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 physical risk assessments we conduct for our IBX®s consider regional environmental components such as wildfires, flooding, wind and drought, as well as mitigation of these types of events. 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 flood exposure.
In 2022, we conducted a TCFD-aligned climate risk scenario analysis with an external consultant to evaluate our physical and transitional risks. Through a series of workshops engaging Equinix subject matter experts across multiple functional areas, we prioritized climate risks and opportunities relevant to our business. The analysis modeled physical risks across multiple climate change scenarios and time horizons to evaluate how these risks may evolve and the onset of the changes in risk. We use the results to understand potential impacts of climate change and how to manage associated business risks, such as increasing energy and water costs during drought and increased business interruptions from flooding.
Equinix supports 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.
|Describe the Board’s oversight of climate-related risks and opportunities.||
Nominating and Governance Committee
Sustainability Executive Steering Committee
Talent, Culture and Compensation Committee
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.||
Risks, including those related to climate change, are managed at multiple levels throughout the organization and across cross-functionally engaged teams. Equinix recognizes management of climate change must be cross-functional, and given the nature of Equinix’s business building 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.
The Enterprise Risk Management (ERM) program at Equinix is designed to drive the identification, assessment, management, monitoring and reporting of key business risks, including those associated with the environment, society and governance. Our ERM process incorporates guidelines and best practices from the ISO 31000 standard (Risk Management – Principles and Guidelines) and the COSO standard (Enterprise Risk Management – Integrating with Strategy and Performance). As we grow, we aim to continually look for ways to enhance our ERM process and incorporate risks associated with the diverse regions in which we operate.
Equinix’s risk reporting structure enables our internal teams to monitor the status of key risks and the effectiveness of our mitigation efforts against these risks. Our Risk Management Practices are managed by our VP, Global Risk and Security with support from the VP, Business Assurance Services. Key risks are communicated to the Board, and the Nominating and Governance Committee receives quarterly updates on key risk topics.
Equinix evaluates key risks and controls by using a standard risk assessment template. Key risk topics may include business continuity and disaster recovery planning, human capital challenges, supply chain, cybersecurity, natural disasters (including drought, extreme precipitation and storm surge) and regulatory compliance, as appropriate.
We work diligently to discuss key risks with respective owners who embed the risk conversation throughout the organization. In 2022, we began a multi-phase process to refresh and conduct a deeper analysis on Equinix’s risk list. Phase 1, which included interviews with over thirty senior leaders and Board representatives, highlighted a shift and added risks such as environmental, social and governance to our top risk list.
Equinix’s Sustainability Program Office (SPO) is led by the Senior Vice President of Corporate Finance and Sustainability. The Program Office has a team of seven full-time equivalents (a vice president, three senior managers, a manager, a senior analyst, and an analyst) who are responsible for the day-to-day oversight of Equinix’s sustainability strategy, including how we are evolving our climate-related strategy. The SPO provides thought leadership, subject-matter knowledge, and program management to ensure Equinix has the people, programs and systems in place to evolve its climate-related risk management across a range of material topics. The SPO collaborates across a range of functional areas related to material topics such as design and construction, operations, renewable energy and energy procurement, energy efficiency, and global procurement. The SPO reports directly to the CFO.
The Sustainability Program Office engages with the CEO through the Sustainability Executive Steering Committee, which meets quarterly. Equinix’s CEO is the highest-ranking individual in the company and a member of this Committee. As a member of the Board, the CEO is also a key liaison between the company and the other Board members. It is essential that sustainability be built into his strategy and responsibilities. The CEO ultimately reports to the Executive Chairman and the Board who ultimately have the remit to manage threats and risks, including climate-related issues.
Equinix’s CFO, who reports to the CEO, is also a member of the Sustainability Executive Steering Committee. Equinix’s CFO has climate-related responsibilities because the position manages financial and non-financial reporting as well as oversees Equinix’s global finances and budget. The CFO’s oversight of the annual budget has a direct impact on the implementation of climate-related projects. Equinix’s CFO has been working to increase the level of transparency around climate-related risks and opportunities, including supporting disclosures beyond our annual sustainability report such as TCFD.
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 company has identified over the short, medium and long term.||
To prioritize relevant climate risks for Equinix, a qualitative climate screening was conducted in 2022 to identify, assess, and quantify Equinix’s climate-related transition and physical risks, as well as corresponding opportunities. Operational leaders across key functional business areas were engaged to establish a detailed understanding of how Equinix currently addresses climate risks to successfully execute business objectives.
