WEBVTT - Green Finance Backs Data Centers 0:00:00.320 --> 0:00:04.479 Financial markets can no longer ignore the impacts of climate change, 0:00:04.620 --> 0:00:10.610 shifting consumer expectations and increasing regulatory scrutiny. These forces are 0:00:10.690 --> 0:00:16.730 reshaping industries, redefining risk and creating new opportunities for long-term 0:00:16.810 --> 0:00:22.810 value creation. Through conversations with industry leaders, investors and subject 0:00:22.850 --> 0:00:28.430 matter experts, we explore where sustainability is translating into measurable 0:00:28.690 --> 0:00:34.360 financial outcomes. Welcome to Sustainability Currents, brought to you by 0:00:34.659 --> 0:00:36.340 Bloomberg Intelligence. 0:00:40.330 --> 0:00:42.750 AI is changing the scale of the data center market 0:00:42.870 --> 0:00:47.589 as cloud and computing demand expands and hyperscale data centers 0:00:47.630 --> 0:00:50.690 are moving from what was once a relatively specialized corner 0:00:50.770 --> 0:00:53.920 of the infrastructure toward a much more central role in 0:00:53.940 --> 0:00:58.100 the economy and the energy system. That brings questions around 0:00:58.200 --> 0:01:04.030 power availability, grid capacity, emissions, and water use. How is 0:01:04.069 --> 0:01:07.789 this next generation of infrastructure going to get financed? Joining 0:01:07.850 --> 0:01:12.630 us today to discuss this is Romina Riversity, Managing Director 0:01:12.750 --> 0:01:16.730 and Head of Sustainable Investment Banking, Americas, at Credit Agricole CIB, 0:01:17.330 --> 0:01:23.679 and Patricia DePaul from Sustainable Investment Banking at Credit Ag CIB. Romina, Patricia, 0:01:23.760 --> 0:01:24.840 thank you for joining us today. 0:01:25.160 --> 0:01:27.280 Thanks for having us, Chris. Great to be here. Great 0:01:27.319 --> 0:01:27.680 to be here. 0:01:28.220 --> 0:01:30.530 I mean, we're going to jump right in. And the 0:01:30.550 --> 0:01:33.430 first question I'm going to ask is, you know, based 0:01:33.490 --> 0:01:37.410 on some of our recent research, we've highlighted how we're 0:01:37.450 --> 0:01:41.149 seeing an uptick in issuance from data centers and hyperscalers. 0:01:41.670 --> 0:01:44.070 But there's also been a growing portion of this debt 0:01:44.110 --> 0:01:47.920 issuance that's been focused on sustainable debt. So maybe I'll ask, 0:01:48.660 --> 0:01:51.800 why have green data centers suddenly become such a major 0:01:52.460 --> 0:01:54.100 topic for sustainable finance? 0:01:54.680 --> 0:01:55.120 Definitely. 0:01:55.300 --> 0:01:57.860 And before I get into that question, I think it's 0:01:57.920 --> 0:02:03.190 important to take one step back and even answer why 0:02:03.410 --> 0:02:08.870 is the data center financing growing so rapidly overall? As 0:02:08.930 --> 0:02:12.930 we all know, AI is dramatically increasing the compute demand, 0:02:13.410 --> 0:02:17.530 and that in turn is accelerating the need for hyperscale campuses, 0:02:17.950 --> 0:02:23.400 along with the associated power and transmission infrastructure need. Moody's, 0:02:23.460 --> 0:02:27.020 for example, and here's some interesting stats, estimates that roughly 0:02:27.020 --> 0:02:30.820 $ 3 trillion of investment over the next half a decade 0:02:30.860 --> 0:02:34.180 will be needed for this. And on the power side, 0:02:34.300 --> 0:02:39.100 the IEA expects U.S. electricity demand to grow 2% annually 0:02:39.530 --> 0:02:45.670 through 2030. So investors also generally like the underlying sector 0:02:45.770 --> 0:02:51.080 fundamentals here. We're seeing enthusiasm across a number of of 0:02:51.320 --> 0:02:57.990 the investor-related markets, Blackstone-related digital, priced a $ 14 billion bond 0:02:58.030 --> 0:03:02.029 to finance a single data center. So back to your 0:03:02.070 --> 0:03:06.470 earlier question then, why is data center financing overall growing 0:03:06.730 --> 0:03:11.989 so rapidly? And it's an important funding source on the 0:03:12.050 --> 0:03:16.780 sustainable finance side. We've seen a number of large increases 0:03:16.860 --> 0:03:21.799 in green loans, that's bonds, The ABS, Securitized Transaction, all 0:03:21.860 --> 0:03:27.820 tied to data centers. Sustainable debt specifically, right? Green bonds 0:03:28.300 --> 0:03:31.420 linked to data centers has more than doubled since 2023. 