Digital infrastructure companies are increasingly meeting the energy efficiency challenge, according to the advisers of the VT Gravis Digital Infrastructure Income Fund.
Gravis Advisory Limited, a subsidiary of infrastructure and real estate investment specialist Gravis Capital Management Limited, which advises the fund has researched the accounts of its portfolio holdings to identify exactly how clean and green the companies are.
Listed owners of data centres have made sustainability and increasing energy efficiency top priorities. Equinix, the world’s largest data centre REIT, has achieved 91% energy procurement from renewable energy in 2020 and is committed to reaching 100% renewable energy and achieving global climate neutrality by 2030. Switch, a US data centre operator, has been running all its facilities on 100% renewable energy since 2016.
Another obvious step to reduce emissions is to increase the efficiency of the data centre operating system. The most common measurement of how efficiently a data centre uses electricity is the power usage effectiveness (PUE), this is the ratio of overall electricity consumption at the data centre facility to the electricity delivered to the IT hardware. The hypothetic optimum PUE is 1.0, meaning that 100% of the energy is efficiently used.
According to the latest survey from the Uptime Institute, the average PUE of a data centre is 1.59. Holdings within the Fund have been constantly improving their PUE ratings and have scored on average better than the data centre industry. Notably, US listed Digital Realty has recently delivered new-build facilities with design PUEs as low as 1.12.
Mobile phone towers play a critical role in the digital revolution that society is experiencing. There are several listed real estate companies that own the physical structures that the telecommunication antennae are fixed to. These REITs are seeking to reduce their environmental footprint by both switching the source of their power to renewable energy and by reducing the amount of power that they consume through increased efficiencies.
There are numerous examples of tower REITs improving energy efficiency. For example: American Tower Corp, the world’s largest tower REIT, is installing solar panels and batteries across its sites to reduce reliance on on-site diesel and gas fuelled generators; Vantage Towers, the owner of towers across Europe, is following a similar strategy and is targeting to procure 100% of its electricity from renewable energy sources by the end of 2021, and SBA Communications, the US-focused tower owner, has recorded a decrease of circa 7% in the average emissions per tower over the years 2017-2019 .
Matthew Norris, investment adviser, Gravis Advisory Limited commented: “Climate change is arguably the biggest long-term challenge facing humanity, and one that is becoming increasingly important in determining the investment prospects for digital infrastructure assets. With data centres estimated2 to consume more than 2% of the world’s electricity and emit roughly as much CO2 as the airline industry, the companies owning these assets are increasingly demonstrating their commitment and expertise towards improving energy efficiency.
“There are significant environmental benefits to be found by ensuring the very best technology and infrastructure is installed, ensuring data is stored and transmitted in the most efficient, and increasingly most sustainable way. There is no avoiding the vast amount of energy that is used when we all email, text and use social media – the digital revolution and its perpetual data cycle is very much in motion – but by investing in best-of-class assets that help to centralise processes and encourage use of the cloud, rather than physical in-house data storage, we can work to minimise the toll our hunger for digital technology has on the wider world.”