By Thomas Kostigen
A couple of years ago data overtook oil as the most valuable commodity in the world. Data as information is one valuable form of the commodity that you can invest in. Data as analytics is another valuable form for investing. Deep data dives in the form of artificial intelligence, is yet another data investment category. Still, one of the most overlooked forms of data capital is the way in which data are transmitted via data centers.
Returns on investments for data centers soared some 25 percent last year as more people stayed at home and worked remotely, sending and receiving data in record amounts via data centers. Data centers are where huge computer servers process and package digital information that is being sent and/or received.
According to one recent report, “the long-term catalysts for the data center industry point to years, if not decades, of steady demand for new facilities to house servers and other networking equipment in secure, reliable environments.” Investment exposure to data centers is mostly had by trading in Real Estate Investment Trusts, or REITs, that concentrate in the sector.
Projections for data center investing are incredible because “the number of connected devices is massive and only expected to grow in the years ahead. This is especially true for data-heavy technologies like artificial intelligence (AI), which is expected to grow from a $11 billion market in 2019 to $90 billion by 2025. Augmented reality and virtual reality are expected to approach more than $100 billion in market size combined by 2025,” the report says.
However, a challenge for data center investors may be the environmental impact of servers. Servers produce massive amounts of heat because of their electronic circuitry. That heat has to be cooled somehow or else servers fry. To cool things, nearly as much energy has to be used (40 percent of the total) as the energy consumed by circuits. As it stands, data centers use more energy than all of the United Kingdom, according to ComputerWorld. By 2040, the growth of data centers will be so great that servers will consume more energy than the United States. And along with all that energy come carbon emissions. As I wrote last week, if remote work continues at the same level as last year, more data will have to be processed from all those disparate locations, adding millions of tons of greenhouse gases to the atmosphere.
Facebook, Google, and Apple are all making strides to try lessen the environmental impact of their servers. They have stationed some of their biggest servers in Scandinavia, where cleaner power such as wind, and geothermal can cool things.
Environmental, social, and governance (ESG) investors are keenly aware of the carbon footprint linked to servers, and have raised shareholder resolutions to companies with server farms to come up with plans to mitigate their climate effect. Such resolutions can put downward pressure on stock prices. Which is why it’s important to figure how and what a company is doing to lower their emissions.
“The average U.S. round-trip commute time is about an hour; for those who drive alone to work, like the vast majority of Americans, that equates to nearly 3.2 tons of carbon per year, per person,” according to a Bloomberg CityLab finding. “Dialing in” can eclipse that in some areas because the energy powering servers in suburban and more rural areas might come from fossil fuels and because many employees have to travel at least part of the time in any event for work, whether to the office or other locales.
A good financial advisor can guide as to which companies are more at risk of a negative ESG rating due to their carbon footprints. And from an environmental perspective, at least, it may be best to meet with him or her in person instead of taking a Zoom meeting.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
