Water Risk Management in Data Center Operations

This technical report discusses the operational, regulatory, and reputational risks associated with water use in data centers, particularly in the context of the artificial intelligence (AI) industry's growing demand for water. It outlines how the Big 4 data center companies—Amazon, Google, Microsoft, and Meta—are managing these risks, with a focus on their water risk management scores as calculated by Morningstar Sustainalytics. The report highlights that operational risks, such as local opposition to data center projects, have resulted in significant financial impacts, including USD 98 billion in blocked or delayed projects in Q2 2025. Regulatory risks are also increasing, particularly in Europe, where stricter water consumption reporting requirements are being implemented. The report emphasizes the importance of transparency in water use disclosures and the potential for reputational and legal risks as public scrutiny of water consumption grows. Overall, the findings indicate a pressing need for improved water management practices in the data center sector.