May 31, 2026, Amazon Web Services IAD10 data center in Sterling, Virginia.
Lexi Critchett Bloomberg | Getty Images
The findings, released Thursday, show that a large portion of the world’s data center capacity faces increased risk from severe climate change.
According to a report from climate risk analysis firm First Street, severe hazards that exceed 79% of production capacity include severe climate-driven events such as flooding, high winds and wildfires that can disrupt operations, increase downtime, and increase insurance and repair costs.
First Street surveyed 97 global data center markets in its report.
“While most real asset underwriting still uses historical data, the climate no longer behaves as historical records predict,” First Street CEO Matthew Eby said in a release. “As heat, drought and water stress increase, outdated models no longer fully capture risk.”
The study also found that just over half of all data centers worldwide are in markets exposed to chronic climate stress, such as extreme heat and drought, which impacts energy efficiency and increases costs.
While exposure to unique climate events, such as strong hurricanes, can increase risk, it is the chronic effects of climate change that can cause the greatest physical and economic damage.
Jeremy Porter, chief economist at First Street, said the backward model doesn’t correct for climate or all sources of risk.
“At the end of the day, we’re just underestimating it,” he says.
Mr Porter said the government’s model was outdated because it focused on historical rainfall levels and did not take into account the effects of climate change. As the earth warms, clouds contain more water and rain increases.
The danger, according to the study, is that investors focus on traditional metrics when developing data centers and may not consider how climate can affect long-term operating conditions. Data centers are typically expected to operate for 20 to 30 years.
“Investors who incorporate these factors into their underwriting and capital allocation decisions will be better positioned to identify resilient markets and avoid the risk of mispricing,” Eby said in the release.
However, some developers and operators take climate into account when designing their data centers.
For example, Digital Realty is working to ensure there is enough water to cool the center.
Digital Realty CEO Andrew Power said on the Property Play podcast earlier this year that “nearly all of our 300 data centers around the world today (our global portfolio) are either waterless systems or closed-loop water.” “So consider that there is no evaporation. We are making the investment and choosing to do so.”
While developers can protect their structures from severe weather events by building hardening measures on building envelopes (the physical barrier between the inside and outside of a building), it’s the actual systems that connect to data centers that are most important in terms of understanding both internal and external vulnerabilities to climate risks, Porter said.
He said developers need to look beyond building and parcel-specific risks to systems-level thinking. That means understanding the infrastructure and demographics of your community.
“Significant climate risks can be mitigated through building adaptation, so that’s not a big issue. Then you start thinking about systems, but you also start thinking about infrastructure, egress, site access, power access. There’s a building mitigation process, but then there’s also a community mitigation process,” he said.
Some regions are more exposed to climate risks than others, the study found.
According to First Street, 89% of data center capacity in Asia Pacific is at risk, the highest percentage of any geographic area. This compares to 50% in the Americas and 46% in Europe, the Middle East and Africa.
Some of the industry’s fastest growing markets are also the most at risk, the study found. This includes Northern Virginia in the United States, Johor in Malaysia, and Marseille in France. Nordic markets had the lowest climate risk.
“Most of the top 10 markets with severe climate risks around the world are in the United States. Most of them have feng shui risks,” Porter said, adding that the United States is not as aware of chronic climate risks as the rest of the world.