The physical and transition risks that were screened to align with TCFD’s identified risk categories and the following risks below (Table 1) were identified by Equinix stakeholders as relevant. The susceptibility of Equinix to the risks in terms of preparedness, agility and adaptability was assessed across short- (before 2030), medium- (2030-2050) and long-term (beyond 2050) horizons:
Table 1. TCFD Physical and Transition Risk Categories Assessed
Opportunities considered in these workshops are included in Table 2.
Table 2. Opportunities Assessed by Equinix Stakeholders
Risks were prioritized based on the scope of their impact and which risks are within Equinix’s direct management control (first-order risks).
Scenario analysis modeling was completed against the Representative Concentration Pathways (“RCP”) Low 4.5 (2°C), High 4.5 (2-4°C), and 8.5 (4°C). These RCPs were used to evaluate the various climatic impacts in 2030 and 2050 “future world” scenarios, initially focusing on the highest priority physical risks. In the analysis, Equinix modeled for the likelihood, through climate model alignment, and financial implications of these risks in each scenario and time horizon. The analysis assesses the scope of possible future impact of these risks and facilitates Equinix’s understanding on how future investment can enhance its operational resilience.
Increased frequency and severity of drought was measured by analyzing changes in observed precipitation during a specified time interval against a broader precipitation probability distribution available from the Standardized Precipitation Index (SPI). Changes in drought could lead to increased operational costs and operational limits on key resources such as power and water. Therefore, business implications tied to drought were based on Equinix’s 2021 energy and water consumption, and assumptions were made, backed by existing case studies and peer-reviewed external resources, on how energy costs and water costs may increase under future drought scenarios.
Increased frequency and severity of flooding was measured through analyzing for changes in extreme precipitation events and for coastal locations, changes in storm surge due to sea level rise. Flooding at vulnerable sites could put critical outdoor systems at risk and pose a reputational risk if flooding were to cause more frequent downtime. To understand the implications of future flood risk under various scenarios, the current flood zone exposure of our portfolio was used. Generally, the analysis demonstrated that if a site is already exposed to flooding (via a flood zone or coastal location), climate change could further exacerbate this risk and could result in increased property damage and business interruption.
Through this analysis, it was found that drought and flooding risk may increase across some of Equinix’s portfolio in every scenario and time horizon. It confirmed that investments in water and energy efficiency could be of strategic advantage in building our operational resilience, particularly in those sites that are vulnerable to both risks.
Due to the number, variety and robust nature of scenarios available, NGFS scenarios were leveraged for our analysis. Moreover, the NGFS scenarios were developed by central financial institutions from eight major economies and build on IPCC assessments, socioeconomic assumptions and three different climate integrated assessment models. Through a shadow emissions price, the scenarios provide a proxy for how potential shifts in government policy intensity, changes in technology and shifts in consumer preferences could impact organizations.
For additional information, review the company’s CDP response questions C2.1a, C2.2a, C2.3a, C2.4a.
|Describe the impact of climate-related risks and opportunities on the company’s business, strategy and financial planning.||
Businesses & Strategy
With the aim to mitigate the impact of energy costs, Equinix changed its operational strategy to increase its focus on renewable energy procurement and strategically reach its long-term 100% renewable energy target across its global operations. Equinix primarily focused on regions with existing carbon pricing schemes, including European countries such as France. In 2022, we purchased 7,430 GWh of renewable energy globally to cover 96% of our operational consumption of electricity. By procuring 100% renewable energy, Equinix was able to realize significant cost savings through avoidance of energy taxes. These savings helped contribute toward the expansion of our energy-efficiency program across operations.
Products & Services
Equinix has set a near-term science-based target (SBT) that includes a supply chain component: We will engage suppliers representing 66% of our Scope 3 emissions, in the categories of Purchased Goods and Services and Capital Goods, to set their SBTs by 2025. Our supplier capabilities engagement program is designed to transform how we select and collaborate with our suppliers by incorporating climate performance into the business award outcomes and providing incentives and training to build supplier capabilities. The information we collect and relationships we build provide greater insight into numerous aspects of our suppliers’ ambition and performance, including ESG information and environmental KPIs, such as carbon emissions.
To respond to fluctuating customer demand and escalating energy costs, we have developed a SaaS platform called IBX SmartView® that monitors electrical and mechanical infrastructure within our data centers and utilizes machine learning to help us keep our equipment operating at optimal levels. This artificial intelligence (AI) approach enables machines to independently learn, test and apply knowledge to enhance data center optimization with minimum human input. We also recently (January 2022) announced our Co-Innovation Facility (CIF) at our campus in Ashburn, Virginia. Sustainable innovations, including liquid cooling, high-density cooling, intelligent power management and on-site prime power generation, are being explored in the CIF in partnership with leading data center technology innovators.
