Nearly 80% of data center capacity at high risk to things like flooding and fire, study says

A significant portion of global data center capacity is under heightened threat from severe climate events, according to a recent study published by First Street, a firm specializing in climate risk analytics. The report reveals that approximately 79% of data center capacity is at risk from acute hazards such as flooding, extreme winds, and wildfires, which can disrupt operations and lead to increased downtime as well as higher insurance and repair costs. First Street analyzed 97 data center markets around the world, highlighting a shift in how climate risks are assessed. CEO Matthew Eby emphasized the inadequacy of traditional underwriting practices, which often rely on historical data that fails to reflect current climate realities. "The climate is no longer behaving the way the historical record would predict," he stated. The report indicates that over half of the world’s data centers are situated in regions vulnerable to chronic climate stresses, including extreme heat and drought, which threaten energy efficiency and escalate operational costs. While singular climate-driven events like hurricanes can intensify risks, the study suggests that the ongoing impacts of climate change pose the greatest long-term threats, both physically and financially. Jeremy Porter, First Street’s chief economist, noted that many existing models do not adequately account for the evolving nature of climate risks. He criticized outdated government models that overlook the increased precipitation and heavier rainfall associated with a warming planet. As investors plan for the long-term viability of data centers—typically designed to function for 20 to 30 years—they may overlook how climate factors could influence future operational conditions. Eby advised that investors who incorporate climate considerations into their decision-making will be in a better position to identify resilient markets and mitigate mispriced risks. Some developers are already adapting their designs to address these climate challenges. Digital Realty, for instance, is prioritizing water management in its data centers. CEO Andrew Power shared insights on their innovative systems, stating, "Almost all of our data centers today are either a waterless system or closed loop water, which prevents evaporation." In addition to resilient building designs, Porter stressed the importance of understanding the broader systems that support data centers, including infrastructure and community demographics. He explained that while adaptations can mitigate acute climate risks, comprehensive community planning is essential for long-term resilience. The study also highlights geographic disparities in climate risk exposure. The Asia-Pacific region is particularly vulnerable, with 89% of its data center capacity facing risks, while the Americas and Europe, the Middle East, and Africa report 50% and 46% exposure, respectively. Notably, some of the fastest-growing data center markets, including Northern Virginia, Johor in Malaysia, and Marseille in France, are also among the most at risk. In contrast, Nordic markets exhibit the lowest levels of climate risk, with many U.S. locations facing significant wind and flood threats but lower chronic climate risks overall.