The infrastructure powering artificial intelligence and digital services worldwide faces a mounting threat from the very environmental disruptions its operations help create, according to a new climate risk analysis that paints a grim picture of datacenter placement.
A study by climate analytics firm First Street examined 97 global datacenter markets and found that roughly 80% of facilities face exposure to acute climate hazards including floods, extreme winds, and wildfires. Beyond those acute risks, chronic stressors like sustained heat and drought affect 54% of datacenter markets globally.
The exposure creates cascading consequences. Disrupted operations, extended downtime, and soaring insurance and repair costs threaten the viability of these critical installations. Yet the problem runs deeper: datacenters are being built in precisely the regions where climate conditions are deteriorating fastest, not where operations would be safest.
Jeremy Porter, chief economist at First Street, pointed to a fundamental flaw in how the industry evaluates locations. "Where you build a data center determines a large share of what it will cost to run for the next 20 or 30 years," he said. "Climate is a big part of that: cooling, water, and reliability all depend on location. But most valuations still focus on growth and treat climate as a secondary concern."
The geographic breakdown reveals stark disparities. The Americas account for 86% of datacenter capacity in elevated-risk zones for floods, wind, and wildfires, compared to 60% in Asia-Pacific and 25% in Europe, the Middle East, and Africa. Heat and drought present an inverted risk profile: Asia-Pacific faces the highest exposure at 89%, while the U.S. sits at about 50% and Europe, the Middle East, and Africa at 46%.
Within the U.S., some of the nation's most critical datacenters cluster in vulnerable areas. The Carolinas, Atlanta, the New York-New Jersey region, and northern Virginia, which has emerged as one of the world's fastest-growing datacenter hubs, rank among the top 10 most exposed regions. Rapidly expanding markets abroad follow the same pattern: Johor in Malaysia and Marseille in France are also highly vulnerable, while lower-risk regions like Helsinki, Finland, remain relatively underdeveloped.
The contradiction is stark. About two-thirds of planned U.S. datacenters, which demand massive volumes of water for cooling operations, are slated for drought-stricken regions. A March report from Swiss Re noted that globally, new facilities increasingly locate in areas prone to severe weather events like hail and tornadoes.
"Scale is being built where operating conditions are hardest, not where they're easiest," the study concludes.
Matthew Eby, founder and CEO of First Street, attributed the disconnect to outdated risk assessment practices. "Most underwriting for real assets still uses historical data, but the climate is no longer behaving the way the historical record would predict," he said. "As heat, drought, and water stress increase, outdated models simply don't offer a complete view of risk anymore."
The stakes extend beyond individual facilities. Climate disruptions to datacenters affect entire communities and supply chains that depend on the digital services they provide. "Datacenters run the digital services people and businesses rely on," Porter explained. "So a climate hit to a local datacenter can radiate outward as a service disruption, on top of competing with that same community for power and water in regions already under stress."
Author James Rodriguez: "The industry is building its most critical infrastructure in its worst possible locations, treating climate as an afterthought while betting the entire digital economy on flawed financial models."
Comments