The pervasiveness of artificial intelligence (AI) appears to be inescapable – AI bots are integrated into smart phones; internet searches are completed by AI assistants such as by Alphabet’s Gemini AI model. What’s more, the market for AI products and services is predicted to grow – and fast.

Done responsibly, the application of AI models is anticipated to be a boon to businesses across industry sectors by generating innovative solutions and optimizing efficiencies. It holds promise for pharmaceutical companies, which are beginning to apply AI to accelerate drug discovery. AI models are identifying faster transportation routes for air travel, optimizing irrigation schedules in agriculture, and helping surgeons detect heart disease.

However, the explosive growth of AI is a source of new and alarming amounts of greenhouse gas (GHG) emissions, driven by the operation of energy-intensive data centers. In particular, Alphabet, a leader in the AI space, is rapidly developing AI models and quickly deploying capital to build the power-hungry data centers needed to host its technologies.

It is not surprising that Alphabet’s GHG emissions have ballooned during the past four years, rising 48% higher than in 2019. During the same time period, emissions from its electricity consumption rose 80%. This steep increase in GHG emissions may challenge Alphabet’s ability to reach its climate targets, which are to reach net zero emissions, slash total emissions by 50%, and source clean energy around the clock – all by 2030.

In its 2023 10-K, Alphabet acknowledges that not meeting its goals creates significant risk and states, “Any failure, or perceived failure…to meet evolving and varied stakeholder expectations and standards could harm our business, reputation, financial condition, and operating results.” [Note: Alphabet subsequently removed this language from its 2024 Form 10-K.]

Despite continuing to develop clean energy projects, including a small modular nuclear reactor to be delivered by 2030, it is unclear how Alphabet will pivot from its existing high emissions trajectory to one that will meet its 2030 targets.

Investors may benefit from enhanced disclosure in order to assess the risks, enumerated above, and potential shifts in Alphabet’s business strategy needed to reach its low-carbon targets. As an example, Alphabet could issue a contingency plan that analyzes potential pitfalls toward reaching its targets. It could clearly quantify anticipated emissions reduction per initiative, including savings attributable to energy efficiency, renewable energy, and nuclear power.

Further, Alphabet could graph its emissions trajectory compared to the IPCC’s recommended path to limit temperature rise to 1.5°C and describe the quantities of carbon removal it may decide to procure to compensate for any residual GHG emissions.

Given the economy-wide risk from unabated emissions, Alphabet’s climate ambitions and actions reflect the urgency of the moment. Enhancing transparency may provide investors confidence that it is addressing the full suite of risks it faces while working to maintain its climate leadership.