Australia has become a significant destination for global data centre investment, driven by demand for artificial intelligence infrastructure, available land, and renewable energy potential. Investment has grown dramatically, from over $460 million in 2023 to $6.8 billion in 2026, with 90 new facilities in the pipeline alongside 162 already operational. However, a global analysis by climate risk firm XDI, examining nearly 2,600 planned data centres worldwide, has identified climate vulnerability as a growing concern. Whilst Australia ranked 22nd for risk of physical damage, the country faces one of the steepest projected increases in risk over time. Extreme heat, flooding, bushfire, and threats to supporting infrastructure — including power and water supply — were highlighted as key challenges. XDI's Karl Mallon warned that the central question had shifted: "The question is no longer simply where the next generation of digital infrastructure gets built, but whether those assets can remain operational, insurable and economically resilient over their intended life." The Planning Institute of Australia has urged governments to conduct strategic planning before projects reach the approvals stage, with head of policy Nicole Bennetts calling for mapped locations that account for grid connectivity, climate risk, and proximity to residential areas. She suggested this could also accelerate assessment processes and provide greater certainty for investors. At the regulatory level, the federal government has set out expectations for data centre operators, including co-locating renewable energy projects and minimising water use. Most states — Queensland being the exception — agreed that data centres should fully offset their energy consumption with additional renewable generation. Energy Minister Chris Bowen stated: "If data centres want to benefit from Australia's energy grid, we think they should do their bit to strengthen it." State and federal energy ministers are due to meet to determine how compliance with federal expectations can be enforced. Data Centres Australia chief executive Belinda Dennett acknowledged the role of AI tools in informing site selection, including assessments of climate risk, and argued that planning approval processes needed to become faster, though not less rigorous, given international competition.