The semiconductor industry damaging the planet is a growing concern among environmentalists due to the industry’s rising energy consumption. Hence, chipmakers don’t usually get included in a portfolio for climate investing. However, Pictet Asset Management reveals a different side of the story. The asset manager urges climate-oriented investors to look beyond the industry’s carbon footprint and consider its overall positive impact on the economy.

“For semiconductors, that positive impact is particularly large when it comes to electrification – a key element of decarbonisation,” emphasises Luciano Diana, Senior Investment Manager of Global Environmental Opportunities Strategy at Pictet.

According to the International Energy Agency (IEA), the percentage of electricity in total energy consumption must increase from the existing 20% to 50% to achieve the net-zero emissions target by 2050.

Diana points out that one category of specialised chips, “power semiconductors”, is critical to facilitating electrification, even though they represent just 5% of the whole semiconductor market. The asset manager reminded us that chips are also required in the modernisation of electric grids as well as in the electric vehicles industry.

Besides, Diana clarifies that focusing only on the operations of chip companies may not offer a real picture of the industry’s environmental credentials. For those who want to understand the impact of semiconductors on the environment for climate investing, Pictet suggests a concept called the “industry handprint”. Though difficult to quantify, handprints can assess the positive impact of the company’s products on the environmental footprint of its clients.

The asset manager also highlights how chip makers are also considering waste reduction by recycling at the fabs directly. Fab, short for fabrication, denotes a manufacturing facility where raw silicon wafers are transformed into integrated circuits.

Additionally, Pictet recommends investors to pick companies that not only minimise their environmental footprints but also offer solutions that increase the handprint of their customers and of the economy as a whole.

“From producing renewable electricity to improving our efficiency in using it, semiconductors have a key role to play in driving the green transition,” opines the asset manager.

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