Acquisition and Divestment
Access to Capital
Asset-Level Business Strategy and Financial Planning
For additional information, review the company’s CDP response questions C2.3a, C3.2a, C3.3, C3.4.
|Describe the resilience of the company’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.||
Through our approach to analyzing climate risk, Equinix aims to bolster our resilience in the face of future climate uncertainty. The climate risk assessment, completed cross-functionally with our stakeholders, provided the qualitative data necessary to understand Equinix’s position in the climate risk landscape. By conducting scenario analyses, we gathered the quantitative information necessary to understand the risk exposure of our locations and assess the adaptive capacity of at-risk locations to specific identified physical climate risks.
Our drought and extreme precipitation analyses examined the median (50th percentile) and upper extreme (95th percentiles) of 30 downscaled LOCA models (from the 1/16th degree LOCA climate data set) across the three different future world scenarios (RCP Low 4.5, RCP High 4.5 and RCP 8.5), as the models included address a range of scenarios spanning several possible futures. Our coastal flooding analysis looks at the median (50th percentile) and upper extreme (95th percentiles) of NASA climate data across the same future scenarios. We analyzed multiple scenarios to explore how different assumptions about critical driving forces can yield very different outcomes and thus allow us to better understand and assess the range of potential risks, opportunities and uncertainties. Looking across three possible future scenarios enhances our resilience by providing an overview of conditions Equinix could be susceptible to from a lower warming scenario (RCP Low 4.5) to a higher warming scenario (RCP 8.5). To understand the likelihood of these risks impacting our locations, we also analyzed the climate model alignment in each RCP scenario. A higher degree of alignment was interpreted as a higher degree of likelihood that the risk will occur to the level and time horizon defined. The uncertainty accounted for in this analysis allows for Equinix to test the agility and resilience of its strategy in the face of physical climate change and demonstrate the strategic importance of designing data centers that are able to efficiently operate within this changing environment. Insights from these analyses allow us to identify key opportunities to weave climate-related considerations into our long-term strategy.
The usage of the Network for Greening the Financial System (NGFS) carbon pricing scenarios in our transition risk analysis will build a robust understanding of the effects of our strategy, as these scenarios use three different integrated assessment models (GCAM 5.3, MESSAGEix-GLOBIOM, and REMIND-MAgPIE 4.2) to better capture the variability of future policies and key drivers. NGFS pricing is driven by the Global Change Analysis Model (“GCAM”), an integrated assessment tool, which represents the behavior and complex interactions between energy systems, water, agriculture and land use, economy, and climate.
For additional information, review the company’s CDP response questions C3.2a.
|Describe the company’s processes for identifying and assessing climate-related risks.||
Climate risk assessment, development and action begins with our dedicated subject matter experts on our sustainability and risk teams, identifying and evaluating potential impacts of climate change along with key internal business stakeholders, as well as our third-party consultants.
In 2022, we executed a climate risk assessment process—inclusive screening of potentially relevant climate-related risks based upon their likelihood, significance and scope of impact across the business in the near, medium and long term. The scope of this process is global and includes both organization-wide impacts as well as asset-level impacts. Key functional groups with responsibilities across our value chain were engaged to understand how climate risk relates to their functions and can be used to identify relevant risks. Those groups then rated the impact and preparedness of Equinix as low, medium or high for each identified relevant climate risk. The low, medium and high thresholds were calibrated based on strategic impact. The metrics used to rank impact and preparedness align with the metrics used in Equinix’s Enterprise Risk Management (ERM) program and thus serve as the basis for determining which risks require additional mitigation. Following the rating process, the likelihood of physical risks was assessed via scenario analysis, as described earlier, due to the temporal uncertainty of physical climate risks.
For additional information, review the company’s CDP response questions C2.1b, C2.2, and C2.2a.
|Describe the company’s processes for managing climate-related risks.||
Climate-related risks are prioritized via our climate screening and scenario analyses. Materiality determinations are made after modeling via scenario analysis and understanding the financial and strategic implications of priority risks.
Equinix’s Enterprise Risk Management (ERM) and Business Continuity Program (BCP) teams are responsible for identifying, prioritizing, and evaluating risks and consequences, and responding to minimize the impact of climate-related threats and risks. Strategic, financial, operational and regulatory risks are assessed at the Enterprise level through the ERM process. The scope of the integrated risk identification focuses on four key areas—strategic, financial, regulatory and operational risks—and pertain to direct operations, upstream impacts and downstream impacts.
