Scenario

You run some PnP PowerShell code unattended e.g. daemon/service app, background job – under application permissions – with no user interaction.
Your app needs to connect to SharePoint and/or Microsoft Graph API. Your organization require authentication with a certificate (no secrets). You want certificate stored securely in Azure Key Vault.

Solution (Step-by-step process)

1. Obtain a certificate (create a self-signed or request trusted)
2. In Azure where you have Microsoft 365 SharePoint tenant
   1. Create a new Registered App in Azure; save App (client) id, Directory (Tenant) Id
   2. Configure App: add MS Graph and SharePoint API application (not delegated) permissions
   3. Upload the certificate to the app under “Certificates & secrets”
3. In Azure where you have paid subscription (could be same or different)
   1. Create an Azure Key Vault
   2. Upload certificate to the Key Vault manually (with GUI)
4. While you develop/debug your custom daemon application at your local machine
   1. Provide permissions to the Key Vault via Access Control and Access Policies to your personal account
   2. Connect to Azure (the one where your Key Vault is) running Connect-AzAccount
      – so your app can get a Certificate to authenticate to SharePoint Online
5. For your application deployed to Azure (e.g. Azure Function App )
   1. Turn On managed identity (Your Function App -> Identity -> Status:On) and Save; notice an Object (Principal) Id just created
   2. Provide for your managed identity principal Id permissions to the Key Vault via Key Vault Access Policies, so when your daemon app is running in the cloud – it could go to the key Vault and retrieve Certificate

Here is the sample PowerShell code to get certificate from Azure Key Vault and Connect to SharePoint with PnP (Connect-PnPOnline):

# ensure you use PowerShell 7
$PSVersionTable

# connect to your Azure subscription
Connect-AzAccount -Subscription "<subscription id>" -Tenant "<tenant id>"
Get-AzSubscription | fl
Get-AzContext

# Specify Key Vault Name and Certificate Name
$VaultName = "<azure key vault name>"
$certName = "certificate name as it stored in key vault"

# Get certificate stored in KeyVault (Yes, get it as SECRET)
$secret = Get-AzKeyVaultSecret -VaultName $vaultName -Name $certName
$secretValueText = ($secret.SecretValue | ConvertFrom-SecureString -AsPlainText )

# connect to PnP
$tenant = "contoso.onmicrosoft.com" # or tenant Id
$siteUrl = "https://contoso.sharepoint.com"
$clientID = "<App (client) Id>" # Azure Registered App with the same certificate and API permissions configured
Connect-PnPOnline -Url $siteUrl -ClientId $clientID -Tenant $tenant -CertificateBase64Encoded $secretValueText

Get-PnPSite

The same PowerShell code in GitHub: Connect-PnPOnline-with-certificate.ps1

References:

• https://docs.microsoft.com/en-us/powershell/module/az.keyvault/get-azkeyvaultcertificate?view=azps-5.3.0
• https://stackoverflow.com/questions/43837362/keyvault-generated-certificate-with-exportable-private-key
• Do I need certificate or secret to Connect to SharePoint Online from code
• Register and configure Azure App to Get access to an SPO site from code