0:03:31.400 --> 0:03:34.980 And we have a stat by the Van Eck that 0:03:35.000 --> 0:03:37.660 just came out at the end of August that the 0:03:37.700 --> 0:03:41.600 data center green financing market has grown to $ 60 billion. 0:03:41.620 --> 0:03:45.540 So that's about 80% of issuance. And when you think 0:03:45.560 --> 0:03:49.040 about the rest of the market in the U.S., Year 0:03:49.120 --> 0:03:52.960 over year since 2020, the labeled bond market in the 0:03:53.000 --> 0:03:56.400 United States has been on a decline. 0:03:56.640 --> 0:03:56.839 Right. 0:03:57.060 --> 0:03:57.640 Yeah. 0:03:57.680 --> 0:03:59.660 Corporate space specifically. 0:03:59.710 --> 0:03:59.940 Yes. 0:04:00.000 --> 0:04:03.150 So, I mean, you're seeing this uptick now. So, yeah, 0:04:03.270 --> 0:04:05.870 I think it's great that, you know, the driver has 0:04:05.930 --> 0:04:09.390 been in the corporate space. But sorry, I cut you off. 0:04:09.450 --> 0:04:11.430 I mean, but I think just in America, yeah, that 0:04:11.950 --> 0:04:15.010 it's been such a drastic drop off. So it's actually 0:04:15.130 --> 0:04:17.270 a little bit positive to see this growth from corporates. 0:04:18.310 --> 0:04:21.089 It's really positive. That's exactly right. To see the growth 0:04:21.570 --> 0:04:25.510 from green bonds, from data centers who are clearly, and 0:04:25.540 --> 0:04:27.620 we'll get into the reasons of why they're coming to 0:04:27.640 --> 0:04:30.140 market with a green label when they don't need to 0:04:30.220 --> 0:04:33.020 and what are the benefits for a green data center. 0:04:33.740 --> 0:04:36.700 But I also think it's important to remember that many 0:04:36.740 --> 0:04:39.940 of these green data center issuers right now that we've 0:04:40.000 --> 0:04:42.400 seen in the last year or so, they're not new 0:04:42.580 --> 0:04:45.540 entrants to the green bond market. These are existing frameworks 0:04:45.580 --> 0:04:49.220 that have been in place for some time. Some of 0:04:49.279 --> 0:04:52.020 them have been updated. Others have not been updated. We 0:04:52.040 --> 0:04:55.900 can debate criteria and get into what is the darkest 0:04:55.960 --> 0:04:59.540 of green, medium, light green as it relates to data centers. 0:05:00.160 --> 0:05:06.170 But notwithstanding the framework themselves, clearly this is an opportunity 0:05:06.380 --> 0:05:09.070 for data centers to come to market with a label 0:05:09.390 --> 0:05:14.270 due to a host of advantages, mostly communication benefits that 0:05:14.350 --> 0:05:17.630 they can experience. realized from an issuance. 0:05:18.950 --> 0:05:21.870 And maybe a point of clarity, I mean, because you 0:05:21.890 --> 0:05:24.850 kind of said green data centers, and were you referring 0:05:24.910 --> 0:05:29.940 mainly to like green issuers, like green data center issuers, 0:05:30.040 --> 0:05:33.620 or saying that the data center itself is like completely 0:05:33.660 --> 0:05:34.360 green in nature? 0:05:35.480 --> 0:05:41.670 I'm referring to green labeled debt. from data center issuers. 0:05:42.050 --> 0:05:45.090 So those who are coming to market and they are 0:05:45.170 --> 0:05:49.550 following the green bond principles, the four core pillars, they 0:05:49.610 --> 0:05:54.020 have green frameworks, they have second party opinions, and that 0:05:54.120 --> 0:05:58.700 is where we are seeing growth in the sustainable finance space. 0:05:59.520 --> 0:06:04.219 Despite all the headlines around ESG backlash, we're also seeing 0:06:04.460 --> 0:06:10.080 investor demand for these credible green transactions. We see sustainable 0:06:10.140 --> 0:06:15.060 fixed income funds are continuing to attract inflows since 2019. 0:06:15.060 --> 0:06:19.460 We're up 15 billion USD as of the end of 0:06:19.600 --> 0:06:24.080 Q2 2026, meaning there's still a large pool of capital 0:06:24.140 --> 0:06:29.110 that's actively looking for sustainable investments, Article 8 funds, Article 0:06:29.110 --> 0:06:32.150 9 funds. And so as a result, we really see 0:06:32.210 --> 0:06:35.890 these green transactions some of them being these green data 0:06:35.920 --> 0:06:43.440 center transactions, have stronger demand due to the investor side demand. 