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Rathbones has welcomed the principles behind the government’s new British Data Centre Covenant, while calling for its environmental commitments to translate into clear, measurable standards on energy and water efficiency, as growing AI infrastructure places additional demands on the UK’s grid and water resources.
In his first Autumn Budget, Chancellor John Healey put cheaper energy at the centre of the government’s energy agenda, while reaffirming its commitment to net zero by 2050. He also launched a covenant requiring data centres to invest in local communities, create jobs and protect water supplies in return for faster grid access.
Carbon Brief reported in March that 71 new UK data centres with financial commitments could require around 20 gigawatts of electricity, if built. The scale of the potential demand underlines the need for coordinated policy.
Rathbones’ Responsible Investment Centre of Excellence team says the two announcements should be treated together rather than as separate policy areas.
Matt Crossman, Stewardship Director, Rathbones, said: “We welcome the Chancellor’s stance that putting cheaper energy first does not have to mean putting net zero second. The real test is whether government can accelerate the infrastructure that delivers both: more clean generation, faster grid connections, increasing storage capacity and a more flexible energy system.
“For investors like Rathbones, affordability, energy security and decarbonisation are increasingly the same infrastructure challenge – and what’s needed is better-connected policy. Energy security, grid investment, industrial strategy and sectoral decarbonisation need to reinforce one another.”
Crossman said the covenant would be an early test of that joined-up approach. He added: “AI infrastructure brings enormous economic opportunity, but its expansion can also create significant demands on electricity networks and water resources. Our engagement with technology companies through an investor-led initiative has shown that water availability and quality are increasingly a material business issue, particularly where data centres operate in water-stressed locations where additional demand may place critical pressure on local resources.
“The principle behind the covenant is sensible, and its tests on environmental performance, community benefit and energy-system costs are welcome. The important question now is how those principles translate into clear, measurable standards, particularly on energy and water efficiency, and how consistently they are applied to projects receiving accelerated support. The UK needs to keep pace with the EU, which is already developing standardised expectations on minimum performance and data-centre-level benchmarking are quickly becoming mainstream on many of these issues.”
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