Receive Updates on Water Scarcity: Stay Informed and Take Action
Stay informed about the latest news on water scarcity issues with our daily e-mail updates. Our myFT Collection Daily e-mail provides you with a curated list of the most recent shortage of water news every morning. Don’t miss out on important updates – register here to receive the newsletter directly in your inbox.
Stay Ahead of the Curve at our Center of Moral Money
Visit our Center of Moral Money for all the latest ESG (Environmental, Social, and Governance) news, opinion, and analysis from across the FT. We strive to keep you informed about the evolving landscape of sustainable finance, so you can make informed decisions.
Africa Climate Week: A Difficult Time for Sustainable Finance
The United Nations is kicking off African Climate Week in Nairobi today, with Kenyan President William Ruto among the high-profile speakers. However, the continent is facing challenges in sustainable finance due to recent political unrest. Gabon, the latest African country to experience a presidential coup, had a committed environmentalist president, Ali Bongo. He had implemented a $500 million debt-to-nature swap to protect Gabon’s forests, home to gorillas and elephants. However, the coup has raised concerns about the country’s sustainable bonds and its financial stability.
While we keep an eye on African Climate Week, our attention this week is focused on the Asian edition of the Moral Money Summit taking place in Singapore. If you’re participating, don’t hesitate to say hello!
Water Scarcity: A Growing Risk for Semiconductor Companies
Water scarcity is becoming a significant risk for semiconductor companies worldwide. The extreme heat experienced this summer has exacerbated the issue, as semiconductor manufacturing requires large amounts of fresh water.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor company, announced plans to triple its investment in Arizona, USA, to $40 billion. However, this decision comes as Southwestern states face severe drought conditions. Arizona, in particular, has been affected by a “megas drought,” resulting in historic low levels in major water basins and water cuts for farmers.
Taiwan has also been grappling with water shortages, despite being home to TSMC. The Tsengwen Reservoir, the largest in Taiwan, was only filled to 11% of its capacity in March. These water scarcity risks have caught the attention of investors, who are now recognizing the vulnerability of supply chains to climate change.
Investors Unaware of Drought Risks to Semiconductor Companies
Shareholders of semiconductor companies have yet to fully appreciate the risks posed by water scarcity. Morgan Stanley warns that investors should consider the long-term impacts of water supply in the context of climate change, especially in water-stressed areas like Taiwan. The country heavily relies on seasonal rainfall, which has become less reliable due to climate change.
While semiconductor companies have made broad claims about risks to their businesses, their regulatory filings lack specific details on water scarcity threats. However, some companies, such as Nvidia and Micron, have taken steps to address these risks. Nvidia mentioned potential harm from natural disasters, including water shortages, while Micron issued $1 billion in green bonds to invest in water stewardship.
Recycling and Water Stewardship Efforts
To mitigate water scarcity risks, some semiconductor companies have started recycling the water used in manufacturing processes. Intel aims to be nearly water-neutral through its water stewardship practices, returning clean water to ecosystems in quantities similar to what it consumes. The company has already returned billions of gallons of water to nearby communities.
TSMC also plans to reduce its unit water use by 30% and is working with the Taiwanese government on water recycling initiatives. Such efforts are crucial, but they may not be enough to alleviate the pressure on water supply caused by the growing demand for chips.
The Impact of Artificial Intelligence on Water Demand
Artificial intelligence (AI) is adding additional strain to water resources. The rapid development of AI is expected to increase water demand, as both semiconductor companies and data centers consume significant amounts of water. Research from 2023 found that training Microsoft’s ChatGPT-3 AI model consumed 700,000 liters of clean water, equivalent to the production of hundreds of cars.
Tech Companies’ Responsibility in Water Sustainability
While there has been a recent focus on carbon emissions, the transparency and action taken by tech companies regarding water sustainability remains lacking. Big tech companies have disclosed their carbon footprints but have not done as much for their water usage. Direct water consumption for AI model training and indirect water consumption from electricity usage are not adequately included.
Moving Forward: Combating Water Scarcity
Water scarcity poses a significant risk to semiconductor companies and their supply chains. Investors need to recognize and evaluate these risks in the broader context of climate change. Companies must prioritize transparency in disclosing water efficiency information and implement water stewardship practices, including water recycling initiatives. The development of AI should also consider its impact on water demand.
By staying informed about water scarcity issues and taking action, we can work towards sustainable solutions and ensure the long-term viability of semiconductor manufacturing and other industries. Register now to receive daily updates on water scarcity and other ESG-related news. Stay ahead with the latest insights in sustainable finance at our Center of Moral Money.
Sources:
– Financial Times
– Bloomberg
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
Receive free water scarcity updates
We will send you a myFT Collection Daily e-mail with the list of the latest news Shortage of water news every morning.
This article is an onsite version of our Moral Money newsletter. Registration Here to receive the newsletter directly in your inbox.
Visit our Center of Moral Money for all the latest ESG news, opinion and analysis from across the FT
Today the United Nations begins African Climate Week in Nairobi. Kenyan President William Ruto will be among the big names to speak. But it comes at a difficult time for sustainable finance on the continent.
Last week Gabon became the latest African country to suffer a presidential coup. President Ali Bongo deposed he was a committed environmentalist, eager to protect the gorillas and elephants that inhabit Gabon’s forests, which cover about 90% of the country. He is now from Gabon $500 million debt-to-nature swap it could be in trouble like the country’s dollar-denominated bonds sold off after the coup. Africa’s sustainable bonds could also face difficulties following the coup, BNP Paribas said on Friday. according to Bloomberg.
