Data centre valuation: The billion-dollar question

The International Valuation Standards (IVS) made a specific inclusion of ESG/sustainability considerations which came into effect from 31 January 2025. The IVS glossary defines ESG as “The criteria that together establish the framework for assessing the impact of the sustainability and ethical practices, financial performance or operations of a company, asset or liability. ESG comprises three pillars: Environmental, Social and Governance, all of which may collectively impact performance, the wider markets and society.”

ESG will be fundamental to understand in data centre valuation due to evolving technology creating efficiencies in the use of power and cooling, together with customer demand for energy-efficient infrastructure and transparency for their own ESG reporting.

Some facts about data centres that we’ve learned recently from the report by Mandala: Empowering Australia’s Digital Future October 2024¹:

• Data centres centralise and specialise in data storage; and without the aggregation in energy-efficient, hyperscale data centres, Australian businesses would consume 67% more energy each year (approximately 2 terawatt hours)

In conversations with several data centre operators, a clear consensus has emerged around improving efficiency and sustainability. Many are focused not only on meeting Australia’s growing demand for capacity, but also on maximising underutilised capacity. To prepare for anticipated regulatory changes, operators are increasingly procuring renewable energy and seeking closer alignment with occupiers’ green energy and digitalisation targets. Over the past two years, investors have likewise sought to balance profitability with sustainability, targeting assets already powered by renewables or with a clear path to be.

It is likely, with possible policy changes and customer focus on ESG features and with ESG now embedded in valuation standards and customer expectations, data centres that can lead on efficiency and credible renewable procurement will realise lower costs, stronger demand and more resilient valuations.