Globally recognised as one of the leading suppliers of advanced semiconductor solutions, Japan's Renesas Electronics Corporation received an impressive ‘AA’ MSCI ESG Rating for the first time. Morgan Stanley Capital International (MSCI) is one of the leading global ESG rating providers. ESG score signifies that Renesas is effectively working on ESG issues, developing an ESG strategy to achieve the common and long-term UN Sustainable Development Goals. Companies all around the world are constantly wanting to improve their ESG performance by taking into account critical ESG factors that will help them develop an ESG strategy that brings their company into the prestigious MSCI ESG rating list. 

Talking about ESG reporting, competitor NXP Semiconductors also has an ‘AA’ rating, demonstrating strenuous effort towards ESG issues, along with raising the standard for socially responsible investments in the semiconductor manufacturing industry. Similarly, another prominent competitor, DENSO Corporation has also retained its MSCI ESG score of ‘A’, showing its improved ESG performance in the MSCI company ratings. However, several companies are facing challenges in effective development of their ESG strategy, such as Toshiba, Nidec and Microchip Technology,  are lagging behind their fellow competitors in the MSCI ESG ratings with low ESG scores.

Proactive ESG Practices

Commenting on Renesas and its significantly improved MSCI ESG Rating, going from a B (2020), to a BBB (2021), then to an AA (2022) rating, Vice-President, Sustainability Promotion Office and Investor Relations, Fujiko Yamaguchi, said, “Achieving these results in three consecutive years is a testament of our global commitment to a responsible and proactive ESG practice. We are honoured to have received such a positive evaluation from MSCI this year, and will continue to strive for excellence in all areas of our operations by implementing best practices.” 

GHG Reductions

The semiconductor sector relies heavily on ESG since the growing demand leads to increased emissions of greenhouse gases (GHGs). As an illustration, Infineon has set a goal to cut GHGs by as much as 70% by 2030. Along with reductions, some companies are committed to science-based targets, such as NXP and STMicroelectronics, or by innovating technologies to approach the problem from new angles, for example, by installing climate and humidity controls with overpressure and particle filtration in large rooms, or using extensive facilities for gas abatement such as exhaust pumps, water purification and chillers. 

In general, the shift to an overall awareness of energy use is key: using energy efficient tools to lower energy consumption; opting for renewable energy instead of traditional energy sources in the first place, such as biogas, green hydrogen; building new facilities intentionally near renewable energy sources; and opting for the use of chemicals that have a low environmental impact. These are all ESG practices that, along with selecting suppliers who focus on energy efficiency, help the sector work towards long-term sustainability goals. 

A Truly Global Sector

Despite the fact that semiconductor businesses have set themselves up for success by setting high goals, to significantly reduce carbon emissions, there is still much work to be done. To lower their energy expenses and operating costs, businesses will have to collaborate more effectively with their suppliers and employ more cutting-edge technologies. 

However, Renesas’ success in working towards their ESG targets is indeed notable, since the semiconductor sector’s critical importance in emerging technologies keeps it at the very centre of current geopolitical tensions. With the US looking to strategically develop and protect its own domestic production via the CHIPS Act, and the EU’s ASML quietly showing leadership in the sector, it’s worth keeping a close eye on how well ESG factors help to shape continued growth and performance amid the turbulence of upcoming centers of global production and supply.

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