Written by Ashley Keet, portfolio manager at AXA Investment Manager.
As a powerful force for change, technology is being harnessed to create meaningful positive progress towards a more sustainable world. It touches every aspect of our lives and as new technologies like AI develop rapidly, so does the growth potential of the sector expand.
This combination is creating significant opportunities for investors who are building portfolios that contribute to a more sustainable world while also aiming for financial returns.
Semiconductors: changing gears to sustainable energy
Any investment strategy that includes a commitment to sustainable energy should be looking closely at the technology sector. Power semiconductors, for example, are critical at every point along the energy value chain, from power generation to managing the flow of energy. The global power semiconductor market was valued at $49 billion in 2022 and is projected to reach $80 billion by 2032 as the demand for energy efficient devices and the adoption of electric vehicles, renewable energy systems, and smart grids increases.
Improving the efficiency of EV power systems is key to increasing range and performance, and semiconductors are essential components for power management, control and energy conversion. The average EV already has twice as many semiconductors as an internal combustion equivalent, and this is expected to increase to three times by 2030. This makes the companies that produce these chips an attractive opportunity.
The world leader in auto semiconductors is Infineon. We believe that the company will be instrumental in accelerating the transition to EVs by driving innovation in power management, charging infrastructure, battery management and automotive safety.
It is also an important provider of semiconductors for the energy conversion systems used in renewable energy generation, such as solar and wind power. Ensuring efficient and reliable energy from these intermittent sources contributes to the stability and effectiveness of renewable energy systems.
The internet of things: improving life in real time
‘The Internet of Things’ has exciting implications for both environmental sustainability and social progress.
NXP Semiconductors, a Dutch company, provides the advanced sensor technologies, secure connectivity, and edge computing capabilities that enable real-time data collection, analysis, and management across several sectors. Its technologies support smart lighting, intelligent traffic management and efficient energy usage (for example, smart meters), contributing to sustainable and resilient urban environments.
It is also active in smart agriculture, where soil monitoring devices can help to protect biodiversity by reducing herbicide use and controlling water usage. More efficient farming also reduces the land area required for agriculture, which could lead to a fall in land degradation and deforestation – and potentially encourage reforestation – and a lower carbon footprint for the industry as a whole.
Within healthcare, NXP provides secure and scalable semiconductor solutions for medical devices, such as continuous glucose monitoring devices that help diabetics monitor blood sugar levels in real time. Connected medical devices enable the seamless and secure collection, transmission, and analysis of health data, empowering personalised healthcare and telemedicine applications.
The super-powered chips behind the AI revolution
Accelerated computing and AI are key enablers of innovation in everything from computer-assisted design and machine vision systems to healthcare research.
These advances aren’t possible without the powerful semiconductors that AI programmes rely on.
Market leader NVIDIA has developed specialised hardware and software widely used in AI training and inference tasks. Its technology is embedded in John Deere’s “See and Spray” technology, which captures images of crops and processes them in the cloud to enable more targeted application of herbicides. This can reduce herbicide use by up to two-thirds, offering both a positive impact on biodiversity and improved farmer profitability.
Also powered by NVIDIA chips is the BioNeMo Cloud Service for generative AI in drug discovery. BioNeMo enables researchers and developers to use generative AI models to rapidly generate the structure and function of proteins and biomolecules, accelerating the creation of new drug candidates.
Innovative software: enabling productivity and sustainability
Design is one area where innovative software is being used to develop more sustainable products. A key development is the use of ‘digital twins’, virtual representations of a physical object or system that allows for the simulation and analysis of its behaviour and performance in real time, providing valuable insights for sustainable design and operational improvements.
Leading companies in this area include Bentley Systems, which offers design software that can be used to create digital twins of physical assets such as buildings and infrastructure. This technology improves decision-making, maintenance planning, and sustainable management of assets, ultimately leading to optimised performance and reduced environmental impact. For example, Bentley Systems can analyse how a bridge will respond to increased temperature, changing precipitation patterns, and extreme weather events. This allows for proactive planning and design to ensure that bridges can withstand the challenges posed by climate change.
In healthcare, Dassault Systèmes can create a digital twin of a patient’s heart or brain that can simulate and predict how the organs will behave under various conditions. Healthcare professionals are then able to analyse and optimise treatment strategies, such as surgical interventions, device implantations, or drug therapies.
In other areas, software can improve a business’s overall sustainability. SAP’s Sustainability Solutions can help a business to improve its environmental performance, transition to circular economy models, ensure transparency in their supply chains, accurately account for and report their carbon emissions, drive sustainable product innovation, and address social impact areas.
Companies that provide innovative solutions to help reduce our impact on biodiversity, promote social inclusion and help transition to cleaner energy also have the potential to generate attractive financial returns. In the long-term, this has the potential to be good news for both investors and the planet.
