Climate change will render hundreds of data centres uninsurable, finds research

Most organisations say they have been impacted by physical climate events over past 12 months

A fifth of the world’s data centres will see their insurance costs spike because of climate change, with hundreds losing access completely. 

That’s according to analysis of 9,000 sites by Australian data house XDI, which found that 6.25% are currently at “high risk”. 

That means the value at risk is more than 1% of the value of the asset, presenting “a high risk of insurance becoming prohibitively expensive or withdrawn entirely”.  

XDI estimated that high risk data centres will account for 7.13% of total assets by 2050.  

For a further 15.79%, insurance is likely to remain available, but will become “expensive” said the research.  

The analysis is based on a scenario in which emissions continue to grow significantly in the future, and covers existing and planned data centres.  

The riskiest sites were found across the US, Shanghai, Tokyo, Queensland, Bangkok and Jakarta. More than 10% of data centres in Asia Pacific (APAC) are already at high risk, XDI said.   

A recent survey by Morgan Stanley revealed that 73% of companies in APAC had reported being impacted by climate change over the past year. 

Over 300 sustainability professionals at public and private companies around the world were polled by the US bank’s Sustainable Investing Institute. 

Most (57%) said events like extreme heat or storms had impacted operations in the past 12 months.  

Over the next five years, more than two-thirds believe that physical and transition climate risks could “impact demand, costs, investment needs and relationships with investors”. 

Notably, these concerns were greatest among respondents based in North America.

More than two-thirds said climate-related events were likely to increase operational costs and drive higher allocations to capital expenditure and research and development. 

But, despite the challenges, most respondents (80%) stated their organisation was either “very” or “somewhat” prepared for the need for increased resilience in the coming years.