climate risk management

Equinix recognizes the urgency of global climate change and is committed to improving and elevating our climate risk management practices. Through our work with Accounting for Sustainability (A4S) we embed climate change risk management into our business where possible and appropriate. Our Environmental Sustainability and Global Climate Change Policy details our approach and practices related to the environment, climate strategy, resource efficiency, and reporting.

The assessments we conduct for our IBXs include local environmental components such as earthquakes, wildfires, and flooding, as well as mitigation of these impacts. Assessment outcomes are included in our Global Design Standard and are regularly communicated by our VP, Global Risk and Security. We also have formal flood emergency response plans in place at those IBX data centers with a flood exposure.

In 2021, we initiated a TCFD-aligned climate risk analysis to build a more holistic approach to our processes. Equinix will be evaluating the physical and transitional risks using scenario analysis to prepare our business for the impacts of climate change.

Task Force on Climate-Related Financial Disclosures (TCFD) Alignment

Equinix continues to support the aims of the TCFD to bring transparency around climate-risks into financial reporting. We believe our current sustainability report aligns well with the TCFD guidance and we intend to continue to build out our strategy and reporting in this framework.

Disclosure Response
Describe the board’s oversight of climate-related risks and opportunities Equinix’s Nominating and Governance Committee has ultimate responsibility for climate-related risks, to which Equinix’s Sustainability Program Office (SPO) reports periodically, as needed. The Nominating and Governance Committee of the Board is informed of and oversees material risks including climate-related issues and ensure ultimate alignment with the overall business strategy. The Nominating and Governance Committee of the Board receives input from several teams to manage climate-related risks including: the Enterprise Risk Management team, Government Affairs team, Business Continuity Program Office (BCPO) and Sustainability Program Office (SPO). Per Equinix’s Nominating and Governance Committee Charter, the Committee meets at least three times per year with additional discussions, as needed.

For additional information, review the company’s CDP response questions C1.1, C1.1a, C1.1b.
Describe management’s role in assessing and managing climate-related risks and opportunities. Equinix recognizes that the management of climate change must be cross-functional, and given the nature of our business of building, owning and operating data centers, climate-related physical risks (e.g. extreme weather) and transitional risks (e.g. energy pricing) are highly material to the business. To ensure the continuation of our business success, we have established a multilayered approach for assessing and managing climate-related risks and opportunities at management level, engaging Equinix’s CEO, CFO, and SPO and other relevant stakeholders such as Global Operations.

Equinix’s CEO is the highest-ranking individual in the company and is the executive sponsor for sustainability and related issues such as climate risk mitigation and adaptation. The CEO is responsible for ensuring that sustainability and climate resilience are prioritized when creating long-term business value. The CEO, along with the Sustainability Executive Steering Committee, provides oversight of the strategies and programs – such as the emission reductions through the purchasing of 100% renewable energy – that will enable Equinix to address climate-related risks and opportunities.

Equinix’s CFO reports to the CEO and is also a member of the Sustainability Steering Committee which meets quarterly. Equinix is a supporter of the Task Force on Climate-related Financial Disclosure (TCFD), as evidenced by our U.S. Chapter of Accounting for Sustainability (A4S) membership. Through A4S, Equinix’s CFO is working to increase the level of transparency around non-financial risk. The CFO is incentivized to improve Equinix’s performance against climate-related sustainability indexes, such as CDP Climate Change, as the Sustainability Program Office reports directly to the CFO. The CFO also oversees Equinix’s global finances and budget, which have a direct impact on the implementation of climate-related projects.

Equinix’s SPO is led by the SVP of Corporate Finance and Sustainability. The SPO collaborates across the organization to define and drive sustainability strategy, including how we are evolving our climate-related strategy. The SPO provides thought-leadership, knowledge, and program management to ensure Equinix has the people, programs, and systems in place to evolve our climate-related risk management across a range of material topics and collaborates with other functional areas on topics such as renewable energy, energy efficiency, and design standards.

For additional information, review the company’s CDP response questions C1.1a, C1.1b, C1.2a, C1.3a.