0:06:44.240 --> 0:06:47.640 And I think that that's only going to continue. Yeah. 0:06:47.880 --> 0:06:49.549 And you mentioned that a lot of them have kind 0:06:49.560 --> 0:06:53.030 of these frameworks in place already. And maybe as we 0:06:53.070 --> 0:06:57.970 continue to see this growing issuance to finance this rapid expansion, 0:06:57.990 --> 0:07:05.400 are there growing societal concerns that continue to kind of 0:07:05.440 --> 0:07:09.660 pop up and as these data centers expand, you know, 0:07:09.700 --> 0:07:11.990 how can they address this? I mean, do their frameworks 0:07:12.020 --> 0:07:15.830 need to change or, you know, do you think that 0:07:15.870 --> 0:07:18.970 they could just kind of move forward with the current 0:07:19.190 --> 0:07:23.390 frameworks that they have and, you know, continue to grow 0:07:23.610 --> 0:07:28.160 despite the chance that they could be destabilizing power grids or, 0:07:28.180 --> 0:07:33.460 you know, impacting how, you know, our current system is 0:07:33.500 --> 0:07:33.790 set up? 0:07:34.780 --> 0:07:38.800 Absolutely. There's a number of challenges when coming to market 0:07:38.840 --> 0:07:42.680 with a green labeled bond from a data center. It's 0:07:42.740 --> 0:07:47.100 important to remember here we're talking about labeled debt very specifically. 0:07:47.900 --> 0:07:51.710 And the framework, in my opinion, as has always been 0:07:51.750 --> 0:07:54.830 the case throughout this last decade of the market, what 0:07:54.850 --> 0:07:59.390 does it do? It's an opportunity to proactively showcase your 0:07:59.490 --> 0:08:03.090 use of proceeds, but also here address what are the 0:08:03.150 --> 0:08:06.960 project concerns? and how to use this framework as a 0:08:07.000 --> 0:08:11.240 statement of intent to defend against some of this public pressure. 0:08:11.660 --> 0:08:16.290 We know for data centers specifically, sustainability is increasingly becoming 0:08:16.350 --> 0:08:21.570 tied to one, completion, and two, permitting risk. There is 0:08:21.630 --> 0:08:26.630 an increasing scrutiny around a laundry list of challenges, whether 0:08:26.650 --> 0:08:32.090 that be Energy consumption and rising electricity prices, transmission infrastructure 0:08:32.130 --> 0:08:38.350 and grid strain, water consumption, land use, visual impact, noise, etc. 0:08:39.150 --> 0:08:42.460 Nearly half of the proposed data centers in the U.S. 0:08:42.620 --> 0:08:46.199 are at risk of some type of delay or cancellation. 0:08:46.220 --> 0:08:49.460 And this is in part due to the backlash, the 0:08:49.500 --> 0:08:53.910 political backlash that we've seen. There's been at least 75 0:08:53.910 --> 0:08:58.870 data center projects that are worth around $ 130 billion combined 0:08:58.929 --> 0:09:02.310 that were blocked or delayed by local opposition during the 0:09:02.350 --> 0:09:06.030 first three months of 2026. That's a stat from the 0:09:06.070 --> 0:09:09.729 data center watch. So to answer your question, looping it 0:09:09.790 --> 0:09:14.910 back to sustainable finance frameworks and green bonds, in my view, 0:09:14.929 --> 0:09:19.770 it still is an opportunity to showcase how data centers 0:09:19.929 --> 0:09:24.000 are mitigating this risk. also how they are integrating their 0:09:24.020 --> 0:09:28.150 green criteria. And that in turn gives comfort to investors 0:09:28.750 --> 0:09:33.650 from a financially material perspective when they are looking to 0:09:33.730 --> 0:09:37.850 put some of these transactions in ESG impact funds. 0:09:38.710 --> 0:09:41.210 Maybe I can hop in here real quick. So to 0:09:41.230 --> 0:09:45.050 your question about how exactly they're leveraging these green frameworks, 0:09:45.190 --> 0:09:47.920 I would say that a few years ago, We saw 0:09:47.940 --> 0:09:51.440 that most of the frameworks, they focused relatively on simple measures, right? 0:09:51.500 --> 0:09:54.160 So it was lead certification. So that was all of 0:09:54.179 --> 0:09:57.910 the green building certification. And then the secondary main consideration 0:09:57.990 --> 0:10:02.050 was also PUE, so power usage. effectiveness, which is essentially 0:10:02.070 --> 0:10:06.290 a measure of how efficiently a data center uses electricity. 