The United Nations stated earlier this year that the world has entered water bankruptcy. Global Insight considers what can be done to prevent further losses, including those threatened by data centres and artificial intelligence.

The summer of 2026 was marked by record-breaking high temperatures, severe droughts and devastating wildfires. Many countries restricted water use and dry conditions damaged food production. At the start of the year, even before that extreme heat had hit, the UN declared that the world had moved beyond water crisis into global water bankruptcy. This alarming new reality – marked by irreversible losses – is the outcome of long-term unsustainable water use, land and soil degradation, deforestation, pollution and human-induced climate change.

‘Bankruptcy management requires honesty, courage, and political will,’ UN official Kaveh Madani said upon the launch of his report, Global Water Bankruptcy: Living Beyond Our Hydrological Means in the Post-Crisis Era. ‘We cannot rebuild vanished glaciers or reinflate acutely compacted aquifers. But we can prevent further loss of our remaining natural capital, and redesign institutions to live within new hydrological limits.’

Yet the desire of states to grow their economies and rapidly accelerate technological development threatens to deplete precious water resources even further and undermine the rights of individuals and communities. Madani, who is Director of the United Nations University Institute for Water, Environment and Health, calls for a reset of the global water agenda, which includes transparency on the limits and losses of water, robust governance institutions to protect the natural environment and a shift away from dependence on water-intensive production for economic growth.

Zanchim says that the main issue related to water in Brazil is the lack of proper sewage collection and treatment. This leads to contaminated drinking water and pollutes the rivers, limiting the amount of safe water available. According to UN statistics from 2024, only 55 per cent of the population uses a safely managed sanitation service. The Brazilian government changed the law in 2020 to allow private investment in water utilities to raise standards. Attracting long-term investors is a challenge, however, because of gaps in local oversight and issues with corruption. Another obstacle is convincing the public that paying for sanitation services is worthwhile.

Despite this, some big sanitation companies in Brazil have become creative in attracting private investment. In February, Sabesp, the country’s largest sanitation company based in São Paulo, raised a record $1.5bn in international investment through blue bonds to finance its target of reaching universal sanitation in the state by 2029. For blue bonds to be issued, companies must prove the funds will be used for specific water-related projects and contribute directly to the UN Sustainable Development Goals.

Zanchim adds that while the blue bond investment is a positive step forward for raising governance standards in Brazil, the smaller municipalities will not be able to access the same financing plan. ‘Urbanisation will lead to cities becoming more connected and the possibility of a consortium but we’re going to need ten more years to structure that,’ he says.

In the UK, water governance has proven to be a major challenge to ensure the sustainable use of water and accountability for water pollution in lakes and rivers. The government has proposed legislation to overhaul the beleaguered water sector, which has long been characterised by pollution scandals and underperformance of private companies.

The Clean Water Bill was first announced in the King’s speech in May. It aims to restore public trust and raise standards by introducing a new regulatory framework. The current regulator – Ofwat – will be abolished and a ‘super regulator’ created by merging its functions with the water oversight responsibilities of other public bodies.

Emma Dearnaley, Head of Legal at River Action, says the Bill is a ‘once-in-a-generation opportunity to address the structural causes of failure in the water sector.’ As a result of chronic underinvestment and high levels of sewage pollution, nearly all UK rivers are polluted. Only 14 per cent have a ‘good’ ecological status. ‘After decades of underinvestment, weak accountability and environmental decline, the legislation should establish a long-term legal framework that restores public confidence and ensures the sector operates in the public interest going forward,’ she says.

Dearnaley suggests the government should use its special administrative powers under the Water Industry Act 1991. This would allow it to bring failing water companies under public control and explore alternative models of ownership, ensuring they operate for the public benefit and protect the environment above shareholder profit.

The UK government has already taken action to address some of the issues by securing £104bn in private investment for water infrastructure projects and introducing the Water (Special Measures) Act in 2025. This grants regulators tougher criminal enforcement powers and the ability to block bonuses for executives who fail to meet environmental and performance standards.

In addition to concerns over the poor performance of water companies and widespread pollution, the Environment Agency has warned that the UK faces a five-billion-litre water shortage by 2055 because of pressures caused by climate change, emerging technologies and an aging population.

