A new analysis from climate-risk analytics firm First Street finds that 79% of global data center capacity is exposed to elevated acute climate hazards.

Those include flooding, extreme winds, and wildfires, raising concerns about operational disruptions, downtime, and rising insurance and repair costs.

The report examined 97 data center markets worldwide and found that more than half of all data centers are also located in areas facing chronic climate stresses such as extreme heat and drought, which can reduce energy efficiency and increase operating expenses.

“Most underwriting for real assets still uses historical data, but the climate is no longer behaving the way the historical record would predict,” First Street CEO Matthew Eby said.

“As heat, drought, and water stress increase, outdated models simply don’t offer a complete view of risk anymore.”

The findings suggest investors may be underestimating long-term climate risks when evaluating data center projects, many of which are expected to operate for 20 to 30 years.

First Street argues that traditional risk models often fail to account for changing climate conditions, potentially leading to mispriced assets and overlooked vulnerabilities.

“Investors who incorporate these factors into underwriting and capital allocation decisions will be better positioned to identify resilient markets and avoid mispriced risk,” Eby said.

Regionally, the Asia-Pacific market faces the greatest exposure, with 89% of data center capacity at risk from acute climate hazards.

That compares with 50% in the Americas and 46% across Europe, the Middle East, and Africa.

“Where you build a data center determines a large share of what it will cost to run for the next 20 or 30 years,” First Street Chief Economist Jeremy Porter said in a statement accompanying the report.

“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 report also found that several fast-growing data center hubs, including Northern Virginia, Johor, Malaysia, and Marseille, France, rank among the most exposed markets, while Nordic markets showed the lowest levels of climate risk.