Now I wouldnt dream of understanding 90% of what they are saying in here but seems like they are doing well with their Green IT business. Much more to be done! :)
Title: Turning Green
Date: 1 November 2007
As banks make their IT more energy efficient, new opportunities emerge.
By Joe Morgan
Unless you have been living on another planet, you know that environmental issues have been thrust into the center of the political debate on both sides of the Atlantic. Banks and major corporations can no longer afford to pay lip service to the concerns of environmental activists. Former US vice president and environmental campaigner Al Gore's acclaimed book and documentary, An Inconvenient Truth, has made the dire consequences of global warming part of the mass consciousness.
The fact that green issues have become a hot political topic has not gone unnoticed on Wall Street. Lehman Brothers in March established an internal Global Council on Climate Change led by Theodore Roosevelt IV, great-grandson of the US president. JPMorgan Chase has built up a "renewable energy portfolio" which comprises about $1 billion of equity investments in 26 wind farms. Bank of America has pledged to not only cut back its own emissions by 7 percent but also to reduce greenhouse gas emissions from its client activity-specifically, from its investments and loans to energy and utility companies-by 7 percent.
Also turning to green, Citigroup, which plans a 10 percent reduction in its greenhouse gas emissions by 2011, earlier this year announced a $1 billion investment in the Clinton Climate Initiative (CCI), a foundation set up to tackle climate change.
Shareholder activism, campaigns by environmental groups and influential reports such as the UK government-commissioned Stern Review on the Economics of Climate Change are prompting banks to cut down on carbon emissions and implement eco-friendly policies.
GOING AFTER THE GREEN
Bob Giffords, an independent analyst and consultant for the European banking sector, says the tide of environmentalism sweeping across capital markets firms is not just motivated by a desire to save the planet. Green banking also presents profitable opportunities for financial institutions. "Where there is a problem to be faced, there is money to be made," says Giffords. "Politicians are finding that they are pushing on an open door when they pressure banks to do something [about environmental issues]. The banks are beginning to see good commercial reasons for wanting to pursue these policies."
Nowhere is this more apparent than in the push to make datacenters more energy-efficient, which plays a central part in banks' green IT strategies. Banks need little persuading to reduce power consumption in datacenters, already creaking under the strain of providing high levels of computational power. According to IBM, many major financial institutions in the City of London are experiencing "thermal issues"-which can result in servers breaking down as a result of overheating. New York City's power grid is also under increasing pressure to supply Wall Street firms with the power they need, say analysts at Massachusetts-based technology research firm Forrester.
Server energy use doubled between 2000 and 2005, says California-based microprocessor vendor Advanced Micro Devices (AMD). A survey published earlier this year found that in 2005, total datacenter electricity consumption in the US, including servers, cooling and auxiliary equipment, totaled about 45 billion kilowatt hours, resulting in utility bills of about $2.7 billion. Total datacenter power and electricity consumption for the world costs $7.2 billion annually, according to AMD.
"Besides being good citizens, banks actually need to optimize their carbon footprint. For example, in datacenters, as hardware capital costs go down, energy costs become significant. This is particularly the case with grid technology, which has serious power and cooling challenges," says Giffords. "A modest grid might have 1,000 or more CPUs/cores. Cram it all into a few racks and you get a lot of heat. The largest grids across multiple centers might now be from 10,000 to 20,000 nodes or greater, with forecasts rising to much higher levels. Inevitably, that will eat up power and generate heat."
COSTS ON THE RISE
Of every dollar spent on computer hardware, about 50 cents is spent on energy, according to analyst firm IDC. This is expected to increase to 71 cents over the next four years. And some of that is wasted. A report last year from Santa Fe-based IT consultancy Uptime Institute found that US datacenters were cooled nearly twice as much as necessary.
Banks and corporations are showing signs of moving toward more energy-efficient practices. A report from San Francisco-based datacenter manager Digital Reality Trust earlier this year found that many firms' "detailed" green datacenter strategies include using recycled materials, efficient power usage, purchases of renewable power such as wind and solar energy, high-voltage alternating current system enhancements, power generation on site using fuel cells and gas engines, and using carbon credits to offset the level of datacenter by-products.
