Around 80% of the world's data centres – crucial for storing information from our social media posts to financial transactions – are facing an alarming threat from extreme climate events. Floods, severe winds, and wildfires can not only disrupt their operations but also drive up insurance costs and repair expenses.
According to a recent report by climate risk analytics firm First Street, data centre owners need to rethink where they locate these facilities. Jeremy Porter, chief economist at First Street, warns that location choices can have long-term financial implications: "Where you build a data centre determines what it will cost to run for the next 20 or 30 years." He points out that climate factors such as cooling, water availability, and reliability are heavily dependent on location – yet current valuations often prioritise growth over climate considerations.
The study also highlights chronic climate risks like extreme heat and prolonged drought affecting 54% of data centre markets worldwide. These ongoing issues contribute to operational disruptions and increased insurance costs. Matthew Eby, founder and CEO of First Street, notes that traditional underwriting models are no longer adequate as the climate deviates from past patterns.
The report examined 97 global data centre markets and reveals varying levels of vulnerability across regions. The Americas dominate in exposure to flood, wind, and wildfire risks with 86% of capacity in elevated-risk markets, while Europe, the Middle East, and Africa have 25% of their data centres in such areas. For chronic risks like heat and drought, the Asian-Pacific market is most vulnerable at 89%, with approximately 46% of data centres in Europe, the Middle East, and Africa also exposed.
Worryingly, new data centre developments are often concentrated in regions facing significant climate challenges. This suggests that expansion is occurring in locations where operating conditions are more difficult rather than easier. This finding aligns with previous warnings that data centres contribute to global greenhouse gas emissions but are also increasingly vulnerable to the very climate chaos they help create.
The implications of these vulnerabilities extend far beyond the facilities themselves, impacting individuals and businesses reliant on their services. A localised climate event affecting a data centre can trigger widespread service outages, exacerbating existing stresses on power and water resources within affected communities. Jeremy Porter warns that climate-related disruptions to data centres do not remain isolated but instead have far-reaching consequences.