Utilizing ESG strategies to meet data-related demand and attract more customers
Data underpins the modern digital economy and, likewise, we believe data centers are the necessary architecture that support this new economic paradigm. Although the data center industry grows at about 2% globally per annum,1 the investment opportunity in India is even greater. Here, average growth rates for the industry are over 11%,2 fueled both by an overall increase in data itself and a shift by many companies to house data on the cloud.
At Carlyle, we believe Nxtra by Airtel is well positioned to take advantage of these trends. Offering India’s largest network of 12 large and 120 edge data centers,3 Nxtra deploys tailor-made data center solutions that help Indian and international customers utilize future-ready IT infrastructure. The company aims to increase installed capacity by 2X to over 400 MW in the next few years. Doing so will meet the anticipated surge in demand and could help India become a digital-first economy, which is a strategic priority for the country. The question isn’t whether we will need more data centers; it’s how much capacity is required.
But data centers are massive consumers of energy, and there is significant pressure to make data centers more sustainable in a decarbonizing world. Consider the competing pressures at play—a hyperscale4 data center can use as much power as 80,000 households5 and leading technology companies are some of the world’s largest operators and users of data centers with demand growing year-over-year. At the same time, these companies have committed to being more environmentally sustainable. Microsoft, for example, has made a significant push into greening their operations and supply chain as part of their pledge to be carbon negative by 20306; similarly, Google has pledged to run their data centers on carbon free energy7.
These industry-wide commitments have implications for data center partners such as Nxtra, whose customer base includes some of the world’s largest tech companies. Carlyle acquired a 25% stake in Nxtra in 2020, setting the stage for close collaboration between Nxtra and Carlyle’s ESG and investment teams. Through our partnership, Carlyle helped Nxtra strengthen their ESG strategy by conducting peer benchmarking, mapping out ESG-specific material issues pertinent to business operations, and reviewing requisite certifications in the data center space (for example, International Standard for Organization certifications). With this refined strategy, Nxtra is taking a proactive approach to meet evolving customer requirements, transitioning to lower-level carbon energy and identifying climate-related risks and opportunities. As a result, Nxtra now has a comprehensive ESG strategy that will enable them to anticipate evolving requirements for both current and future customers.
This ambition sets out to be more than a purely aspirational goal for Nxtra, showcased by their various measures to optimize data center operations, in part through their partnership with Carlyle. In fact, Nxtra recently became the first data center company in India to install a hydrogen-ready fuel cell-based captive power plant to provide clean energy to data centers8. Moreover, to date, Nxtra has9:
- Sourced more than 35% of energy consumption by renewable energy at core data centers;
- Improved average Power Usage Efficiency by 20% in the last five years;
- Mitigated over 109,612 tCO2e greenhouse gas emissions in FY 2023; and
- Ensured all core data centers are ISO 50001 (Energy Management System) certified.
Nxtra’s commitment extends beyond carbon. Focused on curbing water consumption and enhancing conservation, Nxtra is actively upgrading its cooling protocols through innovative, technological solutions. In fact, the company aims to achieve 100% wastewater recycling at all data centers through digital enablement (IOT) that will track real-time water efficiency (Water Usage Effectiveness) and other water quality parameters. As another key step, all Nxtra data centers harvest rainwater and reuse treated wastewater. And as it aims to achieve 100% landfill diversion rate and attain “Zero Waste to Landfill” Certification, Nxtra is reducing the amount of waste generated and incorporating holistic and circular waste disposal and recycling options.
The digital economy is only becoming more extensive and intertwined in our daily lives—a trend that will mean more data and a need for more data centers to house it. Through their partnership with Carlyle, Nxtra has adopted a forward-leaning approach to ESG that helps position the company to meet this growing demand and retain and expand their customer roster in the years to come. We believe the result will be the best of all worlds—cleaner, more sustainable, and better returns in the future.
“Sustainability will continue to be a significant focus area given the large energy requirements of data centers and the purchasing demands from our existing and potential customers. To publicly demonstrate our commitment, we have made a pledge to reach net-zero emissions by 2031.”
All data has been provided directly by the relevant portfolio company and has not been verified by Carlyle or any third party. References to a particular portfolio company should not be considered a recommendation of any particular security, investment, or portfolio company. The information provided about the portfolio company is intended to be illustrative, and is not intended to be used as an indication of the current or future performance of this or any of Carlyle’s portfolio companies. ESG goals, targets and commitments are not binding on investment decisions and/or Carlyle’s management of investments (unless otherwise specified, where applicable, in fund documentation or regulatory disclosures) and any reference herein to environmental, social or governance considerations is not intended to qualify our duty to maximize risk adjusted returns. There is no guarantee that any ESG target or related projection will be met, that any ESG activities will be implemented to the same degree for other Carlyle investments or that they will create a positive ESG or financial impact. Descriptions of any ESG or impact achievements or improved practices or outcomes are not necessarily intended to indicate that Carlyle has substantially contributed to such achievements, practices, or outcomes. For instance, Carlyle’s ESG efforts may have been one of many factors—including such other factors as engagement by portfolio company management, advisors, and other third parties— contributing to the success described in each of the selected case studies. The information provided in these case studies is for informational purposes only and may not be relied on in any manner as advice or as an offer to sell or a solicitation of an offer to buy interests in any fund or other product sponsored or managed by Carlyle or its affiliates.
2 https://www.mordorintelligence.com/industry-reports/india-data-center-market (India).
3 Edge data centers are smaller facilities, typically located closer to the end user; large data centers are bigger, more centralized facilities.
4 A hyperscale data center is a mission-critical facility that supports robust and scalable workloads. Hyperscale data centers are often associated with large companies that require vast data processing and storage requirements.
8 Source: FuelCellsWorks https://fuelcellsworks.com/news/nxtra-by-airtel-to-become-the-first-data-center-company-in-india-to-install-fuel-cell-technology-toprovide-clean-energy-2/.
9 Some of these initiatives began prior to Carlyle’s ownership period.