"Green energy-efficient datacenter trends have been adopted more quickly and more deeply than previously believed. Even for people who have been tracking green IT trends closely, many of the report's metrics will be surprising," says Jim Smith, vice president of engineering for Digital Reality Trust.
Firms are taking their strategies beyond computers and servers-the primary focus of green initiatives in the past-and into the domain of facility design and operations. Some capital markets firms are even relocating their datacenters next to flowing water, since water is a better coolant than air.
"Our energy consumption is roughly a third heating, a third cooling and a third lighting," says Jon Williams, head of group sustainable development at HSBC. "We have a specific datacenter strategy aimed at designing the buildings in a way that makes them as energy efficient as possible."
The London-based global banking giant will invest $95 million in its global energy efficiency program over the next five years in a drive to reduce its energy consumption and make it more efficient. Vendors like IBM, Hewlett-Packard, and Sun Microsystems are eager to offer solutions that reduce power consumption in datacentrers. "The energy issue is a long-term problem," says Rich Lechner, vice president, IT optimization and system software at IBM. "But the idea of actively managing energy has just emerged over the past six months."
IBM's "Project Big Green" for datacenters was launched earlier this year. The initiative includes a new global "green team" of more than 850 "energy-efficiency" architects. IBM says it has received strong uptake from financial institutions, though vendor officials decline to name them.
"We help clients redesign their datacenters, either from scratch or in some cases customers are looking to upgrade their datacenter because it is eight years old and not able to handle the density of computing that we have today. Or they may just be looking at retrofitting certain elements," explains Lechner.
The project comprises five steps. First, IBM evaluates an organization's facilities and proposes an appropriate solution before building or updating an energy-efficient datacenter. Virtualization and special purpose processors are then installed across a firm's IT infrastructure along with power management software and liquid cooling solutions, both in and outside of the datacenter. IBM estimates that its clients can cut energy consumption by almost half on an average 25,000 square foot datacenter. This can be done by consolidating x86 servers for Windows and Linux, or Unix servers, to other platforms such as IBM servers with the vendor's Power processors.
To help achieve its aim of reducing corporations' energy consumption, IBM is tapping into cell processor technology used in computer game consoles such as Xbox 360 and PlayStation 3, which are more efficient at carrying out certain applications than conventional quad-core processors. "Special logic built into cell processors makes them ideal for certain classes of calculations. It can be 50 times more efficient than generic Intel processors. A customer can deploy applications on one-fifth the number of systems that would normally be required." IBM says capital markets firms in the US and Europe are using cell processor technology to more efficiently perform functions that require high amounts of computational power, such as Monte Carlo simulations for complex calculations for structured derivatives products.
SHIFTING THE LOAD
IBM uses virtualization technology-where servers host multiple operating systems and applications-to enable firms to identify "hot spots" within their datacenter network. Banks can then shift applications between datacenters to lightly used machines. "Organizations can move workloads among datacenters around the world in response to a power shortage or potentially to take advantage of low utility rates across time zones. As the sun sets, the utility rates will decline in one location. Work can then be moved from other financial centers to exploit this lower rate of usage," Lechner explains.
Capital markets firms are also turning to virtualization software offered by technology vendors like VMware and Virtual Iron to reduce datacenter use. Credit Suisse, which has begun evaluating IT managers according to how well they have helped reduce energy use, has implemented a far-reaching virtualization initiative using technology from vendors such as VMware to achieve an average 15-to-one compression ratio in server use.
David Reilly, head of technology infrastructure services at Credit Suisse in New York, says: "Utilization is up. Power consumption growth has been reduced. The need for ever more datacenter real estate is slowing and time to market for our application developers is improved because provisioning lead times are better with virtualization."
