Transition risks staring at Asia’s Data Centers in the shift towards a Low-Carbon economy

Data centers around the world are entering a period of rapid change. Until now, most attention has been on operational energy challenges—power demand, grid access, and renewable sourcing. But a much bigger issue is building quietly in the background - Transition risks.

According to the Task Force on Climate-related Financial Disclosures (TCFD), climate risks fall into two categories: physical risks and transition risks. Physical risks like heat, flooding, and extreme weather are already visible. Transition risks—driven by regulation, markets, technology, and reputation—are only just beginning, and they may prove more disruptive over time.

What Are Transition Risks?

Transition risks arise as economies move toward a low-carbon future.

For data centers, these risks evolve from how governments, investors, customers, and technologies respond to climate change.

Policy & Legal: New climate regulations, carbon pricing, and disclosure rules that increase compliance costs and liabilities.

Technology: Rapid advances in cooling, materials, and low-carbon design that can make existing assets outdated.

Market: Growing preference from investors and customers for low-carbon, climate-ready infrastructure.

Reputation: Increased scrutiny of high-impact assets, affecting trust, talent, and access to capital.

The Bigger Shift

Leading markets are already raising expectations—looking beyond energy use to assess carbon exposure, materials, lifecycle impacts, and long-term resilience. These expectations are spreading quickly across the global data center landscape.

The transition risks facing data centers won’t appear overnight—but when they do, they will be hard to reverse. Those who act early—by understanding and managing transition risks today—will be far better positioned for the data center market of tomorrow.

The real question for data center operators in Asia is simple: Is the time to act -Now ?