Thirsty ICT – Time to tackle accelerating water risks

Thirsty ICT – Time to tackle accelerating water risks – After our 2023 report on China ICT Transition, we were flooded (no pun intended) with questions on ICT water risks. So this month, on the back of the launch of our new report – China ICT Running Dry – we dive into AI’s high water footprint as well as reflect on our ICT journey. Plus, we reached out to Tencent to get the latest updates on its 2030 carbon neutrality roadmap.

Let’s start with Tencent … back in February 2022, the ICT giant set a target to be carbon neutral in its operations & supply chain by 2030. So, what’s in their transition plans? How were targets set? Will they up renewable sourcing or use carbon offsets? Dr Yongping Zhai, Senior Advisor at Tencent, answers these questions and more.

Encouragingly, transition implementation is well on track. In 2023, green power purchases avoided over 300,000 tonnes of emissions and solar PV capacity is up 166%. But it’s not just about themselves, Tencent is also launching initiatives for consumers, businesses and society to help China reach its 2060 carbon neutrality target – so find out if any of these can help you now!

We are pleased to see Tencent take the lead on net zero. And even better, our engagement with ICT companies in China reveal that others are also seriously following suit. Also, positive is that companies are starting to look to water, which is a must, given the alarming water risks the sector is facing – more on this below.

Engagement with the financial sector on ICT transition revealed what we’d suspected all along – that finance had not fully appreciated how carbon intensive the ICT sector is. This is why ICT was overlooked by banks as a priority transition sector; banks were instead focusing on green finance for hard to abate sectors such as power, cement and steel.

But after hosting one-on-ones, roundtables, workshops and seminars, banks are now excited – there are big green finance opportunities though structural and classification challenges remain. For more, see the 5 things we’ve learned since the launch of our China ICT Transition report.

Rising water risks are another key challenge. We are not the only ones saying so – Joyeeta Gupta, Hilmer Bosch and Luc van Vliet delve into the paradoxical nature of AI in addressing water challenges while being a big water user itself.

They raise an important question – will AI’s high water footprint overshadow its contributions? See their answer and just how thirsty AI is. The authors also cover the latest concerning trends in data centre development.

Indeed, there is cause for worry. Our newly launched report on China ICT water risks shows sizeable threats from multiple types of water risks from rising scarcity & water stress, floods, droughts, coastal threats as well as increasing regulatory risks.

Even without generative AI, the exposure to water risks is high – our analyses showed that almost half of China’s data centre racks are located in water scarce regions, which are as dry as the Middle East. Generative AI and chatbots could see water use surge by a shocking 20x – putting pressure on already stressed water resources.

The report notes that water consumed today by China’s data centres is at 1.3bn m3 – this can provide water for household & services for 26mn people. But double digit data centre growth will mean water use could expand to over 3bn m3 by 2030 and the explosion of AI could see this jump to over 500mn people!

Clearly, we expect “strict measures” to be taken to control ICT sector water usage – so watch this space. It would be wise to see how exposed your portfolio is and don’t forget to use the 5 to-do’s action list to rein in water risks.

This report is the first in CWR’s new 2024 “Accelerated Threat Series” – our response to increasing challenges due to rapid global warming. As we write this, Dubai, Guangdong, Afghanistan and Pakistan have just been inundated with widespread flooding. And with year-to-date warming shooting up to 1.58°C in March, it looks like there will be no let up.

Impacts are evidently accelerating but we are not ready. The time to tackle ICT water risks is now. The world doesn’t function without ICT – banks, stock exchanges, airports, Netflix, TikTok – the list goes on.

So, now that you know how thirsty ICT can be, let’s get to it. We urgently need to deal with this before the explosion of thirsty AI. Don’t know where to start? Call us.