The French government recently passed the Emergency Law for Agricultural Protection and Sovereignty, following intense national debate. It aims to double agricultural water storage capacity by 2035 and clears the way for the reauthorisation of certain pesticides considered to be harmful to the environment and to increase the risk of water pollution. Marie-Benedicte Desvallon is an officer of the IBA Water Law Committee and partner at Wat & Law in Paris. She says that in addition to the conflict over water use between consumers and the agricultural sector, France’s huge investments in artificial intelligence and the building of data centres will lead to increased disputes over the allocation of water resources. ‘The water war has begun in France,’ she says.

Thirsty data centres

The rapid expansion of data centres to support the growth of technology companies and AI is a key battleground for debates on global water security. The intensive resource demands of digital infrastructure are making the situation worse, with predicted water consumption expected to equal the basic annual domestic water needs of all 1.3 billion people in Sub-Saharan Africa by 2030.

Damilola Olawuyi, Independent Expert for the UN Working Group on Business and Human Rights, says in many countries water-related legislation is failing to keep pace with technological developments and their adverse impacts on the water rights of individuals and local communities. ‘There is an urgent need for all countries to mainstream a human rights-based approach to water management and regulation to ensure that projects or infrastructure that may adversely impact water rights, as well as the right to a clean, healthy and sustainable environment, are not approved to proceed,’ he says.

The construction of hyperscale data centres – the physical infrastructure predominantly used to support AI technology – is highly controversial. The developments have seen backlash from local communities, particularly in areas already experiencing high water stress. Data centres require water for cooling servers and for generating large amounts of electricity.

The response from governments has varied, with some introducing stricter regulations than others. In Australia, the government has committed to introducing new rules on data centre development, including requiring developers to build renewable energy plants and minimise water use. Several countries and regional jurisdictions have implemented moratoriums on data centre construction to assess the future impact on local power grids, water supplies and land use. Other countries – including the US at a federal level and the UK – have stopped short of imposing a specific regulatory framework for the environmental impact of data centre development.

A government spokesperson told Global Insight that UK data centres account for only 0.2 per cent of non-household potable water usage and that a pause on development would be a ‘disaster’ for jobs and national security. ‘This does not mean a blank cheque for Big Tech or that every data centre should be approved. Developers should prioritise clean power, use water responsibly, create British jobs and supply chains, and provide investment to the communities in which they are built,’ the government spokesperson says.

It’s worth noting that the government’s figure for water usage is taken from a 2026 report based on data gathered by MOSL, the market operator for the non-household water retail market in England. In the report, delivered by the Water Research Centre, the consultancy noted that systematic biases in the sample used for the data may exist. Hegarty also emphasises that the figure does not take account of future development of much bigger data centres. ‘Many of the data centres for which planning permission is being applied for at the moment are much, much bigger and more resource-intensive than existing ones in the UK,’ he says. ‘If developers plan to use evaporative cooling for those much bigger and more powerful data centres, that would be likely to result in higher volumes of water being used than is currently the case.’

The UN calls for governments to integrate AI infrastructure into energy planning, water governance and land-use permitting, and require standardised environmental footprint reporting. It advocates for a global AI ecosystem built on six principles: transparency; efficiency by design; equity and environmental justice; lifecycle responsibility; global cooperation; and sustainable use.

Olawuyi says that the UN Guiding Principles on Business and Human Rights highlight the duty of states to protect the human right to water, as well as the responsibility of businesses to respect the right across their activities and value chains. ‘In addition to their massive water consumption for cooling, which affects water availability in local communities, the introduction of heavy metals, such as copper, zinc and lead, and other pollutants into water bodies from associated data centre infrastructure are significant environmental concerns that require urgent legal and regulatory response,’ he says.

In the US, the largest builder of data centres globally, local communities have raised major concerns about the alleged contamination of drinking water by nearby construction. In May, US Representative Alexandria Ocasio-Cortez, during a congressional hearing, displayed jars of brown, murky water collected from residents near the Meta data centre in Stanton Springs, Georgia, and criticised the lack of regulatory action in response. Meta told Global Insight that when concerns were raised in Stanton Springs ‘they took them seriously’ by commissioning a study that found its data centre operations and construction didn’t impact the homeowner’s well water.