To identify risks at the corporate level, the ERM team conducts periodic surveys and interviews with key management and leadership across the Company, including risks ranging from cybersecurity to IBX outages, competition, 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 and droughts). The ERM team consolidates this information and creates a risk heat map that is used to assess and prioritize the top 10 risks, after which the results are shared across the executive staff and periodic updates are made at Nominating and Governance Committee meetings. In 2022, the ERM team is taking a two-phased approach to updating the key risk list. Interviews with Executive Staff and the Board will create an initial risk list that will be discussed at the full Board. That list will be utilized to perform a survey of leadership, and the data collected from the two processes will be used to create an updated risk list. The ERM team, in collaboration with the CEO and Nominating and Governance Committee, selects the top five to ten risks, on which a deep dive assessment is then performed. The risk assessment process identifies the risk drivers, mitigation efforts, methods, gaps, and action plans and results in a risk profile. An Executive Staff Risk Owner is designated as responsible for owning and managing the risk. The Executive and/or their designee are assigned to actively manage the risk and the associated risk profile and participate in the reporting to the Talent, Culture & Compensation, Audit and/or Nominating and Governance Committees of the BOD. The risk profile is updated periodically and includes the following elements: owner, designee, risk definition, risk score, velocity, mitigation capability, drivers, controls, safeguards and mitigation measures. Additionally, risk appetite for each risk and key risk indicators (KRIs) are also defined. We completed a climate risk assessment process—inclusive screening of potentially relevant climate-related risks based upon their likelihood, significance and scope of impact across the business in the near, medium and long term. The scope of this process was global and included both organization-wide impacts as well as asset-level impacts.
To identify and assess risks at the asset (data center) level, the process begins during site selection, when natural hazard exposures are identified by the Risk Management function and considered as part of the business case for the site. This information is provided to the Real Estate team as a part of the decision criteria to select a site and then to the Design & Construction team to ensure awareness of issues unique to a particular location. 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. Risks are evaluated and scored for impact, likelihood and severity based on their potential human (i.e., death and injury), property (i.e., loss and damage), and business (i.e., loss of market share, business interruption) impact should an incident occur. Physical risks like hurricanes and floods are included in the assessment. The risk assessment is updated annually and includes risks consistent with the Global Risks Report by the World Economic Forum. This information is presented to the Business Continuity Executive Steering Committee, which includes the Global Head of Operations as well as executives and subject matter experts from within Equinix who meet at least quarterly.
For additional information, review the company’s CDP response questions C2.1b, C2.2, C2.2a, C3.3, C3.4.
|Describe how processes for identifying, assessing and managing climate-related risks are integrated into the company’s overall risk management.||
The metrics used to assess relevant climate risks in our climate screening methodology align with metrics used in our Enterprise Risk Management process.
For additional information, review the company’s CDP response questions C2.1b, C2.2, C2.2a.
|Metrics and Targets:|
|Disclose the metrics used by the company to assess climate-related risks and opportunities in line with its strategy and risk management process.||
Equinix uses different metrics to understand our exposure to physical and transition climate-related risks and opportunities. Our climate risk assessment strategy has identified key additional metrics to track to understand our future exposure to climate-related risks. Transition risk metrics include the cost of renewable electricity, energy efficiency, energy consumption and distribution, supplier engagement progress, and our greenhouse gas (GHG) emissions. Physical risk metrics focus on our water consumption, electricity consumption from the grid, increase in sustainable sourcing, and our global physical infrastructure resiliency.
For additional information, review the company’s CDP response questions C2.1b, C2.2, C4.1, C4.1a, C4.2, C4.2a.
|Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.||
2022 Emissions in line with the Greenhouse Gas Protocol are:
Equinix has been measuring and reporting on GHG emissions in line with the Greenhouse Gas Protocol since 2015. This measurement and reporting inherently reduces Equinix’s risk exposure to increasing expectations from stakeholders (e.g., employees, customers and investors) for emissions disclosure and regulation of corporate climate disclosure. Risks associated to Equinix’s footprint in the transition to a low-carbon economy include the risk of policies which drive carbon pricing and regulation of corporate climate reductions.
For additional information, review the company’s CDP response questions C6.1, C6.3, C6.5.
|Describe the targets used by the company to manage climate-related risks and opportunities and performance against targets.||
Equinix has a target to become climate neutral globally across Scope 1 and 2 emissions and achieve 100% renewable energy coverage by 2030.
Equinix is aligned to an approved near-term science-based target to:
For additional information, review the company’s CDP response questions C4.1, C4.1a, C4.2, C4.2a.