Exclusive: Microsoft’s green grid bid

Greetings from New York, where the antics of Elon Musk are mesmerising the media, never mind Wall Street and Washington. Sustainability investors had better watch him too, since Musk offers a potent lesson about the peril of ignoring “G” (governance) factors when chasing “E” (environmental issues). Tesla’s share price has halved in recent months, harming the returns of many ESG funds. This partly reflects rising competition in the electric vehicle market. But there is also mounting investor concern about Musk’s ability to run Tesla while he is so distracted by Twitter — and the fact he keeps dumping its shares, contrary to earlier promises. Green (like brown) companies can suffer when a capricious leader subverts “G” norms.

Meanwhile, if you want another chilling story it is also worth noting the bruising inquisition that Republican lawmakers meted out to BlackRock officials in Texas this week, in relation to ESG. We will return to this on Monday, as the fallout mounts, and will also cover the progress (or lack of it) from the COP15 summit in Montreal. See my column here about why developments there leave me alarmed. (And if you want more of me, check out today’s Swamp Notes newsletter).

But for now we bring you a scoop about a novel move that Microsoft is taking in relation to its data centres that Moral Money suspects will get other tech companies talking. And look below for a seasonal story about why sustainability-linked investors should pay more attention to their support staff this holiday season. (Gillian Tett)

Microsoft to buy solar power from India’s ReNew Power

ReNew Power, one of the biggest renewable energy providers in India, has inked a deal with Microsoft to supply the technology giant with 150 megawatts of solar power, the latest in the burgeoning business for power purchase agreements in the technology sector.

The solar power will come from a new site in Bikaner, which is about 450km from New Delhi. This deal marks the second big power purchase agreement ReNew has signed this year with a US tech giant, on the back of its September deal with Amazon for 210 megawatts.

The US tech companies, including Alphabet, Meta and Apple, are increasingly desperate for clean energy options. For one, these firms have some of the strongest net zero carbon emissions targets in business. Microsoft has pledged to be carbon negative by 2030. But these companies are also enormous energy consumers.

The Microsoft deal, “just shows the fact that these companies are looking to get their carbon footprint neutralised”, ReNew’s chief executive Sumant Sinha told Moral Money.

And cutting carbon isn’t going to get any easier. The combined power usage of Amazon, Google, Microsoft, Facebook and Apple is more than 45 terawatt-hours a year, about as much as New Zealand.

Indian prime minister Narendra Modi’s government is working on reforms to make it easier to get renewable power projects up and running, Sinha said. And ReNew is looking to broaden its power purchase agreement deals to other sectors outside the big technology businesses.

Deals like this Microsoft agreement illustrate how decarbonisation is increasingly global and how renewable energy can be sourced from the other side of the globe to help big firms cut emissions. (Patrick Temple-West)

From cleaners to heat pumps, responsible investing starts at home

One of Europe’s largest asset managers, Legal & General Investment Management, made us sit up last week when it said it would offer healthcare benefits and extra sick leave to cleaners and security guards.

Who in the investing world has not guiltily wondered in the run-up to Christmas how maintenance workers in their own office are treated?

Last month, LGIM was also among a group of UK investors with £3.2tn under management, including insurance company Aviva and Brunel Pension Partnership, who wrote to FTSE 100 companies they invest in, arguing they should provide cost-of-living help to their staff.

As heating bills creep up across the continent, investors are trying to show that promises to invest in virtuous ways extend to how they manage their real assets and staff.

LGIM in particular is looking to decarbonise its £24bn real estate equity portfolio — covering 76mn square feet — to help meets its target of net zero financed emissions by 2050, while keeping cost to investors low and rents and bills down for tenants.

“It’s about thinking about what we can do for society,” Bill Hughes, LGIM’s global head of real assets, told Moral Money. “Yes, that makes the assets more valuable. It’s a virtuous circle.”

Buildings accounted for 30 per cent of global energy consumption last year, mainly as a result of burning fossil fuels for heating and electricity use, according to the International Energy Agency.

Hughes told Moral Money that some of the buildings the group’s real assets division invests in could become stranded assets if they become too expensive to refurbish and insulate to the standard required by regulators.

“One [risk] is getting caught in assets that have accelerating obsolescence and are more troubled in the new world than we thought,” Hughes said. “It is about making these assets appealing to occupiers and protected in terms of value decline.”

To reduce this risk, LGIM is gradually installing smart meters, energy efficient lighting and heat pumps across its 500 directly managed real estate assets in the UK, and analysing the carbon footprint of its buildings.

One potential flaw in the plan to reach net zero in its buildings portfolio is that LGIM does not currently report on “scope three” indirect carbon emissions (those linked to occupier heating bills for example) linked to the assets in its real estate equity funds. It says it will start publishing these data once more reliable figures become available.

For emissions that cannot be avoided, it says it may buy offsets, meant to counterbalance the release of one tonne of greenhouse gas into the atmosphere with an equivalent removal or avoided emission elsewhere. As we have previously reported, the offset sector has come under serious scrutiny — so we will pay close attention to their use in real estate portfolios. (Kenza Bryan)

Smart read

From wildfires to rainstorms and floods, the types of event that trip up reinsurers are changing, writes FT business columnist Cat Rutter Pooley. For some, it is just not worth the risk.

Can a company be considered responsible if it pays its chief executive hundreds of times the typical income of its frontline workers? What about the investors who vote through such lavish pay packages? Our final FT Moral Money Forum report of the year dives deep into the factors driving corporate pay policies, and the evidence of their success or failure. Our thanks to all the Moral Money readers whose contributions informed Sarah Murray’s reporting. We hope you enjoy it.