Data Centers Highly Vulnerable to Climate Threats: New Report

The rapid proliferation of artificial intelligence (AI) technologies has brought increasing attention to the environmental impact of global data center infrastructure and its vulnerability to climate change. A new study by climate risk analytics firm First Street has revealed that nearly 80% of global data center capacity is exposed to acute climate hazards, including flooding, extreme winds, and wildfires. These findings raise concerns about the future resilience of this critical infrastructure that underpins the digital economy.

First Street's report, titled “Climate Risk in Global Data Center Markets: Implications for Investment and Performance,” examined 97 data center markets worldwide. The study also found that 54% of global data center capacity is located in markets facing chronic climate stressors such as extreme heat and drought. Jeremy Porter, Chief Economist at First Street, emphasized that where a data center is built largely determines its operating costs for the next 20 to 30 years. Porter noted that climate is a significant factor concerning cooling, water, and reliability, yet most valuations still prioritize growth, treating climate as a secondary concern. This creates a paradox where the AI boom fuels the climate crisis through energy consumption, and the very data centers driving this growth become vulnerable to the climate chaos they help create.

These climate risks translate into severe consequences for data centers, including disrupted operations, increased downtime, and inflated insurance and repair costs. Chronic climate risks, in particular, increase cooling requirements, reduce efficiency, and put pressure on operating margins. For instance, Swiss reinsurance company Swiss Re projects that global insurance premiums linked to data centers could surge from $10.6 billion to $24.2 billion by 2030. S&P has also identified hyperscale data centers as an emerging risk pool, indicating that climate risk in the sector is shifting from an operational concern to a capital markets one.

Geographically, the Americas dominate with 86% of capacity in elevated-risk markets for flood, wind, and wildfire. The Asia-Pacific region faces the highest exposure to heat and drought, with 89% of its data center capacity at risk, compared to 50% in the Americas and 46% in Europe, the Middle East, and Africa (EMEA). Major hubs like Northern Virginia in the U.S., Johor in Malaysia, and Marseille in France are positioned in the highest climate-risk tier globally, while Nordic markets are among the least exposed.

These developments underscore the need for investors and developers to re-evaluate their data center location strategies. Matthew Eby, Founder and CEO of First Street, stated that most underwriting for real assets still relies on historical data, but the climate is no longer behaving as historical records would predict. Eby added that as heat, drought, and water stress intensify, outdated models simply do not offer a complete view of risk anymore. Moving forward, climate resilience will play a much more central role in infrastructure planning and investment decisions, requiring substantial investments from companies to ensure operational continuity.