0:10:07.390 --> 0:10:09.800 And I would say that those metrics, they still matter, 0:10:10.740 --> 0:10:15.360 but investors are increasingly wanting to understand really how a 0:10:15.400 --> 0:10:18.800 facility actually operates. So I would say that there are 0:10:18.860 --> 0:10:21.900 still a number of zombie frameworks in the market. So 0:10:21.940 --> 0:10:25.920 they haven't evolved as much as what investors would have 0:10:25.980 --> 0:10:31.439 hoped they've reached. And however, despite that, the direction of 0:10:31.480 --> 0:10:34.280 travel is still very clear, right? So stakeholders, they want 0:10:34.520 --> 0:10:38.620 the operational data. They want measurable outcomes. They really want 0:10:39.080 --> 0:10:43.070 asset level transparency as well. And I would say that 0:10:43.230 --> 0:10:46.069 in turn, also the companies, they want to provide this data, right? 0:10:46.110 --> 0:10:48.270 So we just saw This is very fresh off the 0:10:48.309 --> 0:10:51.700 press just yesterday. There was an article published that said 0:10:51.740 --> 0:10:56.780 that Amazon's sustainability chief is actively asking their stakeholders to 0:10:56.840 --> 0:11:01.459 hold them accountable. So they are wanting to publish more 0:11:01.500 --> 0:11:05.040 metrics that track its environmental impacts. And I think that's 0:11:05.160 --> 0:11:08.200 part of a wider effort to really address their concerns 0:11:08.320 --> 0:11:12.059 from all of these communities. And personally, I think that, yeah, 0:11:12.100 --> 0:11:15.710 the market will evolve meaningfully in the years to come. And, uh, 0:11:16.250 --> 0:11:17.990 We're happy to talk a little bit, if of interest, 0:11:18.070 --> 0:11:22.570 also more about what are the metrics that the ESG 0:11:22.610 --> 0:11:24.670 investor base is actively demanding. 0:11:24.690 --> 0:11:27.199 Yeah, no, I think, thank you for that, Patricia. I 0:11:27.220 --> 0:11:30.120 think that actually leads me right into what I was 0:11:30.160 --> 0:11:32.939 thinking is, you know, when I kind of started that 0:11:33.000 --> 0:11:36.540 long-winded question a few seconds ago, but was, you know, 0:11:37.440 --> 0:11:40.230 communities continue to push back, and it seems like it's, 0:11:40.660 --> 0:11:43.030 in my opinion anyway, it's only going to worsen before 0:11:43.070 --> 0:11:46.130 it gets better until data centers kind of do evolve 0:11:46.170 --> 0:11:49.450 their framework. So maybe you could expand a little further 0:11:49.510 --> 0:11:51.030 on that if you have some thoughts on how they 0:11:51.050 --> 0:11:55.679 could kind of improve the frameworks or evolve, as you mentioned. 0:11:56.040 --> 0:11:56.380 Absolutely. 0:11:56.420 --> 0:11:58.680 I think I'll first quickly speak to your first point 0:11:58.760 --> 0:12:01.699 on this community pushback, and then I'll address everything to 0:12:01.740 --> 0:12:06.470 do with frameworks and what we're seeing investors request. So firstly, 0:12:06.500 --> 0:12:09.610 in terms of the community pushback, so I think that, 0:12:10.350 --> 0:12:14.550 especially in all of the constrained power markets where communities 0:12:14.690 --> 0:12:18.830 are really, at firsthand feeling the impact of rising electricity costs, 0:12:19.370 --> 0:12:23.569 I think that community pushback is likely to increase. So 0:12:24.530 --> 0:12:27.610 I would say, though, that it's an important distinction that communities, 0:12:27.730 --> 0:12:32.390 they aren't necessarily anti-data center or anti-AI. I think the opposition, 0:12:32.490 --> 0:12:34.699 it tends to be much more practical. So what these 0:12:34.740 --> 0:12:37.679 communities are asking is, okay, so who is going to 0:12:37.720 --> 0:12:42.500 pay for the new power infrastructure? Will my electricity bill increase? Like, 0:12:43.040 --> 0:12:45.440 How much water will the facilities use? What is going 0:12:45.480 --> 0:12:48.760 to be the impact on land, on noise, on construction, 0:12:48.820 --> 0:12:52.060 et cetera? And even more to that point is that 0:12:52.100 --> 0:12:55.880 we've actually seen the public sentiment. It has moved quite quickly. 