Cloud IT Infrastructure: Speed, Scale and Sustainability

By

Cloud computing is now a disruptive force within IT infrastructure by changing the way IT professionals build out enterprise infrastructure. The cloud provides numerous benefits for enterprise customers including lower costs, opportunities to create new services, significantly faster computing, infinite storage, and best of breed artificial intelligence. Above all, it allows an outdated, heavily inefficient process to shed its skin and become a highly sustainable, resource-conscious platform. As technology advances, technology companies are discovering new ways to use the cloud to benefit the earth by introducing new sustainability practices.

The cloud's sustainability characteristics are made accessible to enterprise customers through leading cloud service providers including Amazon Web Services (AWS), Google, and Microsoft. As I mentioned in my last article, "Building a Smarter Business: Working in the Cloud," the cloud is scalable technology that allows everyone from the local dairy farmers to the largest conglomerates to deploy the latest technology—and now, make a positive impact on the environment. Cloud data centers have become tremendously more efficient than on-premise, corporate-run data centers thanks to economies of scale (i.e. HVAC), virtualization software, and the use of highly customized equipment that runs more efficiently, unlike off-the-shelf IT equipment typically used in on-premise data centers. Through the use of machine learning, cloud data centers are also leveraging data to drill down to the most sustainable ways to run these massive data centers. These aspects alone put cloud service providers on the forefront of sustainability, but the sugar on top is that the major cloud providers are also some of the largest users of renewable energy.

Large cloud service providers are advocates for greater use of renewable energy (Exhibit 1) and have publicly stated renewable energy corporate targets. While the majority of providers have the stated goal of 100% renewable energy, Google is the only provider who achieved this in April of last year. AWS has not set a target date to use 100% renewable energy, and Microsoft is making progress to achieve their goal of 60% by 2020. In order to realize these goals, many of these cloud service providers have signed large multi-year renewable energy Power Purchase Agreements, plus they purchase considerable Renewable Energy Certificates (RECs) to offset energy usage that's not carbon neutral. We tend to favor certain cloud service providers and believe not only that there are potentially attractive investment opportunities, but also a way for investors to add sustainability to their portfolio.

Exhibit 1: Top global corporate buyers of renewable energy (megawatts)

Source: Bloomberg New Energy Finance. As of March 2018.

Disclosure

Past performance is not indicative of future results. This material is to be used for institutional investors and not for any other purpose. This communication is being provided for informational purposes in connection with the marketing and advertising of products and services. This material contains current opinions of the manager and such opinions are subject to change without notice. Aegon AM US is under no obligation, expressed or implied, to update the material contained herein. This material contains general information only on investment matters; it should not be considered a comprehensive statement on any matter and should not be relied upon as such. If there is any conflict between the enclosed information and Aegon AM US' ADV, the Form ADV controls. The information contained does not take into account any investor's investment objectives, particular needs, or financial situation. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to you. The value of any investment may fluctuate. Investors should consult their investment professional prior to making an investment decision. Aegon AM is not undertaking to provide impartial investment advice or give advice in a fiduciary capacity for purposes of any applicable federal or state law or regulation. By receiving this communication, you agree with the intended purpose described above.

The information presented is for illustrative purposes only.

Results for certain charts and graphs are included for illustrative purposes only and should not be relied upon to assist or inform the making of any investment decisions.

Specific sectors and securities referenced have been recognized as leading market players as identified by Aegon AM US. Specific sectors mentioned do not represent all sectors in which Aegon AM US seeks investments. It should not be assumed that investments of securities in these sectors were or will be profitable.

Aegon AM US may trade for its own proprietary accounts or other client accounts in a manner inconsistent with this report, depending upon the short-term trading strategy, guidelines for a particular client, and other variables.

This document contains "forward-looking statements" which are based on the firm's beliefs, as well as on a number of assumptions concerning future events, based on information currently available, and are subject to change without notice. These statements involve certain risks, uncertainties and assumptions which are difficult to predict. Consequently, such statements cannot be guarantees of future performance and actual outcomes and returns may differ materially from statements set forth herein. In addition, this material contains information regarding market outlook, rates of return, market indicators and other statistical information that is not intended and should not be considered an indication of the results of any Aegon AM US-managed portfolio.

All investments contain risk and may lose value. Socially responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgement exercised, by any company of Aegon Asset Management will reflect the beliefs or values of any one particular investor. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful. Investors should consult their investment professional prior to making an investment decision.

Aegon Asset Management US is a US-based SEC registered investment adviser and is also registered as a Commodity Trading Advisor (CTA) with the Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association (NFA). Aegon Asset Management US is part of Aegon Asset Management, the global investment management brand of the Aegon Group.

Recipient shall not distribute, publish, sell, license or otherwise create derivative works using any of the content of this report without the prior written consent of Aegon USA Investment Management, LLC, 6300 C Street SW, Cedar Rapids, IA 52499. ©2019 Aegon Asset Management US. Ad Trax: 2590757.1 Exp Date: 6/30/2020.

Michael Heenan

About Michael Heenan

Michael Heenan is a senior credit research analyst on the Technology, Media and Telecommunications team responsible for global credit analysis of investment grade and high yield securities within his coverage universe.