FY23 Climate andNature-Related
Risks Report

FY23 Climate and Nature-Related Risks Report

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TABLE OFCONTENTS
Climate and nature risks in the hyperscale data centre context

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AirTrunk’s journey so far

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Climate-related risks and opportunities

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Nature-related risks and opportunities

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FY23 Climate and Nature-related Risks Report

ABOUT THISSTATEMENT

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These commitments are jointly made by all entities
within AirTrunk Group.
Together, these entities are referred to as AirTrunk (we,us, or our).
This statement is made in relation to the financial year
commencing 1 July 2022 and ending 30 June 2023.

FY23 Climate and Nature-Related Risks Report

CLIMATE AND
NATURE RISKSIN THE
HYPERSCALE DATACENTRE CONTEXT

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Companies, governments, and communities are increasingly
impacted by the physical impacts of climate changearound the world. Shifting weather patterns, intensifying
natural disasters, and rising sea levels are leading to supply
chain disruptions, infrastructure damage, and changing
operational environments. The growing concern aroundclimate change is also leading customers and governments
to increasingly scrutinise a company’s contribution toclimate change and nature loss, leading to an increase inregulations and shift in customer preferences.
Climate change and nature loss require many organisations
to reconsider their approach to developing and maintaining
resilience strategies. Asia-Pacific and Japan (APJ), in
particular, is disproportionately affected by climate change
due to its geography and population density1, therefore it isimportant that we:
1. Plan for increasing likelihood and severity of extreme
weather, changing climatic conditions, and nature loss
across different scenarios and time horizons.
2. Monitor transition related risks such as technology
costs, customer preferences, and industry regulations.
3. Collaborate with a wider group of stakeholders to
improve collective action and capacity to respond toclimate change.
Developing mitigation and adaptation plans is crucial and,in most cases, challenging. The lack of data availability,
long-time horizons of risks, and uncertainty of most climate
and nature-related risks can lead to companies neglecting
climate and nature-related risk planning.
However, by leaning into the challenge, companies can not
only reduce risks but also open opportunities to provide
better services, expand revenues, and manage costs.
To this end, AirTrunk, as the leading hyperscale data centre
provider in APJ, is publicly stating its commitment to:
1. Identify impact and risk across value chain activities andgeographies, beyond a facility’s immediate operations.
2. Connect climate and nature/biodiversity risks,
opportunities, and co-benefits where possible toprogressively integrate the two considerations over time.
3. Drive system level impact by collaborating with a wider
network of stakeholders, such as closely partnering withcustomers or participating in initiatives that develop
market capacity to understand and respond to climatechange and nature loss.
This report shares examples from AirTrunk’s own journey
towards understanding and responding to climate andnature-related risks and opportunities.

1 McKinsey & Company, ‘Climate risk and response in Asia’ Report, November 2020.

FY23 Climate and Nature-Related Risks Report

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AIRTRUNK’SJOURNEY SO FAR
Climate risk management has been fully embedded within
AirTrunk’s Enterprise Risk Management Framework andis prioritised as one of the company’s top key enterpriserisks. Since performing its first climate risk assessment in
FY22, AirTrunk has made significant progress by quantifying
several climate risks and opportunities. The scope of analysis
included: Identifying measures to improve resilience in water
stressed regions and, at the same time, taking steps
towards developing AirTrunk’s water stewardship strategy;
 Defining approaches to strengthen community
relationships and engagement with a range ofstakeholders; and Developing risk mitigation measures to ensure AirTrunk’s
ability to deliver on our Net Zero commitments across its
Scope 1 and 2 emissions by 2030. Notably, the company isfocused on working with its customers to transition theirenergy consumption at AirTrunk data centres to 100%
renewable energy by 2030.

