![\"Amazon](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/11\/1762222398_543_960x0.jpg\")
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Amazon Data Center in Ashburn, Virginia. Northern Virginia is known as Data Center Alley due to its large concentration of hyper scale data centers (AP Photo\/Ted Shaffrey, File)<\/p>\n
Copyright 2023 The Associated Press. All rights reserved.<\/p>\n
Although forecasts of the scale of data center buildout vary widely, anything near this projected scale has enormous climate implications. The most obvious concern is the emissions generated in powering the massive hyperscale complexes, which are being designed to consume as much as 2 gigawatts (GWs) of power\u2013roughly 15 times the capacity required by the entire city of Philadelphia during summer peak load. According to energy analyst Rystand\u2019s 2025 review of industry announcements, data centers consuming up to 100 GWs of power<\/a> could come online in the next 10 years. Much of this power would come from gas-fired power plants.<\/p>\n A second concern is that the capital available for building infrastructure is finite, and hyperscale data centers are diverting resources away from electrifying heavy industry, buildings, and transport, and powering these sectors with clean energy. U.S. tech industry leaders believe their hyperscale model of data centers, with their enormous appetites for power, is critical to providing the GenAi applications that customers want. To date, however, customer demand has not emerged; revenues represent only a small fraction of expenditures. <\/p>\n Meanwhile, as the Center for Strategic & International Studies<\/a> and others have highlighted, recent innovations could lead to competitive GenAI applications being built at a tiny fraction of the cost and without the need for hyperscale data centers. If this happens, the U.S. will be forced to reckon with a massive waste of capital and asset strandings on a large scale. <\/p>\n Growing concerns about pollution and electricity costs<\/p>\n In the communities where data centers are being sited, residents are becoming increasingly angry about secretive, backroom deals and the unaddressed health, environmental, and electricity cost impacts of the gargantuan facilities. As Louisiana Public Service Commissioner Davante Lewis states<\/a>, \u201creal health risks come from the utilities rushing to build more gas plants and delaying renewable energy commitments,\u201d locking communities into \u201cdecades of pollution and higher bills.\u201d <\/p>\n Louisiana Public Service Commissioner Davante Lewis has been leading community efforts to ensure concerns about the pollution and electricity cost impacts of Meta’s proposed data center complex are addressed (Photo by Jemal Countess\/Getty Images for Legal Defense Fund)<\/p>\n Getty Images for Legal Defense FundThe Power of Pensions to Shape AI\u2019s Direction<\/p>\n For institutional investors invested in the tech, real estate, and utility companies that build and power data centers, the key question is how best to use their ownership power to mitigate GenAI\u2019s systemic risks to the value of their portfolios.<\/p>\n With $6.17 trillion<\/a> of retirement savings under stewardship, trustees of state and local pensions\u2013which include elected officials such as treasurers and comptrollers\u2013 have enormous power to shape corporate decision-making, including the power to shape the future of data centers. Engagements of these pensions and their asset managers with portfolio companies the tech, real estate, and utility sectors must now make data centers a priority focus.<\/p>\n The vast majority<\/a> of returns in pension portfolios are determined by systemic factors (those affecting the economy as a whole) rather than idiosyncratic ones (limited to specific companies or sectors). This means that in these engagements, pension trustees and their asset managers must address more than company profitability. Likewise, diversification or stock-picking will not suffice to protect beneficiaries. They must work with companies on strategies that reduce data centers\u2019 impacts to the entire economy.<\/p>\n AI\u2019s Systemic Climate Risks<\/p>\n Climate change science makes clear that building a new generation of fossil fuel infrastructure to power data centers would cause irreparable damage to the economy and the life savings of millions of workers and retirees. <\/p>\n Rising GHG emissions are contributing to a growing number of extreme weather events, causing a crisis in the property insurance industry. Reduced affordability and availability of insurance raises concerns that climate risks could cascade into the banking system and the broader economy. Photo by Apu Gomes\/Getty Images)<\/p>\n Getty Images<\/p>\n Some pension trustees are acutely aware of threats posed by rising GHG emissions to portfolio value. Two years ago, CalPERS, the nation\u2019s largest pension plan, committed<\/a> to investing $100 billion toward climate solutions by 2030 and holding accountable companies that do not have a credible plan to reduce GHG emissions, explaining that \u201cresponsibility for decarbonizing both the portfolio and economy should not be passed off to others by a passive divestment effort.