Data centre investors underestimate climate risks, see these as ‘not a priority’: report

THE fallout of climate change may expose the world’s data centres to losses that investors are not currently pricing in, according to a report published on Friday (Nov 13) by Jupiter Intelligence.

The privately-held risk analytics company estimates that annual losses from floods, wind and wildfires could be around US$4.4 billion. It is “simply not a priority” for investors, said Wahib Ghazni, the report’s author.

Lenders financing data centres in emerging markets are at greater risk than those in developed ones, he added.

A study earlier this year of roughly 2,600 planned data centres worldwide indicated that more than 150 will be built on sites facing a high physical climate risk.

Key hazards include coastal inundation, high heat and riverine flooding.

A separate analysis by Schneider Electric Research Institute found that climate risk puts 38 per cent of the value of the world’s data centres at risk, before adaptation measures are taken.

THE BUSINESS TIMES INSIGHTS

Powering Asean's Future 2026

Find out how enterprises are navigating power constraints and sustainability targets

ACCESS THE INSIGHTS

Most of the risk, or 61 per cent, is to IT equipment, rather than buildings housing data centres, the Jupiter Intelligence report found, adding that such climate impacts are currently largely uninsured.

The debt financing such infrastructure is typically short-term, whereas much of the increase in climate-related costs identified in the report will emerge over the longer term, it said.  

The Jupiter Intelligence study, which modelled its analysis on more than 14,000 already operational data centres, highlighted risks to hubs in China, where insurance coverage is low and the risk of floods is high.

SEE ALSO

Data centre sector ‘politically salient’; Singapore takes practical approach to regulation: Tan Kiat How

OpenAI announces changes to how it handles data centres amid outcry after US midterms

Google to invest US$15 billion in Malaysia in 2027 and 2028 amid data centre expansion

AI data centre boom is set for upheaval after US election rout

Singapore’s data centre operator STT GDC eyes US$2.4 billion loan, adds to AI debt binge

More

China, including Hong Kong, represents 17 per cent of the value of data centres in the world, but has 49 per cent of the potential climate loss. North America, by contrast, has 44 per cent of the value and 17 per cent of the potential loss.

“The huge problem in China is pure geography,” according to Ghazni.

“Many of the data centre hubs are in three low-lying deltas and flood plains, exposed to monsoon rain and typhoons.” BLOOMBERG