There is a well known critical flaw in current financial accounting: financial statements have failed to reflect the reality of climate transition commitments, risks, and investments, resulting in perverse, upside-down incentives that undermine the Paris Agreement goals.
This disconnect means systemic climate risks and assets are not priced into markets, leaving sectors like insurance—and by extension, digital infrastructure—exposed to hidden vulnerabilities and missed opportunities.
For data centres and digital infrastructure, this is highly relevant. These sectors are both energy-intensive and central to the digital economy, making them significant contributors to emissions and key players in the transition to a low-carbon future. And data center end-users and hyperscalers must be assumed to require supply chains and partners to legally commit to creating the most sustainable data centres, regardless of the political climate—shown by being among the largest acquirers of carbon credits, offsets and nature-based solutions.
The International Accounting Standards Board’s (IASB) 2024 interpretation of IAS37 now allows emission reduction commitments to be recognized as accounting obligations, and IAS38 enabling investments to meet these commitments recognized as incentivized assets.
This “Accounting for Reality” approach could with a simple flick of an accounting wrist materially improve financial metrics, reduce cost of capital, and unlock hidden value by turning sustainability investments into recognized assets rather than costs.
The adoption of these existing standards in financial accounting would give boards, investors and data center contracting partners better information for decision-making, enhanced transparency, and new financial incentives to accelerate decarbonization. This would not only support compliance and risk management but also position digital infrastructure as a leader in sustainable, profitable growth—directly aligning with investor, contracting partners and regulatory expectations in a rapidly evolving market.
The focus is to prove this accounting treatment and that it will give better information for better informed decisions, and unlock hidden returns.
The key question is who in digital infrastructure industry will be first to pilot and embrace this and lead in creating what should be the tipping point.
Join arch.law’s Nancy Lamb, Jane Pittaway and Andrew Watson, Co-Founder of Rethinking Capital for this not to be missed discussion. Sign up to the round table International Finance Forum 2025
If you missed the Tech Capital event but would like to learn more about the team and how we can support the ever evolving industry please do get in touch!