The analysis was conducted across under three climate
scenarios: A speedy Net Zero scenario (SSP1 RCP2.6) aligned to
below 2-degree world; A baseline scenario (SSP2 RCP4.5) aligned to current
nationally determined contributions; and A hot house world scenario (SSP5 RCP8.5) aligned toabove 4-degree world.
Additionally, AirTrunk conducted a pilot test of the Taskforce
on Nature-Related Financial Disclosure (TNFD) (v.4) to better
understand its impacts and dependencies on nature andmanage the related risks and opportunities. The pilot was
conducted at AirTrunk SGP1 data centre (SGP1) in Singapore.
The SGP1 pilot was a considered first step to measuring
and addressing AirTrunk’s risks and opportunities related tonature and biodiversity. A thorough assessment and strategy
will follow, at which point the company will scale its efforts
more deeply across its value chain and portfolio.

FY23 Climate and Nature-Related Risks Report

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CLIMATE-RELATEDRISK AND OPPORTUNITIES
Governance
The AirTrunk Board has ultimate responsibility for theoversight of climate-related risks and opportunities withdelegated oversight responsibilities assigned to the EHS,
Construction and Risk Committee (ECRC). The ECRC receives
quarterly updates from the Head of Risk and Sustainability
and the Senior Risk Management Committee (SRMC) whichis comprised of AirTrunk’s Senior Management team. These
updates are focused on providing the latest emerging risks,climate risk profile and heatmap, as well as a summary of thecontrol environment for climate risks.
AirTrunk has appointed numerous Executives as climate
risk owners. Specific priority risks have been allocated to
AirTrunk’s Chief Technology Officer, Chief Development
Officer, Chief Marketing Officer and Chief Legal Officer who
hold the ultimate responsibility for executing responses,
management of their allocated risks and reporting progressto the SRMC. All climate-related risks are discussed at
the SRMC on a quarterly basis and reported at Board level
through the ECRC.

Assessing and Managing Risks
AirTrunk has aligned its approach to identifying andassessing climate risks with its existing enterprise risk
management framework to ensure climate risks can be easily
integrated into the existing risk management processes.
To identify climate risks and opportunities, AirTrunk takes
an iterative approach, continually reviewing numerous
information sources, including external audits, inputs fromvarious functions, regulatory reviews, customer and supplier
feedback, climate risk experts’ advice, and site level analysis.
These insights are taken into workshop settings with the
SRMC to ensure all identified climate-related risks are
considered and prioritised. AirTrunk’s previously identified
risks are subsequently reviewed using an establishedevaluation matrix across likelihood and impact, relying on
quantitative criteria to discern the appropriate rating.

As climate-related risks tend to manifest over longer time
horizons, AirTrunk has focused on allocating an expected
time horizon for each risk to reach materiality. Assessedrisks are captured within its enterprise level risk register andpresented to the SRMC and subsequently the ECRC for input,
review and approval. For each priority risk, a member of the
SRMC is allocated as the risk owner, with responsibility to
manage and monitor the risk.
For the nine key risks AirTrunk prioritised, the assigned
risk owners have developed 43 mitigating strategies. These
strategies will be implemented in the next 24 months andclosely monitored to ensure climate-related risks andopportunities are effectively and adequately managed.
By aligning AirTrunk’s risk management approach for climaterelated risks to its existing enterprise risk management
framework, these risks can be seamlessly integrated into thecompany’s overall existing risk management process.
In addition, AirTrunk has assessed the full spectrum of
existing enterprise level risks to understand if they may havea climate-related dimension that overlaps with identified
climate risks, and whether these risks could be merged or,if identified, added to the risk register as discrete climaterelated risks.

AirTrunk’s Climate Risks and Opportunities
While the type and magnitude of climatic hazards to which
AirTrunk is exposed varies across APJ, general trends
indicate increasing temperatures, disruption of historicalrainfall patterns which can exacerbate risk of droughts,
and more extreme rainfall events as key hazards across all
jurisdictions. These trends are being monitored closely toensure they are appropriately assessed based on the extent
of exposure to AirTrunk.
Furthermore, governments are increasing expectationsof companies to mitigate their impact and manage risks
more closely.

