The study conducted by First Street highlights the vulnerability of data centers to acute climate risks such as flooding, extreme winds, and wildfires, which can disrupt operations and increase costs. It emphasizes that traditional risk assessment models, which rely on historical data, are inadequate in predicting future climate impacts.
Over half of the data centers are also located in areas facing chronic climate stress, including extreme heat and drought, which can further affect energy efficiency and operational costs. First Street's CEO, Matthew Eby, noted that investors who adapt their underwriting and capital allocation strategies to account for these climate risks will be better positioned to identify resilient markets.
The report indicates that the Asia-Pacific region has the highest risk exposure, with 89% of its data center capacity at risk, while the U.S. has significant acute risks primarily from wind and flooding. Companies like Digital Realty are already taking steps to mitigate these risks by implementing water-efficient cooling systems.
The findings suggest that a shift towards systems-level thinking in infrastructure planning is necessary to address both internal and external vulnerabilities to climate change