Laith Cahill
Senior Net Zero Stewardship Specialist
Rapid AI-driven data centre expansion is reshaping sustainability considerations for investors, with implications for electricity systems, emissions, water resources and climate resilience. As issuers turn to bond markets to finance this expansion, how can bondholder stewardship address the risks and opportunities?
Financing data centres
Demand for AI is driving rapid expansion in data centre capacity. The number of operational US data centres with at least 100 MW of capacity could rise from around 90 in 2026 to almost 300 by 2030 if planned projects proceed. Estimates suggest that total AI-related infrastructure investment could reach US$7 trillion by the end of this decade.
Capital expenditure by the five largest hyperscalers – Alphabet, Amazon, Meta, Microsoft and Oracle – has rocketed from US$97 billion in 2020 to a projected US$800 billion in 2026. Bloomberg estimates indicate that it could reach $1 trillion annually by 2027. [1]
To fund this expansion, hyperscalers and developers are turning to bond markets and private credit. Hyperscalers bond issuance reached around US$170 billion by late June 2026, against an annual average of US$35 billion between 2020 and 2024.
Meanwhile, developers are flooding the high yield markets. AI-related issuance is expected to reach over US$100 billion over the next few years, close to 5% of the global index.
This expansion also has material climate and energy implications. Data centres currently account for 1–2% of global electricity demand, although their share rises to ~20% on some national grids. In the US, data centre growth has been partly met by new gas capacity and delays to coal retirements. Several hyperscalers have also reported rising emissions, while data centre land and water requirements can create additional pressures, particularly in water-stressed regions.
Why bondholders should care
Decisions taken now on power sourcing, siting, resource use and physical resilience will shape outcomes for decades. Power availability, water scarcity, permitting delays, community opposition and physical climate risk increasingly affect project viability and credit quality, while carbon-intensive electricity increases exposure to transition risk. These factors can affect costs, cash flows and refinancing needs.
Accordingly, the move into bond markets presents an opportunity for bondholder climate stewardship. For repeat issuers, opportunities arise before issuance, through allocation and pricing, through bond documentation and during refinancing. While shareholders have voting rights, bondholders can influence terms and issuers’ cost of capital when new bonds are issued.
Closing the information gap
Members of IIGCC’s Bondholder Stewardship working group reported difficulties in obtaining basic, decision-useful information, particularly from high-yield issuers.
Analysis presented by Accela Research, during IIGCC’s webinar on Data Centres & AI, identified four important drivers of operational emissions: capacity, utilisation, electricity procurement and energy efficiency. Useful disclosures include:
- Power and emissions: electricity sourcing, clean power plans, demand projections, actual power usage effectiveness (PUE) and Scope 1–3 emissions.
- Water and resilience: site-level water use, physical climate exposure and resilience measures.
- Project and commercial risks: grid connection timelines, construction milestones, expected capacity use, customer concentration and credit quality.
Where operator disclosure is limited, hyperscalers can help fill the gap. Federated Hermes’ Beyond the Building: A Value-Chain Approach to Data Center Sustainability Assessment report found that some provide detailed, and sometimes site-level, information on energy sourcing and water use.
IIGCC’s forthcoming data centre playbook will explore how power, water and physical climate risks can affect the financial case across development, ownership and operations. IIGCC is also developing a provisional methodology to benchmark hyperscalers’ Scope 1 and 2 emissions targets, with early results indicating considerable variation.
Different issuers, different approaches
Many investors are also discovering that data centre issuers may not fit neatly within existing net zero stewardship frameworks. Often, these frameworks were developed before the recent surge in AI-related infrastructure investment and tend to focus on sectors traditionally considered high-impact from a climate perspective.
Depending on their business model, data centre operators may be classified as technology, communications or real estate companies and can therefore fall outside sectors traditionally prioritised for engagement programmes. As a result, investors may need to revisit stewardship priorities and sector classifications to adequately reflect these issuers’ growing energy demand and emissions exposure.
As AI-related financing expands, bondholders are engaging two distinct groups of issuers: investment-grade hyperscaler tenants and high-yield data centre operators and developers. Both are central to data centre growth, but their business models, financing needs and relationships with bondholders differ significantly.
Hyperscalers typically have established sustainability teams and more developed public reporting than data centre operators. At some hyperscalers, dual-class share structures concentrate voting power with founders, limiting other shareholders’ influence through voting. Growing bond issuance creates an additional route for engagement when these companies seek new financing. Bondholder stewardship can therefore complement shareholder engagement where voting influence is otherwise constrained by dual-class shares. Coordination with equity teams can help maintain consistent expectations across the capital structure.
High-yield operators are often more leveraged, concentrated and exposed to construction, permitting and grid-connection risks. Yet reliance on debt may give bondholders greater influence. Individual investors can assess whether material risks are adequately disclosed and reflected in allocation and pricing, while bond documentation can secure ongoing disclosure. Frequent refinancing can also create recurring opportunities to revisit expectations as projects develop.
The working group suggested that high-yield investors could also engage with hyperscalers, encouraging them to set stronger disclosure and sustainability practices for third-party developers. This could help carry investor expectations beyond the issuer and across the ecosystem.
Engaging across the ecosystem
Many material decisions sit beyond both operator and hyperscaler, including those of:
- Utilities and grid operators, which influence connection timelines and how new electricity demand is met, and are often major bond issuers.
- Banks arranging issuance, which can shape offering documents and disclosure at issuance.
- Chip and equipment manufacturers, whose products affect operational efficiency and embodied emissions.
- Policymakers and regulators, which shape planning, grid access and disclosure requirements.
Understanding these dependencies can help investors identify where engagement with the issuer may need to be complemented by engagement elsewhere in the financing and infrastructure ecosystem.
Looking ahead
Data centres are an important test case for bondholder stewardship: climate and credit risks converge, bond markets are providing a growing share of financing, and many material decisions sit outside the issuer. As issuance grows, investors have opportunities to seek better disclosure, engage throughout the financing lifecycle and work across the wider value chain.
IIGCC’s forthcoming data centre stewardship playbook will provide further practical support for investors. In the meantime, explore IIGCC’s Net Zero Bondholder Stewardship guidance for more on engagement across the financing lifecycle and debt ecosystem.
[1] Vanguard calculations, based on data from Bloomberg, as of July 31, 2026.
Disclaimer: This Insight is provided for general information only and does not constitute financial, legal, accounting, tax or investment advice or any recommendation. Investors are responsible for their own decisions and must act independently, taking account of their own circumstances, obligations and applicable legal and regulatory requirements.