EdgeConneX Secures $1.7B In Sustainable Financing To Expand Data Center Portfolio

Data center developer EdgeConneX has secured $1.7B in sustainability-linked debt to help finance its growth, the latest in a series of data center companies to pursue this strategy.

A growing list of data center providers has issued sustainability-linked securities or taken on debt tied to ESG goals over the last several months to help fund the rapid expansion needed to keep up with unprecedented demand.

EdgeConnex, in an announcement Tuesday, said the series of debt issuances will lower the company’s cost of capital to allow expansion in new and existing markets and will improve the company’s investment-grade credit profile. 

“This new financing affords the company high flexibility to not only invest in our core infrastructure in a sustainability-minded way but also to support our high growth customers that need green, sustainability-linked solutions hyper-locally and at hyperscale globally," EdgeConnex Chief Financial Officer Joe Harar said in a statement. 

The $1.7B raised by EdgeConneX consists of different kinds of debt. In addition to asset-backed securities, which are essentially bonds linked to the performance of specific properties, it also includes so-called ESG term loans. According to Data Center Dynamics, funds operated by Ares Management Corp.’s infrastructure lending division committed to extending around $1B in sustainability-linked debt that will be used for refinancing and funding EdgeConnex’s development pipeline.

As with most sustainability-linked debt agreements, the interest rate on these loans varies depending on EdgeConneX’s ability to meet predetermined sustainability goals. While these exact metrics have not been disclosed, EdgeConneX has stated the company intends to be carbon, water and waste neutral by 2030, with a data center platform that operates on 100% renewable energy.

EdgeConneX’s deal reflects a growing financing trend across the data center space: the issuance of securities and debt financing linked to a company’s ability to meet environmental goals.

Data center operators who need development cash fast are increasingly issuing securities when revenue can’t keep up with growth. This kind of debt offering is a relatively new phenomenon for the data center industry, but the past year has seen a wave of similar securities issuances from companies like Equinix, Flexential and Aligned Data Centers. 

Over the past three months, Equinix has issued $1.2B in “green bonds” to fund sustainable development projects, while Aligned Data Centers took on close to $1B in sustainability-linked loans. Earlier in the year, Aligned issued $1.3B in securities, the bulk of which were tied to sustainability targets. Flexential's $2.1B offering in December included $1.6B requiring that facilities built with the funds meet certain power and water usage benchmarks that the company is collectively calling its Green Finance Framework. 

A handful of other data center or telecom companies — including data center giants Digital Realty and NTT — have also raised funds o converted debt to structures tied to sustainability and ESG goals.