The Philippines, one of the major destinations for data center investments, should address concerns of greenhouse emissions as operators in this sector are prioritizing sustainability among other factors in deciding where to locate their investments and to ensure continued investments in this new asset class, a new study suggests.
A new report from global real estate consultant JLL revealed that 85 percent of data centre managers in Asia Pacific believe that sustainability will significantly impact their operations and decision making, confirming that the growth of the sector will increasingly be influenced by environmental, social and governance (ESG) considerations.
Sustainability largely refers to the conservation of the environment. As such, it means meeting our own needs without compromising the ability of future generations to meet their own needs.
The survey, which shows a regional view of the future direction of data centers with respect to Environmental, Social, and Governance (ESG) strategies, was conducted across 505 data centre managers across Asia Pacific (70% run by enterprises and 30% by service providers), 30 of which are located in the Philippines.
According to JLL’s analysis, becoming more sustainable and socially responsible is the top strategic priority for data centers in the next two years, ranked ahead of traditional productivity and efficiency metrics.
Driven by net-zero carbon ambitions, owners and operators will focus on technologies that reduce power consumption, minimize waste, and rely more on renewable energy sources to power this asset class. Approximately 50 percent highlight that they will implement Artificial Intelligence (AI) powered cooling technology in their data centre by 2023.
“Addressing concerns surrounding greenhouse emissions is a priority, especially when it comes to our energy and sustainability practices in the Philippines,” said Nix Garchitorena, Energy and Sustainability Manager of JLL Philippines.
“The investment in Data Centers in the Philippines is expected to grow considerably in the coming years. It is critical that more emphasis is placed on environmental considerations to ensure these newly developed assets are future proofed,” said Charlie McNaught, JLL Philippines’ Director for Capital Markets.
Demand for data centres — the buildings that house computer systems and servers that store and process the world’s data — has skyrocketed due to the widespread adoption of digital communication tools and ecommerce. To fuel this growth, the amount of energy used by data centers doubles every four years and the sector now accounts for up to 4 percent of greenhouse gas emissions globally.
However, the JLL said that only 28 percent of operators polled in the survey have visibility of their energy usage data, which would enable them to add transformational business value, maximize efficiency and reduce waste.
“Asia Pacific is arguably the most dynamic data centre market globally and strategies will need to adjust to meet the changing operating environment and increased ESG expectations. The sector urgently needs to address its expanding contribution to global emissions, so operators need advice along the entire real estate life cycle – from site selection to investment to facilities management – in order to address the sizable sustainability issues they face,” said Chris Street, Head of Data Centres, Asia Pacific, JLL.
Further to this, Charlie McNaught, JLL Philippines’ Director for Capital Markets, said that the interest in the Data Center sector in the Philippines is not surprising.
“The country is home to 76 million internet users who spend an average of more than 10 hours on the internet daily. This provides a solid base to fuel data consumption which is expected to further grow as we anticipate greater data demand in the future on the back of wider technology adoption. With the sector in the Philippines still in its early stages of development, it allows managers to plan in their development strategy to ensure their facilities are constructed and operated in line with current and future ESG expectations,” he said.
Respondents also identified re-evaluating construction aspects of data centres as central to achieving climate neutrality in the future, particularly minimizing carbon-intense materials such as steel and concrete, Investor Interest in Data Centers Driven by the shift to cloud-based internet services and online retailing, competition for assets has intensified, thus data centre real estate is attracting more interest from publicly traded real estate investment trusts (REITs), private equity groups and sovereign wealth funds. As a result, institutional investors will not only be looking for a stable income stream, but increasingly positioning ESG as a major consideration for any investment decision.
However, according to JLL analysis, the lack of global data centre standards makes it difficult to report indepth ESG metrics. The same respondents believe the responsibility is on operators to develop their own clear and well-defined key performance indicators (KPIs) to gain the investor trust crucial to create shareholder value and maximise returns.
“The growth of data centres in Asia Pacific comes with a mounting environmental cost but provides necessary impetus for investors and operators to enact more sustainability-based operational and development practices. As more data centres are required regionally, the conversation will inevitably shift towards greening the real estate supporting this sector and alignment with more aggressive ESG strategies,” said Kamya Miglani, Head of ESG Research, Asia Pacific, JLL.