\u201d The Minnesota State Board of Investment has similarly explained<\/a> why it believes climate risks threaten its funds\u2019 long-term viability: \u201cmarket returns depend on the long-term health of the economy, which in turn depends on the productivity of social and environmental systems.\u201d <\/p>\n A 2024 study<\/a> by Ortec Finance highlights why systemic climate risk is a growing concern, finding that \u201cUS pension funds could experience the most significant impact [of a failure to reduce GHG emissions], with investment returns declines approaching 50% by 2040, followed by further declines without recovery until at least 2050.\u201d <\/p>\n Ortec Finance (2024) finds that US pension funds could face investment return declines of up to 50%* by 2040 if climate policies remain unaddressed, with further declines through 2050.<\/p>\n Ortec Finance (2024)<\/p>\n Fortunately, climate solutions that provide affordable electricity and an economic boost to U.S. workers and communities are readily available. Perhaps the most exciting success story in technology is the rapid scaling and cost declines in renewable energy and battery storage over the past decade. Despite federal policy headwinds, these clean technologies represent 93% of new capacity additions<\/a> to the U.S. grid this year. <\/p>\n State and local pensions, along with other climate-aware institutional investors, have played an important role in the growth of these sectors. However, with global GHG emissions still climbing, coasting on this success is not an option. They must help accelerate the pace of the energy transition. <\/p>\n This requires coming to terms with the dramatic changes underway in the power sector. Industry analyst Rystad anticipates that global power demand will rise 30% over the next decade<\/a>. Data centers are a key contributor to this surge, especially in the U.S., where roughly half of the world\u2019s data center power demand is currently found. <\/p>\n Opportunities for near-term clean energy deployment<\/p>\n Transitioning sectors such as industry, buildings and transport to carbon-free electricity requires time and large capital expenditures for electrification. In contrast, the tech sector is well-positioned to tap carbon-free electricity in the near term. A host of cost-effective clean energy solutions are poised to meet data center demand:<\/p>\n Large-scale renewable energy projects can be paired with battery storage, such as was done with the Gemini solar and battery project<\/a> in Nevada;Enhanced geothermal energy can provide around-the-clock power, as Fervo Energy<\/a> has done for Google in Nevada;Increasing grid managers\u2019 flexibility in balancing supply and demand can eliminate the need for new power plants. Rewiring America shows<\/a> how tech companies could achieve this outcome and reduce household energy costs by investing in distributed energy resources such as heat pumps, rooftop solar, and home batteries; andOff-grid solar \u201cmicrogrids,\u201d paired with batteries and small backup gas generators, can be built in sunny locations, as shown in research conducted by Scale Microgrids and Stripe<\/a>. <\/p>\n Pension trustees have a fiduciary duty to assess these and other strategies for mitigating systemic climate risks to their portfolios. Once they conclude that the tech industry\u2019s energy-intensive and fossil fuel-reliant strategy for data center buildout is generating systemic risks that can be averted with a shift in strategic direction, it is their duty to seize the opportunity to help bring about that shift. <\/p>\n","protected":false},"excerpt":{"rendered":"Stock prices are soaring due to investor enthusiasm about the potential for Generative AI to transform the economy.…\n","protected":false},"author":2,"featured_media":260975,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[256,64,63,99,68,10832,186,8666,7929,4363,184,185,8146],"class_list":{"0":"post-260974","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-ai","9":"tag-au","10":"tag-australia","11":"tag-business","12":"tag-climate-change","13":"tag-data-centers","14":"tag-finance","15":"tag-fossil-fuels","16":"tag-investors","17":"tag-pensions","18":"tag-personal-finance","19":"tag-personalfinance","20":"tag-renewable-energy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/260974","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=260974"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/260974\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/260975"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=260974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=260974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=260974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}