Dive Brief:
- As artificial intelligence continues to grow and financing flows to data centers and related infrastructure, Nuveen — the investment manager for retirement services company TIAA — is offering sustainable investors a guide on how they can navigate AI’s investment opportunities and ESG risks.
- The guide, published last month, details AI investment opportunities for sustainable investors like sustainable power generation for data centers and water-efficient data center infrastructure. It also walks investors through the potential environmental implications of such investments, as well as social considerations like labor market and governance implications like regulations.
- While examining the investment opportunities, Nuveen noted AI’s environmental impacts largely fall into one of three categories: power, carbon dioxide emissions and water and cooling. Prioritizing sustainability when it comes to AI has previously been called the “elephant in the room,” though social and governance implications are often overlooked.
Dive Insight:
Over $650 billion has been invested in AI data centers since 2020, based on capital expenditures from Amazon AWS, Microsoft, Meta, Google and Oracle from 2020-24, according to the report. However, the report notes that relative to the investments, “ESG implications of the AI boom receive far less attention and may be less well understood by investors.”
Nuveen Global Head of Responsible Investing Amy O’Brien co-authored the report, released Jan. 7, with Senior Director of Responsible Investment Strategy Ovidiu Patrascu. They found that tailoring sustainability frameworks to AI gives investors a greater ability to assess trade-offs.
“AI’s environmental, social and governance (ESG) considerations have wide-ranging implications for energy and water consumption, labor, regulation, data privacy and geopolitics that investors should be mindful of,” O’Brien and Patrascu wrote.
Among the AI investment opportunities for sustainable investors beyond power and data centers, Nuveen said investors should look into financing biodiversity solutions like ecosystem regeneration, water conservation and sustainable landscaping. Additionally, the report said that investors should look to finance innovative smart tech that creates efficiencies in power, water and cooling for data centers.
Alongside investment opportunities and environmental risks, sustainable investors should consider social implications like data privacy and trust; energy affordability; the use of AI for societal benefits and implications for the labor market, according to the report.
“We are in the early innings of AI impacting the labor market, and more change is likely in the coming years,” the report said. “In addition, it is critical for investors to evaluate companies’ approach to developing and retaining a workforce that is both trained to leverage AI capabilities, and flexible to reskill in areas where AI might not be as effective, such as softer skills and management of stakeholder relationships.”
Companies also face governance pressures that investors should consider, including regulations, geopolitics and their own corporate governance requirements. The report said that “corporate boards will be under significant pressure to understand, plan and execute (where appropriate) on the AI implications for their businesses and workforce.”
Domini Impact Investments CEO Carole Laible called AI “the topic of the day” in a prior interview with ESG Dive. “This is an evolving concern for sustainable investors, but it's now so broadly underway that it's nearly impossible to avoid exposure to AI,” she said. “The train has left the station.”
Laible added that as companies across industries and jurisdictions have directly or indirectly begun incorporating AI, “it's starting to become infeasible to say I don't want to be invested in AI.” As such, she said it’s important to recognize the environmental and social impacts that investing in technology brings.
