Expert interview on the sustainability of data centres

Data centres play a crucial role in the digital ecosystem. At the same time, they are under criticism due to their high energy consumption and CO2 emissions.

Maxi Harm , Project Manager for Digital Infrastructure Finance at KfW IPEX-Bank , talks about the financing of data centres in the context of sustainability. Together with Pavlena Rangelova and Paula Hollekamp , Maxi analysed the role that data centres play in the digital ecosystem and looks at it from a holistic and sustainable perspective.

Maxi, data centres are critized for consuming a lot of energy. In your paper you argue that data centres can contribute to a more sustainable world. How is that possible?

There are several aspects: The first is that by working remotely from home and attending virtual meetings instead of commuting and travelling around the globe CO2 emissions could be reduced. Another aspect highlights that sustainability not only means climate protection, but also implies social and economic considerations. There are several Sustainable Development Goals (8 - “decent work and economic growth”, 9 - “build a resilient infrastructure”, 3 - “good health and wellbeing” and 4 - “quality education”) that could be supported by data centres. Finally, high-performance computing and data-storage systems are used for climate simulations. The higher the performance of a supercomputer, the more accurate the climate model. That makes the goal of projecting possible climate changes for the course of this century attainable but means enormous amounts of data that need to be computed and analyzed. By developing even more powerful data centres this becomes possible.?

Outsourcing data to colocation data centers is being compared to car sharing. Why is that so??

Any individual, business or governmental organization uses data centres of sorts. In in-house data centres companies are housing their servers, networking hardware, or other necessary IT equipment in a facility that is owned and run by the company itself, often within their corporate offices. The services of colocation data centers on the other hand are scalable and offer the opportunity to utilize available IT capacity to a higher degree compared to in-house solutions. The colocation data centres are bigger, very efficient and process optimized. This saves energy and leads to fewer redundancy losses. In this sense they provide the high availability infrastructure needed to run the servers, just like car sharing provides mobility without having to own a car.

Are there any other topics linked with sustainability worth mentioning?

When we talk about CO2-neutrality of data centres we often only refer to the energy source (renewable vs. fossil) used to power them. But if you evaluate the CO2 footprint of a project in my view you have to go the full distance and take the whole value chain into account – from sourcing the raw materials for the building, currently mainly steel and concrete, to recycling retired servers, which are replaced every three to five years. I think it is worth supporting those kinds of projects that take a look at Scope1, Scope2 and Scope3 emissions.?

What is KfW IPEX-Bank’s expertise in financing data centres??

Financing digitalization is one of the strategic growth areas of KfW IPEX-Bank. This includes data centres and towers next to fibre optic expansion. We have closed several data centre financings in different jurisdictions and built up a deep sector knowledge, which makes it easier for us to understand the needs of our clients. As a specialist bank we can offer tailor-made financings with structural elements fitting the specific project. Furthermore, we are well connected with the banking market and are able to arrange, structure and syndicate financings, which brings us in a position to also underwrite large volume deals.

Bearing in mind the aspects highlighted above and the climate crisis we are living in, I think that we all have the responsibility to act as sustainable as possible. Therefore, our main focus is to support projects that are as energy efficient as possible and use renewable energy sources. ??

You are invited to get in touch with Maxi Harm and talk about the sustainability of data centres!