Global Head of Real Assets at IQ-EQ, Tamas Mark discusses how environmental, social, and governance (ESG) considerations are reshaping the data centre market. From energy efficiency to capital allocation, he explains why investors must adapt to a rapidly evolving digital infrastructure landscape and why the future of the asset class looks brighter than ever.

The age of artificial intelligence is driving unprecedented demand for digital infrastructure. Tech giants like Meta, Amazon, and Google are investing billions into next-generation data centres -the invisible engines powering cloud computing, machine learning, and everyday applications like ChatGPT. Yet as these facilities expand, concerns around their environmental footprint are intensifying.

Long viewed as environmental liabilities – energy-hungry, water-intensive, and often opaque in their reporting – data centres are now at the forefront of an industry-wide transformation. Regulation, investor scrutiny, and technological innovation are pushing operators to redefine the sector as a leader in sustainable infrastructure.

In this wide-ranging conversation, Mark outlines why ESG has moved beyond box-ticking into a decisive factor in capital allocation, how advances in cooling and modelling technologies are improving efficiency, and why private capital has a once-in-a-generation opportunity to shape the future of this critical but undersupplied asset class.

The ESG Imperative in Digital Infrastructure

“We know that this is an undersupplied asset class, which makes it very attractive. But at the same time, we also know that from an environmental perspective, this is probably one of the most complex classes we have in the industry,” says Mark.

The paradox is clear: demand for data centres is surging globally, but the scrutiny over their environmental impact is rising just as fast. According to Mark, the pressure is coming from multiple directions:

• Institutional investors (LPs): Many now have their own net-zero targets, making it impossible to allocate capital to funds that fall short on ESG.
• General Partners (GPs): Asset managers are committing to ambitious carbon reduction goals, reshaping the pipeline of investable assets.
• Regulators: Particularly in the EU, frameworks like the Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy are setting clearer rules.
• Tenants: Major corporations will no longer sign leases without evidence of environmental responsibility.
• End users: Even consumers, says Mark, expect their apps and services to operate with minimal ecological impact.

“On top of all this,” Mark notes, “individuals are demanding sustainability from the very same infrastructure they rely on every day – even if they themselves continue to generate unnecessary digital storage. But all in all, I think this gives me a positive feeling that we are going to successfully transform this industry.”

From Liability to Leadership

For decades, the environmental story around data centres has been bleak. They consumed vast amounts of electricity, required intensive water cooling, and often lacked transparency. Yet according to Mark, a profound shift is underway.

“If you want to extract value from your data centre, you cannot extract that value if you keep on operating it as you did five, 10 years ago. This is changing,” he explains.

The industry is beginning to recognise that sustainability is not just reputational window-dressing but central to long-term profitability. With tightening regulations and rising exit expectations, ESG has become a competitive advantage rather than a burden.

Cooling Innovation: A Game-Changer

Among the most significant challenges is cooling – historically one of the largest environmental burdens of data centres. Mark points to several promising technological shifts:

• Wastewater utilisation: Amazon, for example, is reusing non-potable wastewater to cool facilities and has pledged to become “water positive” by 2030 – replenishing more water than it withdraws.
• Air cooling in colder climates: Nordic countries, with naturally low temperatures, are emerging as prime locations where air cooling can reduce reliance on water-based systems.
• Design integration: “We need to think about cooling not after the fact, but from the moment we design and build these facilities,” Mark stresses.

These approaches, while still evolving, are already making a measurable impact.

“The likes of Amazon or Google can set carbon expectations because they have the modelling capabilities to forecast operations. This is critical to transforming the industry,” he adds.

Forecasting Carbon: The Rise of Digital Twins

A recurring theme in Mark’s analysis is the need for better forecasting and scenario modelling.

“To transform this industry, we need service providers who are specialised in forecasting carbon emission as well. This is not something that the GPS and asset owners will be able to do or should be doing in-house. This is much more complex.”

The rise of digital twins – virtual models of data centres that simulate operations – allows investors to test different scenarios for water usage, energy consumption, and carbon footprint. “It’s an extra cost, but the benefit is clear,” says Mark. “If you can model the future accurately, you can extract more value.”

ESG and Capital Allocation

ESG is no longer optional when raising funds. In the EU, funds classified under Article 8 or 9 of SFDR (those that promote or have sustainable objectives) are attracting significantly more capital than Article 6 funds.

“LPs are looking very carefully. In some cases, even if they like the product, they simply cannot invest unless the fund meets ESG criteria,” Mark explains.

This is a structural shift. ESG is now directly reshaping capital allocation in digital infrastructure, influencing fundraising success, and dictating how managers design their strategies.

The Investor Lens: What to Prioritise

When asked what ESG factors investors should prioritise when evaluating data centres, Mark highlights three pillars:

• Energy efficiency and carbon intensity of operations
• Source and availability of renewable energy
• Water usage and lifecycle emissions from construction

“I couldn’t single one out as more important than the others,” he insists. “They are all integral.”

Due diligence, too, has evolved. Today, investors must scrutinise ESG disclosure frameworks (GRESB, SFDR templates), independent audits (LEED, BREEAM certifications), and governance structures (board-level ESG oversight).

“If a project lacks environmental permits, credible certifications, or robust reporting structures – that’s a red flag,” Mark warns.

Transparency and Scenario Planning

Transparency is improving, Mark believes, but gaps remain. The missing piece is often forward-looking clarity.

“I think we still need to improve how we forecast the future, how we can communicate to the market – that this is how we operate today, this is our goal in five years. For example, when it comes to our carbon emission and what exactly is on our roadmap to get there.”

Scenario planning and forward-looking disclosures will, he predicts, become central to investor confidence and valuation.

ESG as Value Creation

Is ESG aligned infrastructure a competitive advantage? Mark is unequivocal.

“I am 100% convinced that the answer is yes. And I think we know pretty much that when it comes to the exit, that actually ESG will be much more important even than what it is today. So that’s why I’m very positive that in order to hit their exit values, ESG will play a very crucial role when assessing that.”

Global valuation standards are evolving too, with RICS updating its “red book” to integrate ESG considerations. This alignment between investor demand and regulatory frameworks reinforces the centrality of sustainability to long-term performance.

The Role of Private Capital

Data centres represent a rare “safe haven” asset class in real estate. Demand is clear, supply is limited, and the growth trajectory is near certain. But scaling this infrastructure requires vast amounts of capital.

Public investment alone cannot meet this need. Nor should it, argues Mark. Instead, private capital has a critical role to play.

“Private investment is essential not just to build data centres but to ensure renewable energy sources are integrated,” he says. In exchange, public-private synergies can deliver benefits like district heating, where excess heat from data centres is redirected to nearby communities.

Future Plans

So, what should private bankers, institutional investors, and asset managers take away?

Mark offers a clear message: “Don’t be afraid of investing. It’s one thing how we operate this industry today but will look very different tomorrow. And this will create the difference and will create extra value as well.”

The data centre is no longer a back-office liability. It is the frontline of the digital economy, powering everything from AI to social media. And as Mark stresses, its transformation into a sustainable asset class is not just desirable, it’s inevitable.

The convergence of regulatory pressure, investor demand, technological innovation, and end-user expectations is forcing the industry to adapt at unprecedented speed. For investors willing to embrace ESG not as a burden but as a driver of value, digital infrastructure offers one of the most compelling opportunities of the decade.

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