Describe the climate-related risks and opportunities the organization has identified over the short, medium and long term Equinix has identified several climate-related risks and opportunities, including:

  • Physical Risks:
    • Acute: Our office buildings and IBX data centers, are subject to risks resulting from factors including physical impacts of climate change such as extreme weather conditions, heat waves, floods, or natural disasters. These could materially increase our costs of operation whether through increases in our energy use in order to maintain the temperature and internal environment of our data centers necessary for our operations; service interruptions; equipment damage; or the cost of structural modifications
  • Transitional risks:
    • Market: Equinix is exposed to changes in power prices that result from fluctuating market forces and emerging regulations on generators, transmission and distribution costs, and taxes, as well as changes in the commodities prices driven by changing global market dynamics in the coal, oil and natural gas sectors. In order to remain competitive, we must control both our electricity demand through building and operating efficiently and mitigate potential impacts from these risks through smart power procurement strategies that consider cost and price certainty as well as carbon emissions.
    • Regulation: Emerging regulations on Greenhouse Gas (GHG) emissions could increase the cost of electricity by reducing the amount of electricity generated from fossil fuels, by requiring the use of more expensive generating methods or by imposing taxes or fees upon electricity generation or use. State regulations also have the potential to increase our costs of obtaining electricity. State programs have not had a material adverse effect on our electricity costs to date, but due to the market-driven nature of some of the programs, they could have a material adverse effect on electricity costs in the future.
  • Opportunities:
    • Products and services: Equinix sits at the intersection of technology trends and has a unique ability to offer low carbon data center products across the world. Equinix is providing customers with products and services that incorporate sustainability, energy efficiency, and renewable energy sources, which help them to reduce the carbon associated with their digital footprints.
    • Energy source: Equinix is focused on utilizing renewable energy to: reduce our carbon footprint and offer low-carbon services to our customers; and second, promote better access to energy including new renewable generation sources. Increasing our reliance on renewable energy will not only mitigate exposure to energy-related risks, but offer opportunities for cost savings, improved reliability, and better access to energy for Equinix and beyond.

For additional information review the company’s CDP response questions C2.1a, C2.3, C2.3a, C2.4, and C2.4a.

Describe the impact of climate-related risks and opportunities on the organization’s business, strategy and financial planning. Equinix reviews our annual financial planning and business strategy in the face of power prices, our renewable energy goal, and the needs of customers, and evolves our strategy and programs as new climate risk and opportunities present themselves.

To manage transitional risks and opportunities related to our products and services, Equinix aims to deploy best-in-class data center energy efficiency technologies, innovations and strategies for reducing energy consumption. We also design, build and operate our data centers with high operational standards, and evolve our operational strategy to focus on renewable energy procurement, underscored by our long-term goal of using 100% renewable energy across our global platform.

Climate-related risks and opportunities have impacted our power supply chain and have resulted in our preference to buy renewable energy around the world. We have also set ambitious climate-neutral and science-based 2030 targets.

To manage physical risks, our global and site operations teams conduct R&D and evaluations on what infrastructure changes and process improvements will be best suited for temperature or climate regimes or extreme weather patterns in different regions. Our mechanical and electrical engineers continue to look for new technologies and processes to implement to drive cost savings and enhance reliability or resiliency.

For additional information review the company’s CDP response questions C3.1b, C3.1d, and C3.1e.

Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2-degree Celsius or lower scenario Equinix had not previously introduced climate-related scenario analysis into its business strategy due to various reasons including the rapid organic business growth and M&A activities globally over the past several years. The rapid growth of our portfolio has created difficulties in the availability of quantitative data for constructing potential pathways and outcomes. In 2021, Equinix initiated the first phase of climate-related scenario analysis work to model and evaluate risks and opportunities. Equinix aims to develop qualitative scenario narratives exploring the potential range of climate change implications.

For additional information, review the company’s CDP response questions C3.2, C3.2b.

Risk Management
Describe the organization’s processes for identifying and assessing climate-related risks. Equinix’s Enterprise Risk Management (ERM) and Business Continuity Program (BCP) teams are responsible for identifying, prioritizing, and evaluating risks and consequences, to minimize the impact of climate-related threats and risks and opportunities.

