Decarbonising data centres – FinTech Futures

One of the things I have written about previously was Meta’s proposed data centre in the Netherlands.

Many FIs are now looking to utilise external data centres to reduce emissions

It got me thinking about FIs and whether they are doing anything with their infrastructure to address net-zero targets. What I know about data centres can be written on a postage stamp. So, I put a call out, which Adrian Mountstephens and Eleni Coldrey from the data centre provider Equinix answered.

My discussions with Adrian and Eleni were fascinating, and what was evident is there has been a sudden and seismic change in the marketplace.

A year ago, the large FIs asked their data centre providers to share their sustainability credentials, mainly as a box-ticking exercise to demonstrate best practices. RFPs were a great example, with many boxes to tick and fill in but no great thought behind the boxes themselves.

But according to Adrian, there has been an enormous shift from some EU-based FIs in the last few months. Banks, payment processors and ISVs with significant investments and IT infrastructure sitting in data centres are now asking:

“How can I reduce my greenhouse gas emissions by moving workloads out of my on-prem data centre and into co-location with my data centre provider?”

A rapid step change, moving away from the box-ticking and into helping to quantify the emissions reductions achieved by modernising the IT infrastructure. New hardware and software platforms are more power-efficient and easier to cool—FIs are now looking to move their operations onto these.

Several factors are driving this, including:

Large FIs are now reporting their Scope 1 and 2 emissions and committing to reduce these. The commitments align with the EU net neutral 2050 goal. But many of these organisations have also set 2030 goals, and 2030 is just around the corner – probably just one hardware cycle refresh away, so time itself is a driver. Regulations are also coming from the EU like the EU Taxonomy, which aims to drive consistency and transparency in how FIs report their activities.

But here is the interesting bit. The sustainability teams at FIs have cottoned on to the fact that any IT workloads moved from an on-prem data centre (Scope 1 and 2) onto a co-location data centre or public cloud, e.g., AWS/Azure etc., become Scope 3. As the reporting of Scope 3 is not currently mandatory, this cuts down on the reporting requirement.

This fact means that the sustainability team is putting pressure on the CIO/CTO of the business to move out of on-prem data centres to reduce Scope 1/2. This delivers a quick way to achieve a sustainability win, a first for IT infrastructure as never has anyone considered IT a quick win for anything.

Now CIOs and CTOs are picking up sustainability targets and recognising the benefits of moving workloads to data centres and the cloud and thus into Scope 3. If you are wondering, this is not greenwashing at all, because this move simply shifts responsibility to the data centre provider as this becomes their Scope 1 and 2. And companies such as Equinix (and the cloud providers) publicly report all Scope 1 and 2 and have 2030 neutral targets. In fact, data centre providers are trying to self-regulate and align with the EU’s sustainability goals. It is worth looking at the European Data Centre Association’s climate neutral pact for more on this.

FIs are looking to understand if they modernise an application or function and move it from on-prem to a co-located data centre, whether that will help them achieve worthwhile reductions.

Often, this involves discussions around a specific data centre’s PUE (power usage effectiveness). In layman’s terms, PUE is defined as how efficiently the data centre converts the power coming through the door into power supplying the customers’ equipment. An ideal PUE is 1. So, if a facility has a PUE of 2, it indicates that the amount of power used to run the IT equipment is half the power consumed by the entire data centre facility.

Another interesting trend is the emergence of the circular economy. It is becoming increasingly crucial to FIs – how they and the data centre provider recycle hardware and when.

According to Eleni, this is a very recent phenomenon as last year she was not having these types of conversations with anyone.

Data centre providers are getting pressure from ‘green’ investors and their customers and are self-regulating. This sandwich means that companies such as Equinix have set 2030 neutral goals.

They are under pressure to build the most efficient data centres. In the case of Equinix, new facilities are designed to a 1.2 PUE. There are huge investments in facilities to modernise power and cooling infrastructure to make the buildings more efficient.

Increasingly, data centres use 100% renewable energy, which can cause problems, e.g., the previously mentioned data centre in the Netherlands. The data centre providers must be mindful of the impact of drawing renewable energy on the local infrastructure and progressive data centre operators are looking at PPAs (power purchase agreements) to actively invest back in the local grid and secure supply for the long term.

To that end, Equinix has a new data centre in Silicon Valley that uses hydrogen fuel cells for its primary power – totally off-grid.

It is incredible how fast the market is moving and how considered companies are now being around carbon reduction plans. It is also heartening to see CIOs and CTOs getting sustainability targets, a driver for real change. According to some recent research by Equinix, 65% of tech decision-makers will only work with IT partners who can meet key carbon reduction targets.

About the author

Dave Wallace is a user experience and marketing professional who has spent the last 25 years helping financial services companies design, launch and evolve digital customer experiences.

He is a passionate customer advocate and champion and a successful entrepreneur. 

Follow him on Twitter at @davejvwallace and connect with him on LinkedIn.