5 hours Ago By Dan Robinson
Microsoft shareholders may be exposed to the "material financial risks" from its links with the fossil fuel industry, which the megacorp identified as the top growth target for its AI and cloud computing services. Redmond-based Microsoft reckons its agreements with the oil and gas industry could represent a market opportunity of $35 to $75 billion annually in the coming years, using its technology services to aid fossil fuel exploration and production. This is despite the fact that immediate reductions in greenhouse gas (GHG) emissions are necessary in order to meet the commitments of the Paris Climate Agreement and avoid the most damaging economic consequences of the predicted climate changes.
Microsoft simultaneously styles itself as a "first mover" on climate change, and says that it advocates for the expansion of clean energy solutions around the world. The warning about "material financial risks" comes from a Microsoft filing with the US Securities and Exchange Commission (SEC) and contains claims from an organization trying to get them discussed at Microsoft's Annual Shareholders Meeting scheduled for December 10. The organization in question is As You Sow , a non-profit that aims to "promote environmental and social corporate responsibility through shareholder advocacy.
" Its goal here appears to be to get a proposal adopted that would require Microsoft to report on the "material reputational, legal, and operational risks" of providing its AI and cloud products to aid oil and gas extraction, in order that shareholders would at least be aware of any potential financial dangers the company may be exposing them to. According to analysts at Kimberlite, an oil and gas market research and consulting biz, Microsoft is already the largest cloud services provider to the oil and gas industry , ahead of Amazon and Google. As You Sow claims that while Microsoft insists it limits partnerships only to energy companies "who have publicly committed to net zero carbon targets," it does not detail any "credible external standard" to evaluate the net zero claims of these businesses.
The org concludes that this means Microsoft is maintaining multiple partnerships with energy companies that lack credible net zero commitments. As You Sow goes further in the filing, claiming that Microsoft is selectively reporting on the climate-positive applications of its tech services, while omitting to mention the risks of using the same tech to boost extraction of fossil fuels. Microsoft is therefore at risk of "greenwashing allegations and reputational damage," as well as significant legal consequences, the non-profit says.
However, by identifying the risks associated with these technologies, reporting them to shareholders, and offering solutions that might limit any associated harms, Microsoft would be able to increase transparency, decrease risk, and provide investors with vital information about the company's exposure to material climate-related risk, As You Sow states. We asked Microsoft for comment and a spokesperson told us: "Unfortunately, Microsoft is politely declining to comment at this time." Sadly, the hyperscalers must decide what side of climate history they want to be on.
Elsa Nightingale, principal ESG analyst at Canalys, told The Register that if a company chooses to harness AI to expand oil and gas extraction, it can no longer rightfully claim to be pursuing its own net zero goals, or the goals of the UN Paris Agreement. "Sadly, the hyperscalers must decide what side of climate history they want to be on. Either they demonstrate the innovation needed to pivot away from oil and gas projects with long lead times, or they acknowledge their role in directly jeopardizing the carbon reduction goals they have long championed," she said.
Earlier this year, Microsoft revealed in its annual Environmental Sustainability Report that it had increased its own carbon dioxide emissions by nearly 30 percent since 2020, despite its stated goal of becoming carbon-negative by the end of the decade. This effect is largely attributable to indirect emissions (Scope 3) from the construction and provisioning of more datacenters to help the company meet customer demand for its cloud services. However, this latest SEC filing purports to show that the IT giant is happy to aid customers in the fossil fuel industries that are directly contributing to further GHG emissions.
"AI creates enough of an existential crisis for corporate sustainability, with the astronomical energy and water consumption required," Nightingale said. She highlighted Canalys research which revealed that 53 percent of channel partners view AI as a "tremendous" or significant opportunity, even though the environmental impacts of the current AI boom are already challenging enough . ®.