0:12:56.480 --> 0:13:00.199 So in August of this year, the University of Pennsylvania 0:13:00.280 --> 0:13:04.280 issued a study which found that about 60% of U.S. 0:13:04.440 --> 0:13:06.800 adults are now opposed to new data center development. So 0:13:06.820 --> 0:13:09.479 that's really significant. And even more so is that that's 0:13:09.559 --> 0:13:12.460 actually up 12 percentage points from beginning of the year. 0:13:13.080 --> 0:13:15.200 So I would say that this is really a growing 0:13:15.260 --> 0:13:20.020 challenge of your license to operate. And that's where green 0:13:20.040 --> 0:13:22.880 frameworks come in very handy, right? It's in terms of 0:13:23.230 --> 0:13:27.230 being able to provide a structure for communicating the projects 0:13:27.429 --> 0:13:31.790 more responsibly and then framing also your long-term infrastructure benefits. 0:13:32.450 --> 0:13:34.589 And so to your question then is, okay, so how 0:13:34.630 --> 0:13:38.850 can we utilize these frameworks more effectively? At Credit Agricole, 0:13:38.870 --> 0:13:42.250 we speak a lot with investors, have a very active dialogue. 0:13:42.780 --> 0:13:45.980 And there are four areas that repeatedly come up. The 0:13:46.020 --> 0:13:50.210 first is energy efficiency, PUE, what we previously discussed. The 0:13:50.250 --> 0:13:54.170 second is low carbon electricity. The third is water efficiency. 0:13:54.210 --> 0:13:57.110 And then the fourth is community slash your infrastructure impact. 0:13:57.290 --> 0:14:02.890 So PUE very much remains the industry's foundational metric, but 0:14:03.010 --> 0:14:06.480 I don't think it's sufficient anymore on its own. Why 0:14:06.540 --> 0:14:08.800 is this? So you can have two facilities and they 0:14:08.830 --> 0:14:12.809 can have very similar PUEs, right? Say like a 1.3 PUE. 0:14:13.230 --> 0:14:16.970 And those can have a very different environmental footprint depending 0:14:17.030 --> 0:14:20.330 on what kind of electricity they're using. So that brings 0:14:20.390 --> 0:14:23.770 me to my second area of focus, the electricity source. 0:14:24.130 --> 0:14:28.070 That is often your largest contributor to your carbon footprint. 0:14:28.690 --> 0:14:31.390 So you can have a very highly efficient data center, 0:14:31.410 --> 0:14:36.310 which is powered by, say, coal-heavy electricity. and that may 0:14:36.370 --> 0:14:39.590 ultimately have a larger footprint than a slightly less efficient 0:14:39.670 --> 0:14:44.000 one being powered by clean energy. So data centers are, 0:14:44.240 --> 0:14:47.940 I would say, increasingly really being viewed at power infrastructure. 0:14:48.320 --> 0:14:50.860 Just this morning, we were at a talk with KKR 0:14:51.140 --> 0:14:53.460 where they were mentioning how it's no longer considered just 0:14:53.560 --> 0:14:57.710 a real asset play. It really is being seen as 0:14:57.930 --> 0:15:03.130 power infrastructure. And therefore, I would say that investors, they 0:15:03.410 --> 0:15:06.600 now want to understand, okay, so What is your operator's 0:15:06.660 --> 0:15:10.239 power strategy? So are they using carbon-free electricity? Is it 0:15:10.260 --> 0:15:14.370 24-7 carbon energy? What are the tenant versus your landlord considerations, 0:15:14.550 --> 0:15:17.370 et cetera? And here I would say, you know, really 0:15:17.410 --> 0:15:22.450 important to caveat, physical PPAs that add renewable capacity at 0:15:22.490 --> 0:15:26.080 the site, they carry the most weight. Whereas virtual PPAs, 0:15:26.360 --> 0:15:30.560 bundled EACs, only really count where physical connection isn't feasible. 0:15:30.580 --> 0:15:30.880 Right. 0:15:31.470 --> 0:15:35.790 And then the third, water. That's really becoming a major 0:15:35.810 --> 0:15:40.480 investor focus, especially in water-stressed regions. AI workloads, they generate 0:15:40.630 --> 0:15:44.260 a lot of heat. So cooling systems are required, which 0:15:44.840 --> 0:15:48.900 in and of themselves, they consume significant amount of water. 