License to Operate: Why Data Centers Need More Than Capital

Over the past decade, data centers have quietly transformed into one of the most attractive asset classes for financial institutions. Once seen as niche digital infrastructure, they’re now foundational to the modern economy, and a magnet for investment. Private equity, infrastructure funds and institutional investors now consider data centers a cornerstone of long-term digital growth portfolios. According to CBRE’s 2025 Global Data Center Investor Intentions Survey, 95% of institutional investors plan to increase their exposure to data centers in 2025, up from 78% just two years ago.

What’s driving this wave of investment? Simply put: demand. Public incentives have accelerated institutional interest, but it’s the fundamentals that keep capital flowing: stable, long-term returns from anchor leases with hyperscalers like Alphabet, Amazon and Microsoft; resilience to inflation and macro shocks; and explosive demand driven by Artificial Intelligence, cloud and high-performance computing. 

But with visibility comes vulnerability.

Data centers are no longer invisible infrastructure. They are consuming significant resources – electricity, water and land – and are increasingly subject to public, regulatory and political scrutiny. As communities organize around environmental and social concerns, permitting delays mount. The greatest challenges facing data center investors today are no longer solely technical, they are also reputational.

For financial sponsors, asset managers and operators, investment success will depend not only on engineering and finance but also on trust. Strategic communications are now essential to secure stakeholder trust, regulatory clearance and social license to operate.

The Market Is Booming – and so Is Government Support

The global data center market is undergoing explosive transformation. Valued at approximately $348 billion in 2024 globally, it is predicted to increase to approximately $1 trillion by 2034[1] Governments are not just responding to this momentum, they’re actively enabling it.

• In the United States, a federal executive order[2] prioritizes AI infrastructure and fast-tracks permitting. In parallel, the Environmental Protection Agency (EPA) has proposed allowing construction on data center sites to begin before air permits are finalized, which is a major shift.

• In the United Kingdom, data centers have been designated as "critical national infrastructure," unlocking preferential regulatory treatment. The government has committed £14 billion to AI and digital infrastructure development, including the creation of AI Growth Zones with upgraded grid access and publicly funded supercomputing capabilities[3].

• In Saudi Arabia, the Public Investment Fund (PIF) announced a $6 billion commitment[4] to build one of the world’s largest hyperscale data center ecosystems.

• Across Asia-Pacific, markets like Japan, Singapore and South Korea are competing aggressively via tax incentives, fast-track zoning and AI-specific subsidies. According to Moody’s, nearly 40% of global data center investment will flow into APAC by 2030[5], making it the fastest-growing region in the world for digital infrastructure.

The convergence of forward-leaning public policy and private capital has created a powerful flywheel – one where government action to accelerate data center development is directly catalyzing private investment at scale. Financial institutions aren’t just responding to this momentum – they’re amplifying it and taking the lead in shaping the next generation of digital infrastructure.

• Blackstone, through its platform QTS Realty Trust, plans to deploy over $8 billion[6] to expand data center capacity in North America, capitalizing on demand from hyperscalers.

• KKR has announced a $50 billion partnership[7] with Energy Capital Partners to jointly invest in global data center and power infrastructure tied to AI and cloud needs.

• Macquarie Asset Management has committed up to $5 billion[8] to back Applied Digital’s development of high-performance AI data center campuses.

• JPMorgan Chase and Starwood Property Trust recently co-financed a $2 billion development[9] in Utah, highlighting growing bank participation in hyperscale buildouts.

This capital commitment underscores a new investor reality: data centers are central to long-term digital infrastructure portfolios. However, with that exposure comes increased visibility, scrutiny and communications complexity.

The Reputation Challenge: Sustainability, Scrutiny and License to Operate

Despite the financial upside, data center growth faces intensifying environmental and community resistance – threatening timelines, stakeholder trust and long-term value. As data centers scale globally to meet surging AI and cloud demands, they are also confronting heightened scrutiny and NIMBYism around their energy use, water impact, emissions and governance practices – with consequences that go beyond compliance: 

Energy Demand & Grid Strain

Between 2017 and 2023, electricity consumption from data centers more than doubled. By 2028, they could account for 12% of U.S. total electricity usage[10], driving record high power prices[11], much of which will ultimately be passed along to businesses and consumers.

Water Under Stress

Large-scale data centers can use up to 5 million gallons per day [12] – equivalent to the daily needs of a town with approximately 10,000 to 50,000 people. In some regions, utilities expect 33% water rate hikes[13] over the next two years – more than 15 times the historical average.

Land Use & Air Quality Impacts

Diesel backup generators remain a critical source of emissions. Researchers at University of California, Riverside and California Institute of Technology estimated that emissions from data center operations have led to $5.4 billion in public health costs[14], including elevated respiratory illness and cancer risks in nearby communities.

Ethical Governance & Political Risk

Data center developments often span multiple election cycles, exposing them to changing political priorities. Local media scrutiny shines brightest where transparency is weak. Stories of bribery scandals[15], non‑disclosure agreements or opaque permitting can rapidly erode public trust and politicize a project. 

Local Procurement & Economic Accountability

As communities demand a greater return on infrastructure investment, data center developers are facing pressure to deliver tangible economic value to the areas in which they operate. Media narratives often amplify when promises about local benefit are vague or unmet. When commitments to local hiring, sourcing or infrastructure investment don’t match the scale of a project, developers and investors risk being seen as outsiders exploiting communities – especially by local media.

Community Resistance and Project Delays

Public concerns around data centers are fueling a sharp rise in community resistance and NIMBYism. To date, 28 States[16] in the U.S. have reported local community-led opposition to data center developments. The result: an estimated $64 billion worth of data center projects[17] have been delayed, downsized or canceled due to permitting issues, litigation or public backlash.

Strategic Communications: A License to Operate

With increasing exposure comes heightened expectation. Strategic communications is now a core pillar of risk management and stakeholder value creation. Here's how:

1. Engage Early, Locally
   Identify key stakeholders early—residents, regulators, NGOs and utilities—and lead with listening. Use tools like public forums, advisory panels and surveys to gather feedback. Communicate proactively about project goals, timelines and community impacts to build trust before issues arise.

2. Reframe the Narrative 
   Present data centers as essential community assets that drive long-term local investment through innovation, job creation, and access to tech-driven education or job training. Use proactive storytelling to highlight tangible benefits such as local hiring, workforce development, technology education and infrastructure upgrades.

3. Prepare for the Headlines
   Establish crisis comms protocols for protests, outages, air quality events or litigation. Speed, transparency and tone matter.

4. Speak to LPs and Institutional Mandates
   Align external messaging with ESG expectations of institutional investors, showing how sustainability and community acceptance directly support long-term value creation and license to operate.