square footage can dwarf whole football fields.
The giant tech companies are investing billions of dollars to create, train, and run AI models. For example, Alphabet, a leader in this space, is rapidly developing AI models and deploying capital to build the data centers it needs to host this emerging technology. The company plans to spend tens of billions of dollars this year on data centers and infrastructure.
To its credit, Alphabet has set industry-leading GHG emissions reduction goals—to reach net-zero emissions, slash total emissions by 50%, and source clean energy around the clock—all by 2030. As laudable as those goals are, Alphabet’s GHG emissions have ballooned, rising 48% higher than in 2019, according to its own 2024 Environmental Report.
Climate risk
It is not clear to us how Alphabet will pivot from its sky-high emissions trajectory to one that will meet its own 2030 targets. Given the growing gap between its publicly stated climate goals and its AI ambitions, Trillium, along with As You Sow and Zevin Asset Management, escalated our concerns in the form of a shareholder proposal to be voted on at this year’s annual shareholder meeting on June 6. We asked Alphabet’s Board of Directors for much greater transparency on its plans, urging disclosure of any stress tests the company has conducted against its emissions reduction strategies and whether it has a Plan B (or C or D) if some strategies fall short.
Investors have many reasons to be concerned. Should Alphabet blow past its own targets, it would seriously tarnish the tech giant’s hard-won image with consumers and employees as a global climate leader. It also raises questions about the company’s ability to balance AI growth while managing climate risk as historically destructive wildfires, hurricanes, and flooding threaten the same global economy it, and the rest of us, will depend on for long-term growth and stability. Ignoring the problem, or undertaking half-measures, will not be enough to protect us from the multi-trillion dollar losses to the economy so clearly spelled out by the U.S. Treasury Department, Federal Reserve Bank, and many others.
Beyond the potentially devastating losses to the global economy, finding a solution to runaway emissions from data centers is a huge business opportunity. That became obvious with the introduction of DeepSeek, the China-based AI platform that shocked the market with a model comparable to Alphabet’s advanced AI solutions while using a fraction of the computing power (and corresponding amount of emissions released).
So, can big tech scale AI and still meet climate goals? We believe so. By enhancing transparency about its strategies and plans to achieve climate targets, we believe Alphabet can provide shareholders with the confidence it will continue to assert its climate leadership and build long-term value.
______________________________________________________________________
Andrea Ranger is Director of Shareholder Advocacy at Trillium Asset Management
Disclosure: The views expressed are those of the authors as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be a forecast of future events or a guarantee of future results and may not be relied upon as investment advice. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy and is not a complete summary or statement of all available data. This is not a recommendation to buy or sell the securities mentioned. It should not be assumed that investments in the securities mentioned have been or will be profitable.