0:15:49.340 --> 0:15:52.130 And so in regions facing drought, drought or water stress, 0:15:52.250 --> 0:15:55.450 it's becoming a major community concern. And I would say 0:15:55.470 --> 0:15:59.020 that there's an increasing discussion around, for example, liquid versus 0:15:59.060 --> 0:16:02.660 water-free cooling, and then the trade-off between your water and 0:16:02.700 --> 0:16:09.050 your efficiency trade-off. And I'd say that I think in 0:16:09.090 --> 0:16:12.380 my personal view, Water is likely to become a much 0:16:12.540 --> 0:16:15.280 bigger topic over the next five years, particularly in the 0:16:15.380 --> 0:16:18.820 US Southwest and other constrained regions. And then finally, because 0:16:18.840 --> 0:16:22.060 I know I've rattled on for a bit, everything that 0:16:22.080 --> 0:16:24.080 touches on community. So I would say that this is 0:16:24.100 --> 0:16:28.240 probably the fastest growing area of investor concern. Why? Because 0:16:28.660 --> 0:16:31.910 community opposition, as we've talked about, it can really delay 0:16:32.070 --> 0:16:35.350 projects by years, right? Like permitting challenges, they can affect 0:16:35.370 --> 0:16:39.360 the construction timelines and then also returns, of course. And 0:16:39.400 --> 0:16:42.300 your grid constraints can really limit any type of future 0:16:42.340 --> 0:16:45.120 expansion that you may want. So I would say that 0:16:45.140 --> 0:16:49.950 this is really where sustainability, it becomes increasingly intertied with 0:16:49.990 --> 0:16:51.110 your execution risk. 0:16:52.250 --> 0:16:56.490 Not only on the investor side and on the bank side, 0:16:56.830 --> 0:16:59.750 I think it's also worth noting that there's a third 0:16:59.810 --> 0:17:03.490 party here in this green framework ecosystem called It's the 0:17:03.530 --> 0:17:08.170 second party opinion providers. And as Patricia just described, those 0:17:08.310 --> 0:17:12.430 key factors that are going into investor decisions. I was 0:17:12.650 --> 0:17:16.250 at a Climate Week event just yesterday with a leading 0:17:16.310 --> 0:17:20.190 second party opinion provider and half of the entire presentation 0:17:20.609 --> 0:17:25.400 was answering that question. can data centers be green? And 0:17:25.880 --> 0:17:30.080 we spoke about our four key pillars here and our views, 0:17:30.100 --> 0:17:33.240 which are very similar and informed by the ESG investors. 0:17:33.600 --> 0:17:37.659 But even on the SPO provider side, they are quite aligned. 0:17:38.119 --> 0:17:42.280 And I'll read their three criteria very quickly. But first, 0:17:42.480 --> 0:17:46.379 it was power, right? Of course, that's the most critical factor. 0:17:46.660 --> 0:17:49.720 This is from a second party opinion provider. Second, water. 0:17:50.190 --> 0:17:52.790 cooling and water use. They say it can be material. 0:17:53.310 --> 0:17:57.690 And then PUE, as Patricia went into this second party 0:17:57.730 --> 0:18:01.210 opinion provider, framed it as useful but not sufficient alone, 0:18:01.310 --> 0:18:03.490 which we fully agree with. So it really is the 0:18:03.550 --> 0:18:07.730 entire ecosystem of these green labeled deals. I was looking 0:18:07.880 --> 0:18:11.840 at the criteria in a new lens than what we 0:18:11.880 --> 0:18:15.139 were looking at four or five years ago when this began. 0:18:15.160 --> 0:18:15.620 Yeah. 0:18:16.400 --> 0:18:19.770 There's obviously a lot of factors that go into it 0:18:20.330 --> 0:18:24.449 in terms of labeling a data center as green or sustainable. And, 0:18:24.750 --> 0:18:26.929 you know, there has been some pushback from people saying like, 0:18:26.990 --> 0:18:29.430 is this just, you know, greenwashing in terms of them 0:18:30.119 --> 0:18:32.840 issuing a sustainable bond? But, you know, do you think 0:18:32.859 --> 0:18:40.280 there's actual like material impacting, materially impacting financial decisions related 0:18:40.359 --> 0:18:44.830 to these data centers issuing or, you know, Is this 0:18:44.850 --> 0:18:47.450 still just like a labeling exercise they're doing by saying, oh, 0:18:47.660 --> 0:18:49.840 we're doing this. It's going to be green. What are 0:18:49.859 --> 0:18:51.160 your thoughts on that? 0:18:51.500 --> 0:18:54.460 No, I would say that absolutely. Like when they issue 0:18:54.480 --> 0:18:56.940 a green financing framework, it's very much linked to this 0:18:57.130 --> 0:19:01.040 existing sustainability strategy. So it is in place. There is 0:19:01.160 --> 0:19:05.480 no real risk of greenwashing. It's material to their operations. 