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Daily Update — Decemeber 05, 2025

Physical Climate Risks; Impacts of Rapid Data Center Growth; and Outlook on Emerging Markets

Today is Friday, December 5, 2025, and here's your curated selection of Essential Intelligence on global markets from S&P Global. Subscribe to be notified of each new Daily Update.

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Energy Transition & Sustainability

Physical Climate Risks: What Can We Expect As The Need To Adapt And Build Resilience Rises?

 

Extreme weather events and persistent climate risks are increasing. In 2024, global economic losses from natural disasters reached $320 billion, surpassing the inflation-adjusted averages of the past 10 years and 30 years, according to reinsurer Munich Re. The UN projects that if greenhouse gas emissions are not reduced, there could be 40% more natural disasters by 2030 compared with 2015 levels.

 

S&P Global Ratings research indicates that all sectors will face at least moderate direct exposure to climate hazards by 2030 and will inherit additional physical risks from their value chains. These climate-related risks could negatively affect credit quality, as disruptions from extreme weather may weaken cash flows, increase capital expenditure needs and impair issuers' ability to service their debt. Investments in adaptation and resilience may help mitigate these risks.

 

The potential investment opportunity in adaptation solutions is estimated to reach $9 trillion across private debt and equity by 2050, with $3 trillion attributed to growth driven by a warming climate, according to Singapore's sovereign wealth fund GIC. Companies that provide adaptation products and solutions stand to benefit from this market opportunity.

Artificial Intelligence

Rapid data center growth faces sustainability challenges: Increasing emissions and water stress

 

Global power demand for data centers is expected to nearly double between 2024 and 2030. In response, data center companies are leading efforts to procure clean energy to meet their power requirements and climate goals. However, this rapid growth presents challenges, particularly in the US, where S&P Global expects emissions reductions in the power grid to slow. Emissions could ultimately increase compared with earlier forecasts due to the swift expansion of data centers.

 

Additionally, S&P Global estimates that 43% of data centers worldwide will face high water stress in the 2020s. While some adaptation and resilience measures are being integrated into the designs of data centers in water-stressed areas, water management programs are not widely implemented across the industry in North America and Europe, according to 2024 S&P Global Corporate Sustainability Assessment data.

 

Data center operators must carefully balance high growth expectations and power demand with site-specific solutions. Reputational risks may increase if stakeholders perceive negative spillover effects from data center operations.

Economy

Emerging Markets: Will The Positive Momentum Continue?

 

S&P Global Ratings expects the US Federal Reserve to implement monetary easing in 2026. Unless a significant market correction occurs in the US, this policy, along with a weaker dollar, should maintain an accommodative financing environment for emerging markets (EMs).

 

EMs are projected to contribute approximately two-thirds of global GDP growth in 2026, with a growth rate of 4.4% compared with 1.5% for advanced economies. Robust domestic demand is expected to drive much of this growth, supported by stable inflation and proactive government policies. However, performance across EMs and sectors will vary.

 

While refinancing risks for rated EM corporates appear manageable, a sharp market correction in the US could lead to a more conservative approach. Shifting trade patterns and geopolitical fragmentation may introduce further economic headwinds. Additionally, youth-led protests and election-related unrest could amplify political instability, disrupt policy predictability and erode investor confidence.

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