Table 1: General trends relevant to AirTrunk in APJ

Temperatures have increased,
and trends expected to continue

Disruption of seasonal rainfall
patterns

Average and heavy precipitation
projected to increase

Emission trading schemes andcarbon taxes under consideration or
implemented in many APJ markets

Governments mandating climate
financial risk disclosures, for example,
in Singapore and Australia

Efficiency and renewable energy
requirements increasing in several
markets

FY23 Climate and Nature-Related Risks Report

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CLIMATE-RELATEDRISK AND OPPORTUNITIESAirTrunk’s priority climate-related risk and opportunity areas
have been identified as follows:

Physical Risks:
 Higher than average temperatures (Chronic Risk) which
increases energy demand across AirTrunk’s operations
and may require new technologies.
 Increased intensity of droughts (Acute Risk) that could
result in water disruption.

Transitional Risks: Capital availability: Increasing climate expectations
from financiers to maintain preferential capital rates andaccess to new capital.
 Customer preferences: Changing customer requirements
and customer technology deployment driven bycustomer’s own sustainability frameworks, investor
requirements and reputational pressures.
 Stakeholder scrutiny: Civil Society (communities andclimate activists) and media scrutiny of the tech sector ona range of issues including but not limited to energy andwater use; exacerbated by energy rationing and droughts.
 Climate litigation and regulatory shifts: Potential for new
moratoria for data centres, energy use restrictions orcarbon pricing schemes.

Opportunities:
 Low-carbon products: Providing innovative low carbon
solutions.
 Renewable energy: Increasing availability of renewableenergy procurement mechanisms and supply options for
AirTrunk customers.
 Resource efficiency: Enhanced availability of technologies
driving water and energy efficiencies across AirTrunkoperations.
 Green finance: Tapping into preferential green finance tosupport the achievement of AirTrunk’s decarbonisation
and water and energy efficiency ambitions.
From AirTrunk’s key risks, the company has focused
its attention on those that are most material. A deeper
quantitative assessment has been conducted with a list of
relevant actions.

FY23 Climate and Nature-Related Risks Report

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Case study:
Addressing Water Stress Challenges

AirTrunk has existing water sustainability and resiliency
measures in place to ensure responsible water management
across its sites. These include prioritising more efficientheat rejection technologies where possible and water use
management protocols when water stress is high. Expanding
on existing measures, AirTrunk reviewed how water stress
may change over time and across scenarios.

cooling, or the ever-growing AI space. This, in turn, may cause
unplanned outages, data loss, and service interruptions,
impacting businesses relying on seamless digital operations.

Water scarcity is an escalating concern in APJ, where inmany markets, without rapid investment in improving watersupply, water demand will likely outpace availability. Thisis true for almost every scenario for selected locations, as
per the WRI Water Risk Atlas. If the demand-supply gap for
freshwater continues to widen, the region’s ecosystems andcommunities will be put at risk.

Amidst the pressing challenge of water stress, data centre
companies play a pivotal role in shaping a sustainable future.
By implementing strategic initiatives, companies can not only
enhance their operational resilience but also contribute to
global water conservation efforts. Hyperscale data centres
can explore initiatives including but not limited to, thefollowing:

AirTrunk has assessed that most of the state, municipal, andnational governments in the geographies we operate havetangible plans to invest in expanding rainfall independentsources (desalination, recycled water etc.) specifically to
mitigate the impact of climate change on water supply. This is
expected to significantly reduce the risk of water stress at asystem level in the future since there will be a lower relianceon freshwater and rain-dependent sources.

Investing in Resilience:
Prioritise infrastructure investments like water
recycling and storage facilities to ensure continuity
during water stress events.

