A Tech Odyssey

Do you think the accelerated distribution and uptake of technologies we witnessed during the pandemic will become the «New Normal»?

In many ways, the pandemic promoted faster adoption of technology, both by companies and consumers. Companies had to be capable of connecting with customers, suppliers and employees, and consumers turned to digital platforms even more than before.

This led to the acceleration of certain technologies such as cloud computing, which, promoted by remote work, has become the obvious choice of Information Technology.

Many companies have already started to transition into this «New Normal», and cloud infrastructure providers should benefit. The figures speak for themselves: we anticipate that the total Public Cloud Services for the End-User market will increase from $243 billion in 2019 to $362 billion in 2022¹.

Remote working should continue after the situation normalises, creating opportunities for companies with activities related to data centres, servers, and collaborative software.

However, COVID-19 did not change the environmental and social challenges that we face, and how technology can address these. We believe that, without sustainability, the risks for our populations and planet will likely offset the potential benefits of Technology.

What do you look for in terms of sustainability when analysing a tech company?

We look at companies that offer sustainable development opportunities or manage sustainability risks well. However, when it comes to technology, sustainability can be quite an odyssey, as solutions never come without risks, especially for B2C companies.

Technology is an enabler of innovation. Information Technology equipment, for instance, is essential to the development and implementation of sustainability solutions across all other sectors. It is a key component for renewable energy and essential support for the socio-economic development of emerging countries.

If we look at a company providing semiconductors for solar panels, for example, it seems like a sustainable development opportunity, but is it really– what about the risks?

It all depends: the components rely on minerals that are often present in countries where violations of fundamental rights are widespread (e.g., child labour, forced labour). In addition, if you consider the life cycle approach, they often end up as non-recycled toxic waste!

Appearances can also be deceiving if we look at companies providing applications to access knowledge and banking services in emerging countries facing unstable geopolitical situations. Insufficient cybersecurity measures or abusive use of personal data can very well lead to the risk of people losing their money and seeing their privacy violated.

Thus, while it may seem like technology helps companies that are steering the planet towards a greener future and society on a fairer path, we do not believe it’s necessarily the case. That’s why our analytical framework looks for companies developing sustainability solutions, but only where environmental and social risks are properly managed.

Can you give us a few examples of risk management?

We feel semiconductor companies need to implement appropriate mechanisms to ensure the traceability of their minerals, which should be conflict-free, abuse-free and refined with the least impact possible on biodiversity.

We further believe the hardware industry, in general, has a great area of opportunity to invest, by setting up a reliable, large-scale circular economy that would broadly widen the use of second-generation semiconductor materials recovered from recycling and upcycling schemes. Our view is that this would solve a great deal of severe environmental and social issues.

We also feel that, in terms of data privacy and access to information, telecommunication companies should adopt policies that guarantee non-cooperation with public authorities abusively requiring access to user data.

On these issues, reports on the performance of ad hoc mechanisms are key, e.g., the number of government requests for user information that were received by type and admissibility.

We think technology can be a true enabler of innovation. However, it’s a matter for all (businesses, consumers and public authorities) to make sure it doesn’t hinder us from moving toward sustainable development in our planet and society.

¹Source: Gartner

Hua Cheng, PhD, CFA, is a Portfolio Manager at Mirova, and Louise Schreiber is a Senior ESG analyst at Mirova.

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