To identify and assess risks at the corporate level, the ERM team utilizes interviews and/or surveys to identify top risks to the business. Business risks can include climate-related issues around power (upstream availability, reliability, pricing), transition risk (downstream consumer preference, renewable energy policy, technological disruption) and physical risks (earthquakes, hurricanes, floods). The ERM team creates a risk map based on the results to assess and prioritize the risks after which a risk assessment is created and managed throughout the year.

At the asset (data center) level, natural hazard exposures are identified and considered as part of the business case for a site during the selection process. This information is provided to the Design & Construction team to ensure awareness of issues unique to a particular location and potential design solutions are created to address exposures. The Business Continuity team then conducts annual threat and risk assessments for each data center, which identifies potential major issues and their impact and likelihood. This information is presented to the Business Continuity Executive Steering Committee.

For additional information review the company’s CDP response questions C2.1b, C2.2, and C2.2a.

Describe the organization’s processes for managing climate-related risks. Identified climate-related risks are managed by the Equinix business owner with oversight and responsibility for each risk. A series of internal report-outs to Equinix’s Executives and Board of Directors are completed to ensure risks are appropriately mitigated, managed, and monitored.

For additional information review the company’s CDP response questions C2.1b, C2.2, C2.2a, C3.1d, and C3.1e.

Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management. Strategic, financial, operational and regulatory risks are assessed at the Enterprise level through the ERM process. The ERM process includes periodic risk identification through surveys and/or interviews, in-depth assessments of top risks including evaluation of risk mitigation capabilities and then periodic monitoring and reporting back to executives and the Board.

To identify and assess risks at the asset (data center) level, the process begins during site selection, when natural hazard exposures are identified and considered as part of the business case for the site. This information is provided to the Design & Construction team, to ensure awareness of issues unique to a particular location and potential design solutions are created to address exposures. The Business Continuity team then conducts a threat and risk assessment for each data center on an annual basis, which identifies major issues and their impact and likelihood. This information is presented to the Business Continuity Executive Steering Committee, which includes the Global Head of Operations.

For additional information review the company’s CDP response questions C2.1b, C2.2, and C2.2a.

Metrics and Targets:
Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. Equinix defines substantive strategic impact in the context of climate-related risks, as impact that is more variable and uncertain over a longer time frame than is typically considered for financial risk. From a quantitative standpoint, Equinix considers both the probability and the severity when assessing the magnitude of a risk. A climate-related risk is defined to be strategically substantive if it has a probability of occurring every 2-5 years and a severity of affecting 10% of our operating income.

A site-level risk, including those related to climate change, is substantive if it receives a residual risk score of over 2.0 (out of 5.0.) in an assessment that evaluates and scores for impact, likelihood and severity based on a risk’s potential human (i.e., death and injury), property (i.e. loss and damage), and business (i.e., loss of market share, business interruption) impact. This score requires identification and implementation of potential additional risk mitigation measures which are documented and tracked.

The risks and opportunities managed and/or mitigated by our renewable energy and emissions reduction targets are considered substantive. Our CEO, CFO, SPO and other relevant groups such as certain Global Operations teams are evaluated on Equinix’s progress on these metrics and related performance such as long-term business value and risk mitigation and increased scores on ESG indices or customer satisfaction, which is then considered toward remuneration decisions.

For additional information review the company’s CDP response questions C1.3a, C2.1b, C2.2, C4.1, C4.1a, C4.1b, C4.2, and C4.2a.

Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. GHG emissions are disclosed in the Carbon Reduction section.

For additional information review the company’s CDP response questions C6.1, C6.3, and C6.5.

Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets. Equinix has a 100% renewable energy goal targeting our global operations. This equates to achieving a 100% reduction in Scope 2 market-based emissions originating from electric power over a 2015 base year (766,000 mtCO2e).
Equinix’s SBT will reduce absolute Scope 1 and 2 emissions by 50% and is driven largely by our progress against our renewable energy goal. Our SBT also addresses Scope 3 in terms of upstream emissions from FERA losses (50% reduction) and supplier emissions from the categories of Purchased Goods and Services and Capital Goods.
We also set a 2030 global climate-neutral goal for Scope 1 and 2.
For additional information review the company’s CDP response questions C4.1, C4.1a, C4.1b, C4.2, and C4.2a.

Cybersecurity and Data Privacy

Alignment with evolving regional data privacy and security requirements.