While extreme disruptions are generally mitigated andunlikely, their potential financial ramifications underscore
the need for proactive measures. Prolonged water supply
reductions can lead to operational outages, increased
recovery costs, and necessitate substantial mitigation
efforts.
The impact of water scarcity on data centres can beprofound. Cooling systems, essential for maintaining
optimal operating temperatures of intricate hardware andlower energy consumption, heavily depend on water. As
water availability dwindles, the efficiency of these coolingmechanisms diminishes, potentially leading to overheating,equipment failures, and limited design options for future
campuses necessary for high density deployments, liquid

AirTrunk has calculated financial exposure that these eventswould bring and are using this information to inform the mostappropriate response strategy under high-impact scenarios3.

Optimising Water Use:
Implementing water-efficient technologies andprocesses, such as advanced cooling systems and leakdetection, reduces overall water consumption.
Collaborating with Stakeholders:Partnering with local communities and governments
for integrated water resource management.
Protect, Restore, and Regenerate Ecosystems:
Support habitats and ecosystems through activities
and investments that help to improve the quality ofwater in natural bodies4.
Harnessing Renewable Energy:
Transitioning to renewable energy sources like solar
and wind power minimises water usage associatedwith traditional energy production.

Table 2: Water stress2 across AirTrunk data centres and eligible heat rejection technologies
WATER STRESSAIRTRUNK DATA CENTRESELIGIBLE HEAT REJECTION (example)

Extreme (>80%)-

Dry rated air-cooled chillers

High (40-80%)

MEL1

Adiabatic air-cooled chillers

Medium-High (20-40%)

SYD1, SYD2, SYD3, TOK1, TOK2

Hybrid dry coolers

Low-Medium (10-20%)-

Indirect Evaporative Cooling

Low (<10%)

HKG1, HKG2, JHB1, SGP1Open circuit cooling towers

2 World Resources Institute, ‘Aqueduct Water Risk Atlas’, June 2023.
3 Assessed as part of AirTrunk’s internal risk assessment for select data centres, cost would vary for other facilities.
4 Tokyo Bureau of Waterworks, ‘The Water Conservation Forest. Lush Water Resources Forests Created by Everyone’. N.D.

FY23 Climate and Nature-Related Risks Report

Case study:
Addressing Water Stress Challenges

Exploring Nature and Biodiversity Intersections with Climate Risk
Protecting, Restoring, And Regenerating Ecosystems That Provide Key Services
As part of AirTrunk’s analysis of water related climate risk and opportunities, the company also assessed specific touchpoints between ecosystem services and the provision of water supply. This approach was inspired by the company’s TNFD
pilot.
For example, in Tokyo, the Tama river is a major source of water for Tokyo Metropolis. To ensure the streamflow of theriver and conserve its reservoir, the Bureau of Waterworks manages a water conservation forest with a total area ofapproximately 24,000ha5.
These vital landscapes provide a range of essential ecosystem services that foster the health and resilience of local
watersheds. By acting as natural sponges, these forests mitigate flood risks during heavy rainfall events, regulate water
flow, and minimise erosion. Additionally, their intricate root systems enhance soil retention, reducing sedimentation inwater bodies and safeguarding water quality.
Identifying potential ecosystem protection, restoration, and regeneration activities within AirTrunk’s water supply chain isan action the company can explore that goes beyond its water resource efficiency measures.

5 Tokyo Bureau of Waterworks, ‘The Water Conservation Forest. Lush Water Resources Forests Created by Everyone’. N.D.

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FY23 Climate and Nature-Related Risks Report

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Case study:
Adapting to Low-Carbon Preferences

As the world’s largest and leading technology companies,
AirTrunk’s customers have ambitious climate goals and areincreasingly focused on low carbon energy sources. This
could pose a key climate-related risk for AirTrunk given
resource, cost and regulatory pressures, which need to beproactively measured and addressed.

To better understand the financial implications associatedwith procuring this residual renewable energy, AirTrunkembarked on a quantitative risk analysis to gain acomprehensive understanding of the financial landscape
AirTrunk may encounter as it pursues its renewable energy
goals.