We will continue to monitor Africa Climate Week, but this week Simon and I will be in another corner of the world: Singapore, for the Asian edition of the Moral Money Summit. Please say hello if you participate.
In today’s newsletter, I report on the water scarcity challenges facing the world’s largest semiconductor companies, an issue that resonates around the world. At best, chip manufacturing is one of the toughest manufacturing processes in business. Now, investors are slowly recognizing that the world’s insatiable appetite for semiconductors has collided with the consequences of climate change. —Patrick Temple-West
Water scarcity is a growing risk for semiconductor companies
Extreme heat this summer around the world has raised temperatures in semiconductor companies that need huge amounts of fresh water to meet the growing demand for chip manufacturing.
Last year, Taiwan Semiconductor Manufacturing Company he said it would be more than triple his investment in the US state of Arizona amounts to 40 billion dollars. With the new investment, TSMC is expected to open a manufacturing facility, or “fab,” in the state in 2024. According to the U.S. government, Arizona was the fourth-largest exporting state of semiconductors in 2022.
But TSMC chose an increasingly drought-prone part of the United States. Just as TSMC announced its investment in Arizona, Southwestern states were in the midst of a ‘megas drought’ which depleted the two major water basins of the region bringing them to historic lows. Farmers in parts of Arizona have experienced cuts in the water they can use for irrigation.
Closer to home, drought conditions were even more severe. Earlier this year, Taiwan experienced significant water shortages – less than two years after overcoming the worst drought in a century. The Tsengwen Reservoir, the largest in Taiwan, was filled to only 11 percent of its effective capacity on March 17, according to government data. The level of the Nanhua Reservoir, which supplies Taiwan’s manufacturing centers in Tainan and Kaohsiung, is 41 percent.
Water shortage risks for semiconductor companies are the latest wake-up call to investors about supply chain vulnerabilities caused by global warming. FT climate editor Emiliya Mychasuk highlighted the extreme weather conditions in July introduced risk into the supply chain in commercial activities such as food markets. Even in the best of times, making semiconductors it is fraught with supply-side stress.
For shareholders of semiconductor companies, drought risks have not been fully appreciated, Morgan Stanley warned in an Aug. 27 report. “Investors should evaluate the long-term impacts of water supply in the context of climate change, especially when production is concentrated in water-stressed areas” such as Taiwan. The country “relies heavily on seasonal rainfall to provide its water supply, and climate change has made that option less reliable,” Morgan Stanley said.
The chip makers’ regulatory filings don’t go into detail on the water shortage threats they face. TMSC said in its 2022 annual report that it now requires suppliers to assess drought risks and implement responses. Nvidia this year said its operations could be harmed if hit by a variety of natural disasters, including water shortages. Rivals have made similar and sweeping claims about the overall risks to their businesses. Micron, one of the dominant companies in the global DRam memory chip market, revealed that it issued $1 billion in green bonds in 2021 to help pay for investments in water stewardship, among other environmental initiatives.
Some chip companies are also looking to recycle the fresh water used in manufacturing. Intel said it is nearly water-neutral, returning nearly as much clean water to ecosystems as it consumes. In 2021, the company used 16 billion liters of fresh water, purified water and desalinated water. And thanks to water stewardship practices, it has been able to return more than 13 billion gallons of water to nearby communities.
TSMC said it plans to reduce unit water use by 30%, though its recycling efforts are less specific. The company said it is working with the Taiwanese government on water recycling.
“People don’t realize that water recycling, on-site water treatment plants, and net water consumption targets are now widely used across different industries, including the semiconductor industry,” he told me. Paul Westerhoff, a professor at Arizona State University. “While the last few months in central Arizona have been relatively dry, last winter was quite rainy in Arizona,” he said. “There is more than enough water for Arizona’s growing semiconductor manufacturing industry.”
But water problems could be made worse by the rapid rise of artificial intelligence, Morgan Stanley said. “The rapid development of artificial intelligence will likely increase the demand for water even more – semiconductor companies and data centers both consume a lot of water,” Morgan Stanley said. Analysts he cited research from 2023 which found that in the time it took to train ChatGPT-3, Microsoft’s US data centers directly consumed 700,000 liters of clean water, enough to produce 370 BMW cars or 320 Tesla electric vehicles.
Due to growing demand for chips, “the current rate of recycling doesn’t stop semiconductor makers from putting pressure on Arizona’s water supply,” Shaolei Ren, a professor at the University of California at Riverside, told me.
“Despite the recent emphasis on water sustainability, big tech companies still haven’t done as much for water as they have done for their carbon footprints,” Ren said.
The companies have disclosed Scope 2 carbon emissions from using electricity to train AI models, he said. But direct water consumption for training the AI model is not included, nor is indirect water consumption for electricity usage.
“The lack of transparency regarding information on water efficiency, especially when compared to carbon, is not in line with recent [companies’] statements about water,” he said. (Patrick Temple-West)
Smart reading
Our colleagues did a great instructive read on ‘climate engineering’: the idea that the Earth can be cooled by reflecting some of the sun’s rays back into space. Supporters say it’s the “only” way to cool the planet in the short term, but opponents fear a devastating free-for-all.
—————————————————-