Patrick Sigl is an officer of the IBA Water Law Committee and Director of Water and Natural Resources Law at the Salt River Project, a water utility based in Arizona. Despite being considered a severely water stressed region, Arizona has a booming data centre industry, putting growing demand on vital water resources, including the Colorado River. According to the UN, Google’s Mesa data centre holds a permit to use 5.5 million cubic metres of water in Arizona per year, enough to fill about 2,200 Olympic-sized swimming pools.

To combat severe water scarcity, data centre operators in the state are shifting from water intensive evaporative cooling to dry air and closed-loop liquid cooling. Sigl says that while the dry cooling technology is ostensibly water-free, this type of cooling will increase electricity consumption. ‘Clearly these facilities are going to stress every region’s water power resources,’ he says. ‘Because of the interconnectivity between water and power, you can’t move water without power, and you can’t generate power without water,’ he says.

Water extraction in the Global South

Outside the US in the Global South, some of the biggest tech companies are operating data centres that use vast amounts of water in some of the world’s driest areas. In Chile, a megadrought – exacerbated by climate change – has lasted in the country for 15 years. The effects are most severe in the central region near Santiago, where most existing and planned data centres are located.

The Chilean government is aiming to position Chile as Latin America’s next technology hub to attract investment in the country and improve the quality of life of its citizens. Data centres, however, have faced opposition over their environmental impacts. In 2024, a Chilean environmental court forced Google to abandon its water-cooling plans for a data centre in Santiago after residents brought legal challenges related to its impacts on the city’s main aquifer amid a severe drought. Google did not respond to a request from Global Insight for comment. The company reportedly said in response to the ruling that it would start a new process from scratch and ‘sustainability is at the heart of everything we do’.

Julio Reyes is an officer of the IBA Water Law Committee and legal and environmental manager at Chilean water company Aguas Nuevas. He says that the answer to the appropriate amount of water use by data centres in Chile depends on the specific region in question, with the central part of the country being the most water stressed. ‘The response should always be what is the most sustainable way to minimise the environmental effects of each plant,’ he says.

Reyes says while in general the country welcomes the societal benefits of advancements in AI, ‘the requirement of state of the art, environmentally friendly technologies is relevant and important for the people, especially in communities where these industries are very local.’

In countries throughout Africa, similar debates have arisen over the construction of data centres in areas already experiencing high levels of water stress. In Kenya, plans for a major $1bn data centre in Olkaria, near Lake Naivasha, have stalled over concerns about demand placed on already stretched water supplies.

Foxglove and other civil society organisations filed a report with the South African Human Rights Commission in August on the human rights impacts of the country’s data centre boom. The report indicates that data centres in Cape Town would consume over 4.4 billion litres of water a year – the annual use of more than 18,000 South African households. The groups call for measures including an independent assessment of the sector’s human rights, ecological and economic implications and a temporary pause on new hyperscale approvals.

Hegarty says that there is a ‘staggering information gap’ when it comes to power consumption, water consumption and the impact on housing supply of the proposed data centres in Cape Town. ‘That critical information should be there for the community to make a decision about whether it wants to consent to the development going ahead,’ he says.

Olawuyi emphasises that governments must ensure technology infrastructure development does not exacerbate human rights violations. This includes doing human rights impact assessments before the construction of data centres and providing opportunities for communities to take part in the decision-making related to their design. ‘Furthermore, such legislation should integrate a comprehensive redress system to ensure that those impacted by water rights violations have access to effective remedies,’ he adds.

As the backlash against the rapid expansion of data centres gains momentum, the international community must take the risks seriously. US President Donald Trump has defended data centre expansion, describing it as a ‘golden goose’. But while supporters may consider the potential benefits of AI to be limitless, the limits of natural resources to support major breakthroughs are very real. To a certain extent the tech industry appears to be listening and is attempting to reduce its water use by redesigning cooling systems and investing in local water replenishment projects. Microsoft has pledged to become water-positive by 2030.

But, with the projected water use of data centres exceeding the needs over a billion people before the next decade, governments cannot be so easily assured. It’s vital that the international community develops robust governance institutions to demand accountability on the commitments of companies to sustainable water use and ensure that the fourth industrial revolution respects water rights and develops within the world’s increasingly narrow hydrological limits.

Alice Johnson is the IBA Multimedia Journalist and can be contacted at alice.johnson@int-bar.org