Investors face a carbon challenge as data centre growth outpaces renewable energy solutions
A surge in data centre construction is reshaping global property portfolios, but the sector’s rapid growth is creating a carbon dilemma for institutional investors committed to long-term sustainability goals.
As technology and infrastructure investors pour billions into new data centres to meet soaring demand from AI and cloud computing, the industry’s carbon footprint is expanding at a pace that challenges decarbonization targets and portfolio alignment with net-zero frameworks.
Data centres have become the top target for property investors, with more than US$36bn spent on acquisitions in 2024 alone.
Since 2020, investment volumes have eclipsed totals from the previous decade.
Blackstone Inc. has invested over US$16bn in data centres since 2023, outpacing all other property sectors.
Major institutional investors, including Brookfield Asset Management, The Goldman Sachs Group Inc., and Invesco Ltd., have all made net-zero or science-based climate commitments, yet face the challenge of integrating these energy-intensive assets into their portfolios.
The environmental impact is stark.
A single 50-MW hyperscale data centre can have an annual carbon footprint equivalent to 100 energy-efficient office buildings of 500,000 square feet each.
Globally, data centres account for about 1.5 percent of all energy consumption—more than the annual use of France—and this share is expected to double by 2030, with 40 percent of that energy coming from coal and gas.
In Ireland, data centres made up 22 percent of electricity demand in 2024, up from just 5 percent in 2015.
The new capacity under construction worldwide could add 0.7 percent to global carbon emissions, with Ireland and the US facing the steepest national increases.
While many operators have set climate goals and are turning to renewable energy through power purchase agreements and renewable-energy certificates, the reality is that data centres must run continuously, often relying on fossil-fuel-based grids when renewable power is unavailable.
Some firms are now pursuing long-term contracts for low-carbon power or investing in on-site generation, but the gap between market-based and location-based emissions remains significant.
This distinction can allow portfolios to show progress toward net-zero targets, even when underlying assets remain dependent on local electricity systems.
