79% of global data centre capacity exposed to elevated climate risk: First Street
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New research from First Street found that 79% of global data centre capacity is exposed to elevated acute climate hazards, including flooding, wind, and wildfire risks that can disrupt operations, increase downtime, and drive up insurance and repair costs.
First Street’s analysis shows that climate risk is emerging as a critical factor in data centre investment performance, with physical hazards increasingly shaping operating costs, infrastructure reliability, financing conditions, and long-term asset values across global markets.
The research examined 97 global data centre markets and found that many of the industry’s largest and fastest-growing hubs are concentrated in locations exposed to flooding, extreme heat, wildfire, wind, and drought.
This is increasingly relevant for the insurance industry, which is seeing growing interest in the opportunities emerging from data centre risk.
Rating agencies have highlighted this trend, with a recent report from S&P suggesting that rising demand for data centre insurance coverage could generate $10 billion in new premiums in 2026.
During Moody’s Ratings’ virtual media briefing last month, Brandan Holmes, Senior Credit Officer, noted that data centres represent a significant opportunity for commercial insurers and reinsurers, but also pose risks.
Meanwhile, a new AM Best report described data centre projects as a “considerable opportunity” for the U.S. P&C insurance industry to develop innovative new property and liability coverages amid rising demand.
First Street noted that global data centre capacity has expanded rapidly over the past decade and is expected to nearly double again by 2030. However, while investors have traditionally focused on power availability, connectivity, land access, and demand growth, climate risk remains largely absent from many underwriting and valuation frameworks, despite its impact on uptime, operating costs, insurance availability, and infrastructure reliability.
First Street’s found that 54% of global data centre capacity is located in markets exposed to chronic climate stress, including extreme heat and drought, which increase cooling costs, reduce efficiency, and pressure operating margins.
Exposure varies significantly across regions, reaching 89% of capacity in APAC, compared with 50% in the Americas and 46% in EMEA, highlighting meaningful differences in operating conditions.
The industry’s largest growth markets are also among its most climate-exposed. Key hubs including Northern Virginia, Johor, and Marseille sit in the highest climate-risk tier globally, while lower-risk Nordic markets rank among the least exposed.
A recent analysis from specialty Lloyd’s insurer MS Amlin also highlighted weather-related risks to data centres, noting that just over half (51%) of planned US data centre projects worth $670 billion are located in states at high risk of severe convective storms (SCS).
“Where you build a data centre determines a large share of what it will cost to run for the next 20 or 30 years. Climate is a big part of that: cooling, water, and reliability all depend on location,” said Dr. Jeremy Porter, Chief Economist at First Street. “But most valuations still focus on growth and treat climate as a secondary concern.”
Matthew Eby, Founder and CEO of First Street, added, “Most underwriting for real assets still uses historical data, but the climate is no longer behaving the way the historical record would predict. As heat, drought, and water stress increase, outdated models simply don’t offer a complete view of risk anymore.
“Investors who incorporate these factors into underwriting and capital allocation decisions will be better positioned to identify resilient markets and avoid mispriced risk.”
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