"Vestas are a company we invest in. They use AI technology to predict the direction of the wind. That improves energy efficiency for their wind energy business. Those businesses use the AI products of companies such as Microsoft and Google to do those things.”
As an investor, Lilloy holds real estate investment trusts that invest solely in data centres, and monitors the energy consumption data of the holdings of those Reits in order to ensure he is invested in the most energy efficient data centres.
Frandsen says the management of most of the largest technology companies in the world and most of the big data centre owners have signed pledges committing their businesses to net zero, and so are keen to use renewable energy.
He says: “This makes the big tech companies some of the biggest indirect investors in renewable energy, in terms of their operations.
"Reliability is very important for data centre providers, so the big tech companies often buy the power they need years in advance, which allows the builder of the data centres to have the certainty to invest in the most energy efficient way possible."
Callum Wells, portfolio manager at sustainable investment firm Castlefield, says that technological advances throughout history have replaced an old way of working, and AI is likely to do this, reducing the total level of energy required to complete tasks.
He adds that Nvidia recently updated the market that the next iteration of its products will consume less energy than the present products in its range.
Wells says: “Businesses will continuously strive for improvements in energy efficiency, too, because that’s what businesses do; they constantly improve or they fail. The missing piece is ensuring the sustainable supply of energy to power this and every other aspect of our economic growth.
"To focus on the use case (AI) would be myopic. Carbon emissions as a consequence of energy production is a perfect example of a negative externality from economic activity. The challenge, from my perspective, is that this cost is not always properly captured in the unit economics of operating businesses.
"A global carbon price, or equivalent policy, should help producers and consumers recognise the entire cost of their production and associated consumption. Once we have this in place, market forces should be trusted to do the rest.”
David Thorpe is senior investment editor at FT Adviser