0:19:05.619 --> 0:19:08.940 Investors now really see it tied to execution and completion risk. 0:19:09.580 --> 0:19:11.159 And it is, at the end of the day, it's 0:19:11.240 --> 0:19:14.850 not just, I mean, sustainability is a way of rebranding risk, right? 0:19:15.210 --> 0:19:19.030 So all of these considerations, whether it's PUE or electricity 0:19:19.290 --> 0:19:22.570 or even like battery storage, like all of these additional 0:19:22.609 --> 0:19:25.980 secondary considerations are very, very much tied to their risk 0:19:26.020 --> 0:19:30.290 profile and to their operating systems. And so- I would 0:19:30.430 --> 0:19:34.379 not claim that it's just done to appease investors or 0:19:34.780 --> 0:19:37.260 state communities. It really is to get in front of 0:19:37.280 --> 0:19:41.040 all of people's concerns and make sure that their project 0:19:41.080 --> 0:19:46.050 is feasible. As Romina mentioned, more and more of these 0:19:46.150 --> 0:19:49.970 projects are getting shut down and we're seeing more state 0:19:50.150 --> 0:19:53.690 imposing restrictions on, okay, so if you are going to 0:19:53.710 --> 0:19:55.550 be pulling from the grid, how much are you going 0:19:55.570 --> 0:19:56.909 to be contributing? How much are you going to be 0:19:56.930 --> 0:20:00.169 building on site? Are you going to be doing renewables 0:20:00.300 --> 0:20:05.060 or not? And so I think it's a proactive approach 0:20:05.460 --> 0:20:07.919 to ensure the feasibility of that project. Mm-hmm. 0:20:08.530 --> 0:20:08.910 Yeah. 0:20:08.970 --> 0:20:10.929 And then from the investor side, like what are your 0:20:10.950 --> 0:20:13.520 thoughts on what the investors are actually looking at now 0:20:14.580 --> 0:20:17.400 as they dig into these more, you know, these kind 0:20:17.440 --> 0:20:19.560 of green products coming to market? 0:20:19.900 --> 0:20:25.040 Absolutely. For data centers specifically, those four criteria that we 0:20:25.119 --> 0:20:30.119 mentioned earlier are key for the strength of a framework. 0:20:30.660 --> 0:20:34.000 From a green labeled perspective, what are investors looking for 0:20:34.060 --> 0:20:38.220 alignment with the green bond principles? Strong expected impact metric. 0:20:38.680 --> 0:20:43.410 reporting related to the use of proceeds continue to be 0:20:43.890 --> 0:20:46.570 at the forefront of how an investor is going to 0:20:46.730 --> 0:20:51.440 judge a green transaction. I think that we are seeing 0:20:51.480 --> 0:20:54.660 a bit of a shift from investors moving away from 0:20:55.000 --> 0:21:00.020 labels and more towards that operational credibility. A few years ago, 0:21:00.060 --> 0:21:03.500 it was enough to point to rec second party opinions 0:21:03.560 --> 0:21:07.480 and a high level of sustainability commitments. But today, investors 0:21:07.520 --> 0:21:11.980 really want to understand how these facilities actually operate, right? 0:21:12.040 --> 0:21:14.800 They're asking, how efficient is the facility? Where does the 0:21:14.859 --> 0:21:19.120 electricity come from? The water usage? Can they secure enough power? 0:21:19.280 --> 0:21:22.540 What are the permitting risks? The local communities, everything we've 0:21:22.960 --> 0:21:28.159 touched on earlier. In summary, sustainability is increasingly becoming and 0:21:28.359 --> 0:21:32.520 infrastructure quality discussion. And not only that, but I think 0:21:32.600 --> 0:21:37.380 it's also important to remember the context. All of this 0:21:37.420 --> 0:21:41.420 buildup is happening. It's during a period of increasing climate hazards, 0:21:42.080 --> 0:21:46.040 both in terms of frequency, intensity, hurricanes, flooding. I mean, 0:21:46.220 --> 0:21:48.780 we've seen so much over the last year or so alone. 0:21:49.570 --> 0:21:53.990 And that really is where these green frameworks can continue 0:21:54.150 --> 0:21:59.340 to showcase how data center issuer is mitigating some of 0:21:59.420 --> 0:22:01.820 those risks in today's climate. 0:22:02.920 --> 0:22:04.939 I think that's a very good point. I mean, we 0:22:04.960 --> 0:22:08.420 continue to see bigger issues around the climate and things 0:22:08.680 --> 0:22:12.060 are constantly changing. So it's obviously important for data centers 0:22:12.080 --> 0:22:14.300 to address these issues as they move forward. So I 0:22:14.320 --> 0:22:16.060 think that's a very good point that you've made there. 