you could put some lattice work atmround it, but it would removeable if you need access it.however, you rarely will need to access it especially if you have a way to reset the controller occasionally or unplug it from the electricity to reset it.

I have three tank less hot water heaters and the two outside have not required more than a reset in the 8 years that I have had them.

Can you share photos of the style of your terrace?

My son built a simple modern style trellis to hide irregular brick on the side of his house. Similar to this screening fence in the photo. You could add a thin MDF board painted black to the back of the slats to block the view of the water heater. Add a climbing vine in a pot in front?