The need for better computing capabilities and programs means that brands that are vested in the field are always going to be prominent. At first glance, it might seem like companies that develop graphics processing units (GPUs), application programming interfaces (APIs) for data science, and high-performance computing doesn’t do much to harm the environment.
However, their manufacturing process actually results in high carbon emissions which makes them a company to monitor when it comes to environmental concerns. One of the top brands in the field right now is Nvidia. How does this leading brand score in ESG?
Company Background
Nvidia (NASDAQ:NVDA) is a US-based multinational technology brand based in Santa Clara, California. The company focuses on developing software, as well as GPUs. The company’s major product line is its RTX series of GPUs which is one of the biggest names when it comes to gaming.
Apart from GPUs, Nvidia also creates an API called CUDA which is used to create programs that help fully utilize the power of its GPUs. Thanks to its amazing capabilities in the industry, Nvidia has become the leading brand when it comes to artificial intelligence hardware and software.
The company was founded on April 5, 1993, by Taiwanese-American electrical engineer, Jensen Huang. He was previously the director of CoreWare at LSI Logic. Along with Huang, the company was established by Chris Malachowsky and Curtis Piem who are both established engineers in their own right.
At its launch, the company already focused mainly on video games because the founders believe that it is one of the most challenging problems to solve in technology. Even before launching, the company already had support in the form of millions worth of funding from various venture capitals.
With its huge lead in the industry, Nvidia has set the bar for many aspects of running a business. Of course, you’re here to check out if the brand does well when it comes to its ESG rating. By the end of this scorecard, you’ll be able to see whether the company is good for impact investing.
Environmental Concerns
With its nature of business, Nvidia’s direct impact on the environment has to do with its carbon emissions. We also have to consider that its products are made out of plastics and other non-biodegradable materials that can cause harm to the environment over time. Has Nvidia addressed any of these matters?
If you’re a fan of Nvidia, you should be glad to know that the company has long since considered changing its ways to make a lesser impact on the environment. In 2014, the company started reducing its carbon emissions by 15% per employee. The company has a clear goal and plan when it comes to making 65% of its global electricity use come from sustainable and renewable sources by the end of 2025.
The company’s GPUs are also made around the idea of energy-efficient technology. As per the company, each of its new generations of GPUs is faster and more energy efficient. The goal is to make sure that each GPU is capable of getting better results more quickly compared to its predecessors.
According to Nvidia, its new changes to its CPUs can save up to 12 trillion watt-hours of energy a year which is equivalent to what 1.7 million US homes need
Nvidia’s GPUs are made out of tin, tungsten, and aluminum which are sourced from China and India. The metals are allegedly classified as “conflict minerals” as they are known to result in violence and human rights violations. On the other hand, the products are also built to last.
The problem is that Nvidia releases new generations of its GPUs every few years or so. With that said, Nvidia has taken the initiative to encourage its consumers to recycle their old GPUs. All people need to do is contact the branch where they got the GPU from and it will then teach them how to recycle the GPUs properly.
Nvidia has also promised that it will not dispose of its products in landfills as it contains chemicals that are harmful to the environment. With that, they’ve created a proper way to dispose of their products more sufficiently.
That’s just a small part of the company’s overall plans. Last year, Nvidia CEO Jensen Huang revealed that Nvidia would be using its products to help predict and even mitigate environmental disasters by using AI to simulate the effects of climate change. It’s doing this technique by creating a digital version of Earth.
Nvidia has a digital world called the Omniverse. The digital earth here will be dubbed as E2 or Earth 2 will help predict how regional climate change will affect Earth 30 years from now. Additionally, the company has partnered with Lockheed Martin AI Center to further help in its search for the effects of climate change.
As you can see, Nvidia isn’t just taking active steps to reduce its impact on the environment. It’s actually making effort to show everyone what climate change will do to our world years from now. It’s with these efforts that Nvidia could help other people and companies to see the need for a more sustainable way to live life.
Social Concerns
Regarding social concerns, let’s first talk about how Nvidia is leading the charge in the fight against climate change. Its groundbreaking plans to mitigate the effects of climate change before it happens is a good way to help the world prevent such problems from ever arising in the first place.
A lot of investment institutions and education bodies have praised Nvidia’s plans already. In fact, its recent plans have earned the praise of many impact investors worldwide as the company is putting its best foot forward when it comes to addressing societal concerns.
Just last year, the company started its Ignite program. This helps prepare students from minorities for Nvidia summer internships. The company also supports professional organizations including Black Women in AI, Women in Data, and Women-ai. The company also features a lot of charitable projects that help the community it serves.
