Management of Data Centres in Singapore – Key Legal Issues Part 2 – ESG

In an effort to manage the growth and curtail the energy consumption of the industry, the Singapore government was compelled to implement a moratorium on new data centre projects in 2019 which was eventually lifted in 2022 with a clarion call for pilot projects for new data centre projects with higher sustainability requirements. The criteria for the pilot projects include power usage effectiveness of less than 1.3, and attaining Platinum certification under Singapore's BCA-IMDA Green Mark for New Data Centres.

In addition to these more stringent criteria for new data centre projects, data centre operators and managers are also facing increasing pressure to ensure that their data centres meet ESG indicators for compliance and even financing. In Singapore, there is an ongoing effort to require ESG disclosures by companies as well as a push from the Monetary Authority of Singapore (“MAS”) for green financing and fintech based upon ESG principles. To this end, MAS has been promoting initiatives under Project Greenprint to facilitate the efficient flow of ESG data from disclosure platforms to data orchestrators and registries that can record and maintain provenance of ESG certifications and verified/verifiable data.

Environmental Sustainability

Environmental sustainability is perhaps the more readily understood indicia taking into account energy and resource efficiency, decarbonisation, and overall environmental impact during construction and operations as well as during the retrofitting and optimising legacy data centres.

This has spurred remarkable innovations in the space as various stakeholders align their understanding and goals in this area, and new approaches and solutions are developed. These range from cooling-as-a-service concepts with service providers offering consultancy, retrofitting and management of cooling solutions, materials and hardware research and design to harden equipment improve shelf-life and serviceability while reducing cooling and power requirements, as well as machine- and deep-learning capabilities to better monitor and manage data centre performance and efficiency.

As the space is still developing, Parties will need to be clear about the deliverables as well as potential risks involved especially where data (in particular personal data) is involved, and ensure that their review processes are sound and agreements are sufficiently comprehensive. There are already growing concerns about “greenwashing” and as more disclosures are mandated by regulatory bodies there is a greater likelihood that civil penalties and damages may be imposed for any misrepresentation or mis-reporting, negligent or otherwise.

Social

Data centres predominantly operate with only a necessary complement of manpower on-site presenting challenges for diversity, training and career progression, as well as particular issues for workplace safety and health. Data centre operators and managers have to take particular care to ensure these internal areas and metrics are not overlooked and while also being cognizant of their role in society at large. This could include community engagement and participation in community events, or at least minimising impact to the immediate community.

Governance

Corporate ethics and governance are particularly important in relation to data centre operators and managers. A strong culture of corporate governance is likely to lay the foundation to meet the particularly high standards expected of data centres across all areas from cybersecurity and physical security, to uninterrupted power and connectivity and especially data protection and governance requirements if not for the operators and managers themselves then for the trust and assurance of their tenants.

An important part of this is regular training on general ethics and governance issues, as well as domain-specific training on areas such as financial and other audits, data protection and security, as well as ESG-specific training. This would also enable data centre managers and operators to identify situations where professional advisors with sufficiently qualifications and experience can be valuable in navigating the often complex and evolving landscape.

This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute as legal advice and is intended to provide general information only. Information in this article is accurate as of 29 May 2023.