Nearly 80% of data center capacity is at elevated risk to climate hazards, study says
A new study by First Street, a climate risk analytics firm, reveals that 79% of data centers globally face elevated risks from climate hazards such as flooding, extreme winds, and wildfires. The report highlights that traditional underwriting models based on historical data underestimate these risks, posing long-term operational and financial challenges for data center investors, particularly in rapidly growing and exposed regions like Northern Virginia.
A new study by climate risk analytics firm First Street reveals that a significant majority of data centers worldwide, approximately 79%, are exposed to elevated risks from acute climate hazards. These threats include severe weather events like flooding, extreme winds, and wildfires, which can lead to operational disruptions, increased downtime, and higher insurance and repair costs. The report, which analyzed 97 global data centers, also found that over half are in markets experiencing chronic climate stress from extreme heat and drought, impacting energy efficiency and operational expenses.
First Street CEO Matthew Eie emphasized that current underwriting practices for real assets largely rely on historical data, which is no longer sufficient given the changing climate. He noted that outdated models fail to provide a complete view of risk as conditions like heat, drought, and water stress intensify. The study critiques backward-looking climate models, including some from U.S. government agencies, for underestimating these risks, particularly concerning heavier rainfall.
The findings suggest a critical oversight among investors who may be prioritizing traditional metrics for data center development without adequately accounting for climate impacts on long-term operating conditions, especially for facilities expected to last 20 to 30 years. The study identified the Asia-Pacific region as having the highest data center capacity at risk (89%), while the Americas face 50% exposure.
Notably, some of the fastest-growing data center markets are also among the most exposed, with Northern Virginia in the U.S. highlighted as a key example. This raises concerns about the resilience and financial viability of future data center infrastructure in climate-vulnerable regions.