However, not all eco-friendly measures utilize cutting-edge technology. Using blocks of ice to provide air conditioning in buildings first emerged in Florida in the 1800s, when a physician blew air over ice to cool hospital rooms. The practice in vogue as firms attempt to reduce the emissions produced by conventional air conditioning systems.
COOL AS ICE
Credit Suisse this year installed an ice cooling system to cut down on emissions from its offices at the historic MetLife Building in New York City. The firm must cool 1.9 million square feet of office space in the tower. Three main cooling rooms, which house chilling machines and 64 tanks that hold 800 gallons of water each, are housed in the basement of the building. The system is equal to planting 1.9 million acres of trees to absorb carbon dioxide from electrical use for a year, according to the New York State Energy Research and Development Authority. Goldman Sachs and Morgan Stanley have installed similar ice cooling systems.
"If you take the time to look, you can find innovative ways to be energy efficient, be environmental and sustainable," says William Beck, the head of critical engineering systems at Credit Suisse in New York.
But the green banner can also be waved when implementing far less popular policies. For example, reducing air travel can be labeled as a green initiative when it may just be about optimizing costs. "There may also be serious operational risks in having many executives in the air all the time," says Giffords.
The global reach of major financial institutions undoubtedly swallows up a sizeable amount of energy consumption. Organizations such as HSBC-which consumes 2 billion kilowatt hours of energy a year, three-quarters of which stems from electricity usage along with fuel and air travel-are eager to highlight the steps they take to implement green policies. For example, HSBC has installed NightWatchman software in its offices, which reduces the power consumption of inactive PCs after 7 p.m. The escalators in the banking giant's London headquarters are also programmed to slow down during off-peak times. Even the logo at the top of the building is dimmed until evening falls.
HSBC is also using technology to cut down on air travel. The banking giant has installed Cisco TelePresence, video conferencing technology that simulates the environment of a real board room to such an extent that participants can see one another's eye color. HSBC held its first boardroom meeting this summer using the video conferencing technology, which saved executives from globetrotting to the bank's headquarters in London's docklands.
Deutsche Bank also uses video conferences and conference calls to reduce its carbon footprint. The German bank has also undertaken a series of environmentally friendly initiatives, including regularly improving technology to make energy use more efficient, campaigns to make staff aware of reducing energy consumption and purchasing "energy efficient" office equipment.
Hanns-Michael Hoelz, global head of sustainable development at Deutsche Bank in Frankfurt, says the bank has made efforts to promote environmentally friendly investing. DWS Investments, the fund management subsidiary of Deutsche Bank, offers private and institutional investors "sustainability orientated" investment opportunities, which include its DWS Klimawandel (Climate Change) fund. "Investors can thus decide whether they want to include both traditional investment criteria and ecological, social and sustainability-orientated aspects in their investment strategy," says Hoelz.
Investing in eco-friendly projects is also gaining traction among capital markets firms. "We are now one of 54 banks covering over $50 billion of project lending a year. That is about 85 percent of the global project finance market. We lend directly to a project and our repayment comes from the cash flows of that project. So we could be financing a gas-powered power plant or a wind farm. You have a direct connection with the project, which means you can do environmental due diligence directly on the project quite specifically," explains Williams.
However, lending to environmentally friendly projects accounts for just 1 percent to 2 percent of HSBC's total loans and Williams says that the bank's environmentally friendly policies are influenced by the reputational risk of being associated with environmentally unfriendly practices. "It doesn't take much bad news around the brand for that brand's value to start eroding," he says.
The push toward environmentally friendly policies at capital markets firms is influenced by a host of dynamics, trying to save the planet being just one of them. Some scientists have predicted that many of the world's major cities could be flooded by the end of the century as a result of global warming. "Think of it this way: Climate change will absorb huge amounts of capital both to reduce the industry's environmental impact and eventually to rebuild flooded cities," says Giffords. "Mobilizing capital is what banks do best." And that means capital markets firms will play a central role in dealing with the new opportunities and threats that come with the risk of environmental catastrophes.
© Incisive Media Investments Ltd 2007
All this to be taken with a grain of piquant salt!!!