Climate change poses mounting threat to India's data centres, warns global report

The Hindu

4 days ago

As global demand for artificial intelligence, cloud computing, and digital services accelerates data centre development, a new report has warned that these critical infrastructures face escalating physical risks from climate change. The 2025 Global Data Centre Physical Climate Risk and Adaptation Report, released by the Cross Dependency Initiative (XDI), offers a comprehensive assessment of climate vulnerabilities across nearly 9,000 operational and planned data centres worldwide.
The report flags significant risks in India, with five States – Uttar Pradesh, Tamil Nadu, Maharashtra, Karnataka, and Telangana–featuring in the top 100 most climate-exposed hubs globally.
Uttar Pradesh ranks second in the global risk index, with 61.9% of its 21 assessed data centres projected to be at high risk of physical climate damage by 2050. The risk of damage is expected to more than double – rising by 111% – by 2100.
Tamil Nadu, particularly the Chennai region, also features prominently. Over 10% of the State's data centres are already considered high risk, while nearly 70% fall under the moderate risk category. The State ranks 25th globally in the climate risk index.
Maharashtra, which hosts the largest number of data centres in India – including hubs in Mumbai and Navi Mumbai – is ranked 48th. Approximately 5.71% of its facilities are already in the high-risk category, and 66% are moderately exposed. The overall risk in the State is projected to increase by 133% by the end of the century.
According to the report, 6.25% of data centres globally are currently considered high risk – defined as having a projected value-at-risk exceeding 1% of asset value – potentially rendering them difficult or prohibitively expensive to insure. This figure is expected to rise to 7.13% by 2050.
Moderate risk data centres currently account for 15.79% globally and are forecast to increase to 19.6% within the next 25 years. Apart from India, other high-risk regions include Jiangsu (China), Hamburg (Germany), Shanghai (China), Tokyo (Japan), Bangkok (Thailand), Hong Kong, and New Jersey (United States), where between 20% and 64% of data centres are projected to be highly vulnerable by mid-century.
'Data centres are the silent engine of the global economy. But as extreme weather events become more frequent and severe, the physical structures underpinning our digital world are increasingly vulnerable,' said Dr. Karl Mallon, Founder, XDI.
The report also highlights a growing financial dimension to the risk, noting that climate-induced damages are straining the global insurance market. In 2024, insurance losses from natural disasters exceeded USD 135 billion for the fifth consecutive year, prompting insurers to revise risk models, raise premiums, and reduce coverage in climate-sensitive regions.
In response, the report proposes structural adaptations – such as flood barriers, reinforced materials, and elevation of critical infrastructure – to bolster resilience. According to the analysis, such measures could reduce the number of high-risk data centres by more than two-thirds by 2050 and decrease moderate-risk facilities by over 70%.
'Adaptation measures applied to the base analysis slashed the number of high-risk data centres by more than 2/3 in 2050,' the report states.
The economic implications of these measures are also significant. The report estimates that the average value-at-risk could be reduced by approximately 0.20% in 2025 and 0.28% in 2050, amounting to $8-11 billion in avoided annual damages. Over a 25-year period, the net present value of these avoided losses could reach $120 billion.
However, the report cautions that structural upgrades alone are insufficient. Data centres are also dependent on surrounding infrastructure – such as power grids, water supply systems, communication lines, and road networks – which are similarly vulnerable to climate risks.
'Without ambitious and sustained investment in emissions reduction to limit the severity of climate change, no amount of structural hardening will fully protect these critical assets,' Dr. Mallon said.
India, positioning itself as a global digital hub with rapid expansion of hyperscale data centres, stands at a crucial juncture. Key urban regions including Mumbai, Navi Mumbai, Chennai, Noida, and Hyderabad are witnessing significant investment in cloud computing, AI, and fintech platforms. However, the XDI report underscores the urgency of complementing this growth with targeted adaptation and decarbonisation strategies to safeguard infrastructure, maintain investor confidence, and ensure long-term viability, Mr. Mallon added.