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Company of the Month

The Company of the Month is selected due to recent developments and in connection with the topic ”Child labour”. The Erste AM Responsible Investments team analyses the strenghts and weaknesses of the selected company in terms of ESG.

Only few companies polarise as much as Microsoft does. Who has not felt the urge to strangle their computer after one of the infamous blue screens of Windows had destroyed a full day’s work? Even so, it is still almost impossible to avoid Microsoft software.

Microsoft is one of the leading companies from an ESG perspective

With an Erste AM ESG rating of B-, Microsoft is among the top three percent of the issuers rated by Erste Asset Management on the basis of sustainability criteria. This is due to the fact that the company has managed to find meaningful answers to the basic environmental, social, and ethical questions that its business model poses.

Assuming responsibility vis-à-vis child labour 

Even if management temporarily fails, the company has shown that it can handle problems in an efficient way: in 2010 Microsoft discovered cases of child labour at a Chinese supplier. Erste AM therefore temporarily excluded the company from its sustainable funds.
But our research also revealed that Microsoft’s way of handling the situation was impeccable. The children discovered at the supplier were paid in full by Microsoft, returned to their families, and their school education from that point onwards was financially taken care of by Microsoft.
At the same time, the company massively tightened the guidelines and controls for its suppliers in order to contain the problem also structurally. Due to this proactive way of handling the situation, which does not only pass on the problem of child labour but provides the people affected with alternatives, we have in the meantime re-admitted Microsoft into the investment universe of Erste Asset Management.

Sustainable computing

Microsoft today represents sustainable computing. The shift in Microsoft’s groundbreaking business model from a large number of individual computers and licences to a centralised data processing centre in the form of a cloud has clearly contributed to this. Instead of operating individual servers that are in idle mode for most of the time, Microsoft rents the actually needed data processing capacity on its platforms. While a data centre only transforms about 50% of its energy consumption into actual computing, in Microsoft’s case the percentage is 90%.

Sustainability means to face changes

Kennzahlen Microsoft
Quelle: Bloomberg
Kurs (31.05.2017)USD 70,65

The outsourcing of more and more sensitive data onto the computers of external operators brings about a new set of problems in terms of data security and personal sphere protection. Microsoft focuses on this field and has developed special solutions that are in line with the needs and regulative framework of Europe. This is how the company got ahead of its competition. Other IT companies still prefer to contest the relevance of European specifications with regard to data security in European courts.

A less well-known fact than the dominance of Windows is that Microsoft has also become the market leader in the cloud in the profitable business customer segment – a clear example as to how a sustainable business model can strengthen business success.

[Dominik Benedikt]

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