First Street Puts Climate Risk Into Data Center Site Selection

Climate Risk Enters The Data Center Buildout

First Street has put physical climate exposure into the economics of global data center expansion, saying the buildout for AI and cloud computing is no longer only a question of power, land and network access.

The firm's 18th Risk Assessment covers 97 investible data center markets worldwide under the title Climate Risk in Global Data Center Markets.

First Street used its hazard models alongside global data center market data to examine effects on reliability, operating economics and investment outcomes.

The main finding is direct: First Street puts 79% of global data center capacity in the significant acute-hazard exposure group, including flood, wind and wildfire risk.

It also says approximately 54% of global capacity operates in markets facing elevated chronic heat or drought stress.

Those figures turn climate exposure into a site-selection and underwriting issue for developers, lenders, investors and operators.

A market can look attractive because of power availability or AI demand, but First Street's analysis says physical hazard exposure can still change cooling efficiency, insurance availability, uptime risk and long-term asset performance.

Heat And Water Stress Affect Operating Costs

First Street separates acute disruption from chronic operating pressure.

Extreme heat and water scarcity can create sustained pressure on operating costs, cooling efficiency and capacity utilization.

For high-density AI workloads, those operating limits matter because cooling and power availability shape how much usable compute a facility can support.

Acute hazards work differently.

Flood, wind and wildfire can cause outages, repair costs, insurance losses and business interruption.

First Street links those risks to NOI stability, cash flow durability and long-term asset performance, which makes the report relevant to capital allocation rather than only facility engineering.

The report also challenges assumptions that comparable markets carry comparable risk.

First Street says locations that look alike on infrastructure and demand can still differ materially once climate exposure is considered.

That means two locations with similar data center demand may carry different financing, insurance and resilience costs once physical exposure is included.

Investors Get A New Underwriting Input

The report's practical audience is the capital stack behind digital infrastructure: investors, lenders, developers and operators.

First Street says climate exposure should be folded into site selection, underwriting and capital allocation so institutions can judge resilience and long-term exposure before committing money.

The finding fits the wider AI infrastructure race because capacity growth is pushing capital into established and emerging markets at the same time.

First Street does not say climate risk stops new projects.

It says the risk should be part of the base case for decisions about where to build, how to finance assets and how to evaluate long-term performance.

The company did not name individual projects, specific developers or facility-level mitigation plans in the extracted report page.

It also did not provide market-by-market rankings in the visible text used for this article.

First Street's published figures leave data center buyers and financiers with a narrower decision point: 79% of global capacity faces significant acute hazard exposure, 54% faces elevated chronic heat or drought stress, and the next underwriting step depends on how each market prices resilience, cooling limits, insurance and downtime risk.