$242.72bn At Risk As Data Centres Face Escalating Climate Threats

Data centres, the invisible backbone of the global digital economy, are facing rising threats from climate-related disasters, with billions of dollars in infrastructure, services, and insurance costs at stake, a new report released on Sunday by the Cross Dependency Initiative (XDI), a global authority on physical climate risk analysis, revealed.

The global data center market size was valued at $242.72 billion in 2024; the market is projected to grow from $269.79 billion in 2025 to $584.86 billion by 2032, exhibiting a CAGR of 11.7 per cent during the forecast period, according to data from Fortune Business Insights.

The report, hailed as the most comprehensive of its kind, assessed nearly 9,000 operational and planned data centres worldwide. It analysed their exposure to eight major climate hazards, including flooding, tropical cyclones, forest fires, and coastal inundation.

The findings revealed that without urgent climate adaptation and mitigation efforts, the cost of insuring these critical facilities could triple or even quadruple, by 2050.

While the report found that physical climate risk in Sub-Saharan Africa is currently lower than in many other global regions, cities like Lagos and Nairobi are projected to experience exponential increases in climate-related damage by the end of the century.

These cities, identified as fast-growing tech hubs, are increasingly vulnerable to extreme weather events such as flash floods and prolonged heat waves, which could severely disrupt data services and local digital economies.

Reacting to the findings of the report, the founder of XDI, Dr. Karl Mallon, said that data centres are the silent engine of the global economy, but as extreme weather events become more frequent and severe, the physical structures underpinning the digital world are increasingly vulnerable.

The report’s global assessment revealed that by 2050, between 20 percent and 64 percent of data centres in key hubs like New Jersey, Hamburg, Shanghai, Tokyo, Hong Kong, and Bangkok could be at high physical risk. Notably, centres within the same city or region show vast differences in vulnerability due to factors like elevation, drainage, and proximity to hazard zones.

The Asia-Pacific region is particularly exposed, with over 1 in 10 data centres already at high risk, a figure projected to rise to 1 in 8 within the next 25 years.

If unaddressed, the cascading effects of climate disasters on digital infrastructure could lead to major service disruptions, economic losses, and increased barriers to digital inclusion.

XDI’s report provides a first-of-its-kind quantitative framework to assess how targeted investments in site design, physical reinforcements, and climate-resilient construction can significantly reduce risks. These measures, the report notes, could save operators billions of dollars in damages and insurance costs annually.

However, the study also warns that reinforcing individual data centres is not enough. “The most resilient data centre still relies on power lines, cooling systems, and transport routes that may not withstand worsening climate impacts. Decarbonisation and adaptation must go hand in hand,” Mallon advised.

As Lagos and Nairobi emerge as digital and cloud computing growth centres in Africa, the report’s findings serve as a wake-up call for regional stakeholders to act swiftly. Without climate-smart planning and resilient infrastructure development, the very foundation of Africa’s digital transformation could be undermined by the forces of nature.

The report urges data centre operators, investors, and governments to prioritize climate resilience alongside emissions reductions, as an effort to safeguard the digital economy and maintain the reliability of online services. This includes conducting climate risk assessments across jurisdictions to guide smarter capital allocation, infrastructure planning, and long-term policy development.