Just this year, Nvidia and its customers were able to contribute more than $22 million to charitable causes. In the Ukraine crisis, Nvidia has donated more than $4.6 million to date.
Nvidia has been voted as one of the best places to work in 2022 by Glassdoor. That says a lot about the company. As per reviews for the company, the pay, benefits, and overall treatment from the company are just a part of what makes it such a darling to work with on a daily basis.
The company focuses on the health of its employees and their families. As per its post, Nvidia allows a family leave of up to 12 weeks of fully paid leave which to help employees care for family members. Additionally, the company supports a generous parental leave program of up to 22 weeks of fully paid leave.
Additionally, Nvidia selects eight days each year through which it shuts down all but its essential operations globally.
Being voted as one of the best places to work in the US says a lot about how Nvidia treats its people. For many impact investors, this is a good sign as it shows that the company does care about other things other than what they make from their business.
Jensen Huang has this to say about diversity in the workplace:
“We dedicate ourselves to building a just, decent, and inclusive company. We must be empathetic to the experience of underrepresented groups and act to make NVIDIA a place of opportunity. We do this because it is right and just, and we believe it will help make Nvidia better.”
The employee base of the company is pretty diverse. Data from the company is as follows: Asian and Indian (49.2%); White (36.8%); Others (8.3%); Hispanic and Latino (3.3%); Black and African American (2.4%). Additionally, Nvidia has announced that it has increased its gender affirmation sources for its LGBTQ+ employees.
Just like its environmental projects, the social efforts of Nvidia is well-praised as well. For now, it looks more and more like Nvidia is one of the best brands to support for impact investors. Considering how there’s a constant need for what they offer, the company could be good for those looking to make a profit as well.
Governance Concerns
Talking about governance, Nvidia’s board is diverse as it features people from minorities, as well as women leaders. Nvidia has said before that they offer equal opportunities for everyone, hence, it continues to support and give people from different races and walks of life, positions in leadership roles.
None of the personnel on its board have been flagged with unethical practices or with corruption issues as well.
The highest-paid executive is CEO Jensen Huang who made almost $5 million last year. The lowest-paid employee is given around $35,000 annually. It’s worth noting that executive members have set goals to reach which affects their yearly salary. Employees, on the other hand, are given a good selection of benefits to choose from.
The company has this to say about how it manages governance:
“Our Board of Directors is committed to strong corporate governance. Our Board oversees management performance on behalf of the shareholders to ensure that the long-term interests of shareholders are being served. NVIDIA has adopted Our Code which applies to our directors and employees and the Finance Team Code which applies to our board, executive staff and members of our finance team. Our Board has also adopted Corporate Governance Policies to assist it in following corporate practices that serve the best interests of the Company and its shareholders. The codes of conduct, Corporation Governance Policies, the Board committee charters, Certificate of Incorporation, and Bylaws form the framework for governance at NVIDIA.”
Nvidia is very open about its plans and financial indicators. All resources are available to its shareholders publicly. There have been no reports of Nvidia not listening to shareholder opinion which is a good thing.
As for lawsuits, Nvidia has yet to have any cases that tackle issues outside its products. Most of the lawsuits it has faced involved the company having to answer the court when it comes to product issues. Nvidia has faced all of its lawsuits directly, allowing the court to settle things in a just manner.
In terms of political lobbying, Nvidia has taken a neutral stance when it comes to supporting parties. This neutrality is good for impact investors as it only means that the company is far from supporting corrupt practices and unethical deeds related to the government.
When it comes to governance, Nvidia does surprisingly well too. The gap between employee and executive pay might be big but the company makes up for the disparity by providing amazing benefits for its employees to enjoy. In terms of improvements, it’s tough to see how the company can improve on governance other than increasing the base pay of its employees. Overall, Nvidia gets a high rating on governance concerns.
Verdict
Overall, we’d like to give Nvidia a decent 98/100. The environmental efforts of Nvidia are really top-notch especially considering the line of work it is in. The only reason the company isn’t getting a perfect score is the fact that its materials are acquired from questionable sources. If the company finds a more sustainable way to build its products, then it will deserve the perfect score.
As for its social and governance efforts, it’s tough to criticize Nvidia in these regards as well. Aside from the huge gap in pay for executive and employee positions, there’s not much to say about how the brand governs its employees. The good news is that employees of executives are based on milestones at least.
Overall, Nvidia is one of the best companies to invest on for impact investors. Aside from being a leader when it comes to addressing environment concerns, the company is praised for its efforts with regards to the society around it as well.