0:22:16.440 --> 0:22:19.540 And I'm really having a good time with this discussion. 0:22:20.119 --> 0:22:24.560 You guys definitely have, um, added to my knowledge base 0:22:24.720 --> 0:22:26.580 in regards to the data center build out and some 0:22:26.600 --> 0:22:30.280 of the challenges and opportunities that the parties are facing. But, 0:22:30.580 --> 0:22:33.060 you know, maybe just to kind of wrap it all together, 0:22:33.100 --> 0:22:36.480 like where do you think data center financing goes from here? 0:22:36.500 --> 0:22:39.460 What are the next steps in your opinion? 0:22:39.790 --> 0:22:44.090 I think that data center issuance is actually helping sustainable 0:22:44.130 --> 0:22:50.270 finance becoming much more tangible. This is economically critical infrastructure 0:22:50.490 --> 0:22:54.609 that has you know, enormous amounts of capital as Romina 0:22:54.650 --> 0:22:58.030 mentioned at the top of the interview. And I think 0:22:58.050 --> 0:23:00.439 that the sustainability question surrounding it, right? So everything that 0:23:00.460 --> 0:23:03.540 touches on energy efficiency, electricity, source of water, everything that 0:23:03.560 --> 0:23:06.840 we've touched on so far today, They're increasingly the same 0:23:06.920 --> 0:23:10.379 factors that are determining whether a project can be built 0:23:10.480 --> 0:23:14.540 or not. So if sustainable finance can help communicate how 0:23:14.600 --> 0:23:17.340 the infrastructure is built, how it's powered, how it's cooled, 0:23:17.380 --> 0:23:19.800 how it's integrated into all of these local communities, then 0:23:19.840 --> 0:23:22.420 I think it's serving a very important economic purpose. And 0:23:23.000 --> 0:23:25.439 I would say that this is a very classic example 0:23:25.830 --> 0:23:29.369 of how sustainability factors are also, at the end of 0:23:29.390 --> 0:23:33.010 the day, economic factors. So whether it's through your OPEC 0:23:33.030 --> 0:23:37.330 savings or through risk mitigation or just smoother project execution, 0:23:38.070 --> 0:23:41.750 all of this essentially boils down to your sustainability profile. 0:23:42.090 --> 0:23:44.790 So I would say that the next phase of sustainable 0:23:44.830 --> 0:23:47.770 finance is going to be way less about labels and 0:23:47.910 --> 0:23:51.830 much more about financing this critical infrastructure in a way 0:23:51.869 --> 0:23:56.670 that's very efficient, that's resilient, and also that's socially durable. 0:23:57.109 --> 0:24:00.130 There's two million dollar questions that I've been asked over 0:24:00.170 --> 0:24:05.560 the last... decade, and one of them is, are green 0:24:05.600 --> 0:24:09.460 bonds additional? Is there additionality? And you can ask the 0:24:09.500 --> 0:24:13.030 same question here for data centers when there's an influx 0:24:13.119 --> 0:24:16.570 of investor demand for these deals, whether or not you 0:24:16.609 --> 0:24:18.930 have a green label, which then goes to the question, 0:24:19.010 --> 0:24:22.550 is a green label for a data center additional? And 0:24:22.609 --> 0:24:27.400 I would argue it absolutely is. is additional to add 0:24:27.420 --> 0:24:32.560 a green label. Why? It's ultimately that communication, right? On 0:24:32.580 --> 0:24:35.530 the infrastructure, on the power, on the cooling, on the community, 0:24:35.740 --> 0:24:40.170 everything that we've just spoke about really does have an 0:24:40.550 --> 0:24:45.350 impact on investor views and whether or not there's a greenium, 0:24:45.630 --> 0:24:48.090 whether or not the pricing may or may not change, 0:24:48.109 --> 0:24:51.730 which we know is never certain. there still is that 0:24:51.790 --> 0:24:54.930 point of additionality for a green label. And I think 0:24:54.970 --> 0:24:58.159 that will continue to be true in the case of 0:24:58.660 --> 0:25:02.440 data centers for green bonds, but also the corporate space 0:25:02.560 --> 0:25:06.760 and issuers more broadly continuing to use the label going forward. 0:25:07.440 --> 0:25:11.040 And demand is still there, right? Demand remains strong. And 0:25:11.460 --> 0:25:12.980 I mean, I don't know if you want to expand 0:25:13.340 --> 0:25:16.260 on that a little more, but in a lot of 0:25:16.300 --> 0:25:19.300