By Saeed Azhar and Tatiana Bautzer
NEW YORK, Aug 10 (Reuters) – The race to finance the U.S. data center boom is forcing banks and asset managers to confront an added risk: political and community opposition.
A spate of projects has hit roadblocks or faces opposition, creating another level of due diligence for banks and financiers assessing opportunities. Senior bankers told Reuters they are scrutinizing community concerns when they assess project loans and are leaning toward projects in states that are more welcoming toward data centers. Still, they remain keen to invest in or finance the red-hot sector.
“I will primarily look for two things. One is the readiness of the project … the second aspect I look for is the credit quality of the project,” said Karen Fang, global head of infrastructure & sustainable finance at Bank of America. “Readiness means all the permitting and approvals that are required, and the community support from the people who are going to live around it.”
Governments, regulators and cities worldwide are increasingly moving to freeze, restrict or ban data center construction.
Data centers, which are used for cloud storage and artificial intelligence compute, have caused concern nationwide from people living nearby, with complaints about their noise, appearance and worries about higher power bills and heavy water use.
Wall Street banks, including JPMorgan, Morgan Stanley and Bank of America, advise on financing such projects.
Banks conduct extensive due diligence before funding AI infrastructure projects, including technical, environmental, zoning, appraisal and insurance reviews.
Given the intense opposition, lenders worry about wasting time on projects that may not proceed or face delays, causing them to scrutinize proposals more carefully. Community concerns are part of credit risk assessments for data centers, one bank source said.
“The amount of work that goes into putting a bank loan in place for one of these projects is significant,” said Kevin Curtin, head of AI infrastructure investment banking at JPMorgan.
“Putting the credit agreement in place is only the beginning. Throughout construction, builders must continually demonstrate that the project remains in compliance with the financial covenants and monitoring requirements agreed with lenders before each drawdown.”
Morgan Stanley Chief Financial Officer Sharon Yeshaya said the firm is “very cognizant” of the risks. “This is a capital-heavy, capital-dependent industry, and we are here to help clients raise, syndicate and underwrite that capital needs, and to find offsets for the risks,” she said.
A source at a private capital firm said lenders consider community sentiment when assessing a project’s risks, and approvals and permits remain fundamental before financing can move forward.
PROJECT RISKS
In the first quarter of 2026, at least 75 projects worth about $130 billion faced local opposition, according to research firm Data Center Watch. Big tech companies will spend more than $6 trillion on AI through 2030 — many times the capital deployed to internet infrastructure during the dotcom era, Goldman Sachs forecasts.
Banks typically begin talks on funding a project at least a year before construction starts and have recurring conversations with developers as it progresses, another banking source said, meaning that problems with projects can waste time and energy doing additional due diligence.
Banks are involved in several projects that face community action.
For example, banks including JPMorgan and Morgan Stanley managed the $12.3 billion bond sale for BlackRock, a partner with Meta on a data center project in El Paso, Texas, according to a term sheet seen by Reuters. Some residents oppose the project. JPMorgan, Morgan Stanley and BlackRock declined to comment while Meta said the company is actively engaging with residents, city leaders, and local organizations.
Data center operator QTS, owned by private equity firm Blackstone, did not approach lenders for bank financing for its now-terminated Prince William Digital Gateway data center project in Virginia, a source familiar with the matter said. The project had faced strong local opposition. QTS declined to comment.
Firms including Morgan Stanley and KKR Capital Markets were among the lead arrangers for a $9.7 billion warehouse credit facility for Dallas-based data center operator CyrusOne, which is facing opposition from residents to its $500 million center in Sangamon County, Illinois, according to NPR.
CyrusOne said it has financing for the project, without providing details. Safeguards are in place for the financiers, as part of the credit facility can be used for new construction only if all permits and leases are in place, one of the sources said. Morgan Stanley and KKR declined to comment.
Bank of America, one of the biggest U.S. lenders to AI-related companies, is also a structuring agent and one of the financial advisors to Related Digital, the developer of a $16 billion data center campus in Saline Township, Michigan, purpose-built for Oracle. The project has faced opposition from residents but is moving ahead. BofA declined to comment.
ACCOUNTING FOR THE RISK
A senior banker at a foreign lender said investors are getting comfortable pricing potential cancellation risks because demand for compute is expected to remain high.
To try and allay concerns, data center operators are trying to pre-empt issues as they propose projects by considering steps such as building power generation on site.
“Many companies building new AI data centers are trying to address these concerns,” said Rajat Rana of Quinn Emanuel Urquhart & Sullivan, LLP.
(Reporting by Saeed Azhar and Tatiana Bautzer; additional reporting by Isla Binnie in New York and Jaspreet Singh in Bengaluru; editing by Megan Davies and Rod Nickel)
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