Build-out and backlash: why data centre risk looks different in 2026

Data centre opposition is now a material risk – and it's accelerating

The high resource demand of data centres (especially around their electricity and water use) is often the first and most visible trigger of local opposition. Wider environmental and pollution concerns compound the pressure as projects move forward.

US data put the toll at 75 projects blocked or delayed in Q1 2026, with an additional  20 cancelled. Even temporary delays of only one month may cost developers $14.2 million. 

With even a single month’s delay potentially costing tens of millions of dollars in lost revenue, overruns and contractual penalties (which may even escalate to cancelled leases), and additional reputational issues arising when agreed timeframes are not met, the costs of delays can add up quickly.

Planning challenges are stopping projects before construction begins. Delays can cost developers tens of millions – and put their reputations on the line. This risk was not in the original project calculus.

7 environmental and social issues developers need to plan for

1. Water consumption reviews and rulings 

Nearly half of existing data centres operate in regions already facing water stress. 

A single large data centre can consume enough fresh water per day to fill nearly ten Olympic swimming pools. Factor in the indirect water consumption of power generation and the true footprint can be thirty times higher.  

Malaysia, Southeast Asia’s fastest-growing data centre hotspot, shows how quickly water use can become a planning and approval issue. In Johor, where 42 data centre projects worth RM164.45 billion ($40.2 billion) had been approved by August 2025, seven new proposals under review were reportedly seeking up to 76 million litres of water a day, prompting the state to prioritise alternative sources such as reclaimed, raw and desalinated water. 

Transparency requirements around water consumption are growing, with laws being enacted in some US states, such as California and Virginia, giving additional investigatory powers to regulators and banning secrecy. This a trend we expect to grow, worldwide. 

2. Rising expectations around energy provision

Another rising trend is the increasing political will for data centres to pay their way in terms of energy provision, and for them to be active grid participants, rather than passive customers. 

Different countries are taking different approaches; data centre sustainability regulation is not currently converging to a single global standard. Some countries (Malaysia, some US states) use ‘take-or-pay’ conditions to lock-in upfront, non-refundable payment commitments for heavy load users. Others, such as Spain and Ireland, insist that larger data centres finance the development of renewable energy facilities to the level of 80% of projected MW requirements. 

As data centre investment surges, so does investment in climate technology. Climate tech venture capital investment rose to $26bn in the first half of 2026, up 55% year on year. 

Governments and regulators will continue to look for ways to use the liquidity of the data centre sector to foot the bill for renewable energy projects, using grid access as leverage. This puts pressure on developer capex, resulting in increasingly complex financing arrangements and deal structures. 

While in the past some developers have prioritised uptime over energy efficiency, we expect that to change (potentially leaning into risk management products like SLA parametrics). As an active grid participant, developers will be more incentivised than ever to keep energy usage as low as possible. Strong energy efficiency credentials will need to be baked into the project from its inception, to ensure the data centre holds its asset value long term. 

3. Pollution and contaminants from power and cooling

Even routine cooling water discharge often contains chemical additives and heavy metals; if not properly treated, these day-to-day discharges can pollute local waterways, drinking water supplies and agricultural land.

Air emissions from on-site diesel or gas generators also raise health concerns. A health analysis found that permitted emissions from a single data centre could cause up to $99 million per year in health-related damages (costs associated with asthma, cardiovascular impacts and reduced productivity) in the surrounding community. 

A specific risk arises from backup power batteries that can overheat in a chain reaction and ignite fires that release toxic smoke. Firewater run-off from battery fires and diesel spills from backup generators can both carry contaminants into soil and rivers. 

Environmental liability insurance can be very helpful here, not only for the risk transfer aspect but for building out appropriate governance procedures.

4. Noise, nuisance and permitting complaints 

Local community pushback has resulted in 20 data centre projects cancelled in Q1 2026. The central complaints major on two themes. 

A big driver is the perceived knock-on effects for the local community. For example, US states with a high concentration of data centres have seen alarming utility price rises, putting extreme pressure on the cost of living. Issues like these have resulted in a rise of planning / zoning / environmental review complaints (see figure 1)

The other significant rise in community-driven cases concerns noise and nuisance. Noise from backup generators, and temperature control and all-night security lighting can disturb both residents and wildlife. For example, a data centre in Virginia powered by gas turbines resulted in a 'noise that never stops', with concerns about both short-term and long-term health effects.

5. Site availability and legacy risks of brownfield sites

Land take and site availability also matter: data centre campuses need extensive space, often on the edge of cities or in rural areas where land is already contested – for housing or food production.

Retired industrial sites – rail yards, foundries, former power plants – can be an attractive alternative in some locations, offering existing infrastructure and zoning, and often bringing added economic value by returning underused land to productive use. Reuse carries its own liability: legacy contamination from the site's industrial past, and cleanup obligations that can resurface even after remediation.

Doing the correct, in-depth due diligence on a site is incredibly important. Recent history has many examples of where sampling and investigation has not gone far enough, resulting in long running liability claims.  

6. E-waste is set to be a huge issue

Over time, frequent hardware upgrades generate growing volumes of e-waste (servers and electronics); hardware is often replaced every three to five years to keep pace with AI's growing computational demands – and can become outdated before a facility even finishes construction. 

This is a challenge for waste management and recycling systems, and a potential future liability if not properly handled. One study warns that e-waste from AI data centres could accumulate to between 1.2 and 5 million metric tonnes over this decade without better recycling measures – a weight equivalent to 120 to 500 Eiffel towers.

 As frontier hardware is superseded, forward thinking companies will give it a useful second life, processing lower-intensity tasks. The hand-me-down supply chain will eventually become a growth industry in its own right, and full time job for many. 

Once hardware really does reach the end of its useful life taking measures to recycle elemental components will help reduce will help reduce the pressure on the precious minerals mining sector. Comprehensive E-waste management plans could eventually become part of the permitting process, as the problem gains more mainstream recognition. 

7. Waste heat is a challenge, but also an opportunity

Waste heat from thousands of servers contributes to localised warming; new research suggests large AI-focused data centres may create heat islands, with average land temperatures nearby rising about 2°C (and up to ~9°C in extreme cases). This excess heat can disrupt local ecosystems, for example by driving plant and animal life away, and add to the strain on residents already coping with hotter summers.

In the cooler months, though, data centres can add value to the local community, with thoughtful project design. Initiatives that recycling hot water to heat homes, hospitals and schools are a chance for developments to show a clear community benefit. 

The are several examples of this happening in the UK, including a Royal Oak data centre that heats over 10,000 London homes and an initiative to heat 150 public swimming pools nationally. 

As data centre pushback grows, we expect commitments to community projects like this to become a focal point of the planning / permitting approval process.