2026 Sustainable Investing Trends

Power, Water and Community Resistance Shape Data Center Growth

As we all become increasingly reliant on AI, more data centers are needed to meet the growing demand. However, local communities don’t always roll out the welcome mat, as new data centers draw significant amounts of electricity, stress local grids and consume large quantities of water for cooling.

As AI usage grows, these impacts are becoming more visible and politically relevant. Although building data centers creates temporary construction jobs, their ongoing operation supports few permanent positions. This helps fuel local opposition due to perceived inadequate compensation for the disruptions they cause.

Three Forces Driving Opposition to Data Centers

1. Electricity Demand vs. Grid Limits: In Northern Virginia, the world’s largest concentration of data centers sits near homes and schools. Residents complain about noise, diesel generator emissions and rising electricity bills. This has led to organized opposition, rezoning battles, and project cancellations. In 2025 alone, at least 25 data center projects in Virginia were canceled due to community resistance. Risks for investors include delays and higher costs when grid upgrades are required, but credible strategies for making those upgrades are lacking.

2. Water Stress and Permitting Constraints: In drought-prone areas like Phoenix, Ariz., regulators and communities are increasingly focused on the water demands associated with data centers. Scrutiny extends beyond direct cooling needs to include indirect water use in electricity generation, including hydropower, which represents approximately 4%–5% of the local power mix. Regulators and communities focus on the cumulative impacts from multiple data centers, making water efficiency a core investment risk. Speed-to-market strategies that ignore water constraints are vulnerable to redesigns and permitting delays.

3. Community Concerns and Social Tradeoffs: Ireland’s policy shifts illustrate how quickly community concerns can shape regulation. Data centers consume a significant share of Ireland’s electricity and contribute to grid congestion, complicating efforts to meet climate goals. Public concerns over energy bills and the risk of blackouts led to a moratorium on new grid connections near Dublin, and strict conditions were imposed when access resumed in late 2025. Operators must now provide onsite generation or storage, meet renewable sourcing thresholds and support grid stability.

Public Acceptance Is Now a Key Constraint on AI Growth

• Northern Virginia: Local groups are coordinating across counties, focusing on zoning, noise, diesel emissions and transmission costs. Noise pollution from cooling and backup generators has become a rallying point, delaying or blocking tens of billions of dollars intended for data center projects.

• Chile: Environmental groups challenged a planned data center’s groundwater use during periods of drought, resulting in court-ordered pauses in permitting and a redesign away from water-intensive cooling. For investors, such late-stage changes increase capital requirements and destroy schedule certainty.

• Ireland: Grid access is now a negotiated privilege, not an entitlement. New rules require data centers to act as flexible energy assets and support grid stability, as communities frame renewables and grid capacity as scarce public goods.

• Netherlands: Political backlash stopped a hyperscale project in Zeewolde due to land use and competition for renewable power. Local elections shifted municipal control, leading to a nationwide reversal of zoning approvals.

Understanding the Risks Behind AI Expansion

The question isn’t whether AI-driven demand for electricity will grow. Rather, it’s about identifying AI platforms that can scale without undermining climate targets or triggering local resistance.

We believe these six signals are important to investors who take on these risks:

1. Grid Strategy: AI platforms and hyperscalers should contract for clean generation alongside load growth and invest in the ability to quickly turn power sources on or off, or adjust how much electricity they produce, as needed. This helps keep the lights on during periods of high demand or when renewable energy sources like wind or solar aren’t available.

2. Grid Funding Costs: Pay attention to which companies are funding grid upgrades and how those costs are passed to ratepayers. Absorbing the cost affects profit margins; passing costs through to ratepayers breeds resistance.

3. Cooling Design: In stressed regions, air cooling, closed-loop systems that use liquid immersion cooling, reclaimed water, and transparent water accounting are critical. Water intensity affects permitting speed and litigation risk.

4. Operational Controls to Limit Externalities: Are data center owners proactively addressing noise, diesel backup, traffic and heat discharge? Setting performance thresholds and disclosing compliance requirements reduces delay risk.

5. Community Benefits: The benefits to the community of allowing data centers should be quantified, including grid services, infrastructure investment, tax revenue and reliability improvements. Offering training programs and local upgrades can offset concerns about limited permanent jobs.

6. Early Engagement: Data center owners should see early community engagement as a critical early step to help keep projects on schedule and protect profitability. Without it, problems and delays are more likely to occur later, slowing construction, causing costly equipment to pile up, and pushing back the facility’s startup date.

The Path Forward for AI and Sustainable Infrastructure

The interplay between local political dynamics and physical resource constraints shapes the expansion of the world’s AI infrastructure. Platforms that succeed in minimizing water consumption, enhancing power system flexibility and cultivating community acceptance will typically be well-positioned to manage financial risks arising from permitting delays, operational delays and regulatory changes.

For long-term investors, these capabilities determine which platforms can grow profitably and sustainably, setting apart resilient investments from those at risk of disruption.