This article appears in our Q4 2018 Quarterly Report.1
2019 is the year that mobile networks will start to install 5G infrastructure in earnest. 5G represents a quantum leap in the performance of mobile networks which will greatly enhance the opportunities for sustainability but which also carries with it substantial risks.
What is 5G and how is it different to 4G?
5G mobile technology will provide the backbone for a step-change in the performance of mobile devices. The physical hardware uses different kinds of antennas and operates on different radio spectrum frequencies to 4G. This enables ultrafast download speeds that are up to 100x faster than 4G. The technology also massively reduces latency and can connect many more devices to the internet1. Because 5G uses shorter wavelengths, antennas can be much smaller than existing antennas and are able to provide more precise directional control. As a result, one 5G base station can support over 1,000 more devices per meter than what is currently supported by 4G.
However, there are draw-backs with the new technology. One of these is that the super-high frequencies used by 5G only work if there’s a clear, direct line-of-sight between the antenna and the device receiving the signal. Consequently, lots of small antennae will need to be deployed in and around infrastructure that require 5G connectivity such as buildings and roads.
How might 5G support a lower carbon, more sustainable society?
One of the appealing aspects of 5G is that it will allow increased access for mobile devices to streamed content. For example, 5G will enable an average user to download an 800MB movie in 1 second rather than the 43 seconds it currently takes with a good 4G connection2. While this may have advertisers salivating, the broader contribution this will make to a more sustainable economy is limited at best. However, there are other applications that will be enabled by 5G that will make a substantial contribution, in our view.
At the top of this list is probably the much-vaunted ‘internet of things’ (IoT) which essentially involves connecting up different types of infrastructure so that they can be used much more efficiently. This is already possible with 4G technologies but will be made much more powerful with 5G. Because systems equipped with IoT technology can sense and respond intelligently to changes in their environment, these systems only use the power and other resources that they need. This, along with the capacity to sense when maintenance is needed, can significantly reduce the resources required in everything from manufacturing industries, to public transport systems, through to collecting, cleaning and distributing potable water.
Also high on the list is the automation of vehicles. Automating passenger and freight vehicles is expected to have a significant positive impact on the safety of road transport3. An expected second order effect is a substantial ‘dematerialising’ of the transport sector as people increasingly purchase the service of road transport rather than owning their own car. In turn this will herald the emergence of super-efficient electric vehicles as operating costs and energy use become the sector’s defining metric.
What are likely to be the draw-backs
Energy use in telecoms infrastructure is already a major concern with some studies suggesting that the carbon footprint of Information and Communication Technologies (ICT) is equivalent to the airline industry4. Given the higher density of devices that 5G will enable, it is likely that, seen in isolation, 5G will expand the carbon footprint of the sector. Such a narrow view misses two important points, however.
The first, as previously described, is that 5G will enable much greater efficiencies in the wider economy. A study by BT calculated that the sector (including through the deployment of 5G) could reduce CO2 emissions by 1.5 gigatonnes by 20305. A figure that is nineteen times as large as the ICT sector’s own expected footprint in 2030 and over a third of the EU’s total emissions in 2012.
In addition, the sector itself is already highly focused on reducing its own energy consumption because of the cost and inconvenience (for example poor battery life) of efficiency limitations. Design parameters such as ‘bits per joule’ are already key metrics for wireless communication systems6. Improving efficiencies and sourcing low carbon power for data centres have been priorities for major ICT companies for many years. Apple’s entire operations including their data centres are already wholly powered by renewable energy7.
Given the expected explosion in data volumes that 5G will enable, it is unlikely that greater efficiency on its own will be sufficient. New energy harvesting technologies that ‘scavenge’ energy from the local environment or even from radio frequency signals themselves, will be critical to ensuring that the billions of devices that make up the IoT can be powered renewably8. There will of course be other drawbacks around the technology. Not least of these will be the importance of data privacy and security. Issues that are already critical for the industry, but which will become even more important with the advent of 5G-enabled applications.
Current fund positioning
5G telecommunications technology is fundamentally an enabler of a wide variety of new products and services. Not all of these will be aligned with a lower carbon and more sustainable economy. Consequently, we do not view 5G technology per se as an area that is attractive from a positive impact point of view. The fund does have some modest exposure to companies that supply and test the products and services that make up the infrastructure of the 5G network. This includes companies like TE Connectivity and
National Instruments.
In both cases, this is not the principle reason for investing in these companies as such activities remain relatively small parts of their operations.
The fund’s exposure is mostly to companies that provide products and services that are enabled by 5G technology, rather than those manufacturing or operating the infrastructure itself. Here the thematic case is much stronger. We are optimistic about the significant health (from lower pollution) and resource efficiency benefits of automated road transport and invest in several businesses such as Aptiv, Littelfuse and WABCO that sell components which enable greater automation in vehicles.
Other areas of exposure include companies, such as Xylem, that sell equipment for water treatment and distribution including connected devices to improve the energy efficiency of these activities. The fund also owns companies that use similar technology to improve resource efficiency in manufacturing and logistics industries, such as Rockwell Automation and Kion.
It is still early days in the deployment of 5G telecommunications networks and there are still significant issues that need to be resolved. However, we are optimistic about the potential for the technology and, in our view, believe that it offers enormous opportunity to improve efficiency and cut waste across multiple sectors. And in the process, it will drive the development of a lower carbon and more sustainable economy.
2 https://www.lifewire.com/5g-vs-4g-4156322
3 https://www.techspot.com/article/1582-state-of-5g-wireless/
4 https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/13069a-ads2.0_090617_v9a_tag.pdf
6 https://www.btplc.com/Purposefulbusiness/Ourapproach/Ourpolicies/ICT_Carbon_Reduction_EU.pdf
7 Qingwing Wu et al. ‘An Overview of Sustainable Green 5G Networks’, IEEE Wireless Communications, September 2016
9 Op. Cit. 6
