Nearly 80% of data center capacity is at elevated risk to climate hazards like flooding and fire, study says
A study by First Street reveals that nearly 80% of global data center capacity faces elevated risks from acute climate hazards like flooding, extreme winds, and wildfires, with over half also exposed to chronic stress such as extreme heat and drought. The report highlights outdated risk models and urges investors to consider these factors, noting that major US markets like Northern Virginia are among the most exposed. Digital Realty is cited as an example of a company implementing water-efficient cooling solutions.
A new study by climate risk analytics firm First Street indicates that 79% of global data center capacity is at elevated risk from acute climate hazards, including severe flooding, extreme winds, and wildfires. Additionally, over 50% of data centers are in markets exposed to chronic climate stress, such as extreme heat and drought, which can impact energy efficiency and drive up costs.
First Street CEO Matthew Eby emphasized that traditional underwriting models based on historical data are no longer sufficient to predict climate behavior. Jeremy Porter, the firm's chief economist, highlighted that government models are also outdated, failing to account for the increased moisture capacity of warming clouds and heavier rainfall.
The study warns that investors relying on traditional metrics for data center development risk mispricing long-term operating conditions, given that these facilities are typically expected to operate for 20-30 years. It identified Northern Virginia as one of the fastest-growing data center markets in the U.S. and globally that is also highly exposed to acute climate risks like wind and flood.
Some developers are proactively addressing these challenges. Digital Realty CEO Andrew Power mentioned that almost all of the company's 300 global data centers utilize waterless or closed-loop cooling systems to conserve water. Porter further suggested that mitigation efforts must extend beyond building adaptations to include systemic thinking about infrastructure and community-level resilience.