To address this shift, AirTrunk has committed to achieve
Net Zero across its Scope 1 and 2 emissions by 2030 andis collaborating with its customers to transition to 100%
renewable energy for electricity consumed at AirTrunk data
centres. AirTrunk anticipates that its customers will procure
electricity from renewable energy sources by 2030, howeveris aware of the challenges its customers may face given
complexities relating to differences in resources, funding
and regulation across markets in the APJ region. There
may therefore be considerable financial implications for
AirTrunk to procure renewable electricity for a portion of its
customers’ electricity needs, to ensure AirTrunk meets its
own Net-Zero obligations.

Through this quantitative scenario analysis, AirTrunk
was able to strategically evaluate the potential financial
implications against the three climate scenarios.
Furthermore, the analysis quantified potential response
measures and identified how AirTrunk could potentiallymitigate financial risks by pre-emptively procuring renewableenergy ahead of its 2030 target for the residual brownelectricity consumption across its data centres.
This proactive approach safeguards AirTrunk’s financial
stability and underscores its commitment to a sustainable
and responsible business model. By anticipating andassessing potential financial risks and employing informed
strategies, AirTrunk’s goal to achieve its Net Zero by 2030
strategy, in part, through renewable energy becomes more
resilient and adaptive.

Table 3: Fiscal impact of cost of electricity transition in APJ
Speedy Net Zero

Baseline

Australia
Japan
Malaysia
Singapore
Hong Kong

Legend:High

MediumLow

Hot House World

FY23 Climate and Nature-Related Risks Report

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NATURE-RELATEDRISK AND OPPORTUNITIES
While corporate action on climate change risk, including
mitigating greenhouse gas emissions, has increased
significantly, there is also an increased focus on nature andbiodiversity loss. Momentum is growing towards a holistic
approach that includes a stronger emphasis on nature andbiodiversity issues alongside broader climate change topics.
The TNFD is a new, market-led initiative consisting of adisclosure framework that allows financial institutions
and companies to incorporate nature-related risks andopportunities into their strategic planning, risk management
and asset allocation decisions.
In FY22, AirTrunk conducted a pilot test of the TNFD (v.4) at
SGP1 to better understand its impacts and dependencies
on nature and manage the related risks and opportunities.
AirTrunk’s pilot implementation of the TNFD framework
helped to: Gain an initial understanding of the interactions between
SGP1 and the natural ecosystem surrounding the sitefrom a value chain perspective; Set the foundation to conduct similar implementations
across AirTrunk’s portfolio;
 Conduct knowledge sessions on the TNFD with senior
management and other key stakeholders; and Actively participate in building a stronger framework fornature by providing feedback to the TNFD.

A key outcome of AirTrunk’s pilot TNFD study was theprioritisation of the dependency on and impact toterrestrial ecosystem from the extraction/production ofbuilding, energy, and IT material. Building a data centre
impacts on-and off-site biodiversity including species
disturbance, habitat loss, fragmentation and pollution.
Construction alone accounts for ~40% of raw material
flow in the global economy, representing a key area ofconcern6. Furthermore, the solutions with which we seek
to mitigate climate change, e.g. renewable energy, requirea large volume of minerals to enable the energy transition.
Systemic change to address the impact of economic
activity on terrestrial ecosystems requires wider industry
collaboration and companies should map out theirdependencies and impact to specific regions or countries
to ensure material procurement is in line with targets andframework to halt biodiversity and nature loss.
The pilot implementation of the TNFD helped AirTrunkbuild the initial capacity required to understand the hot
spots of its value chain activities with various natureand biodiversity related topics. Moving forward AirTrunkintends to focus on more granular location specific data
points across its portfolio.

6 Torres et. al, ‘Unearthing the global impact of mining construction minerals on biodiversity’, March 2022.