Climate adaptation in cities better for business

The majority of the world’s major cities have disclosed that climate change presents a physical risk to the businesses operating in their cities. This real and current threat is driving local governments – including the City of Sydney and the City of Melbourne – to take concrete action in response, according to Protecting our Capital, a new report from CDP, formerly Carbon Disclosure Project, AECOM and the C40 Cities Climate Leadership Group (C40).

In their latest report, the Intergovernmental Panel on Climate Change (IPCC) made clear that urban climate change risks are increasing. With cities generating more than 80% of global GDP and housing more than 50% of the global population, the panel’s conclusions are undisputed: this density of people and assets increases the concentration of risk from climate change in cities.

Without action, the economic costs of climate change are significant. By 2030, as much as $4 trillion in accumulated costs is at risk from climate change around the world. A recent report by the Asian Development Bank found that in East Asia, especially, the costs of climate change could exceed 5.3% GDP. In the US alone, the recent report from Risky Business calculated that the cost of climate change for business is billions of dollars, and likely to result in up to a 5.9% reduction in economic output.

Cities have long been leading the charge to mitigate greenhouse gas emissions. Driven by the increasing risks of rising global temperatures, cities are now emerging as a leading force for climate change adaptation. The steps cities are taking to improve their resilience lead to greater protection of the physical, economic, natural and human capital that define a city’s key strengths.

The City of Melbourne, for instance, reports that heat related deaths in those aged over 65 are expected to double by 2020, rising from the current 289 deaths per annum to 580+ by 2020 and to 980+ by 2050. Urban heat island effect is a significant contributor to temperatures in the Melbourne CBD, increasing temperatures on a 30-40°C day by 0.5 – 0.8°C, and resulting in costs of approximately $300 million. Both the City of Melbourne and the City of Sydney report that they are piloting and evaluating the costs and benefits of solutions to reduce the urban heat island effect, such as how roof and pavement colours and shade trees affect urban temperatures.

This year, the number of cities that disclosed their climate change activities to CDP nearly doubled, from 110 cities in 2013 to 207 cities. Through this increased disclosure, we can see more clearly than ever before the critical role cities are already undertaking to mitigate climate change risks.

Protecting our Capital focuses on how the evolving role of cities to protect its citizens and economy lead to greater resiliency for business. It is based on analysis of CDP’s extensive database of climate change activities reported by over 200 cities and more than 4,500 companies to understand how action by city governments creates a resilient place for business.

Key findings

1. Cities recognize climate change threats to business
76% of cities report that climate change could impact business. Climate change in cities affects many business sectors, from shipping and food production to tourism and service industries.

2. Cities and businesses are aligned in their recognition of climate change risks
75% of the most severe physical risks from climate change that businesses disclose are also recognized by the relevant city. There is broad agreement between cities and business about what climate change risks the city could face.

3. City government adaptation actions contribute to business resilience
By identifying climate change risks, cities are taking action and delivering initiatives to reduce the impacts of climate change city-wide. The cities’ actions also reduce 129 of the 194 risks reported by businesses. Cities are providing information, incentives and regulations that assist businesses to be more resilient to climate change. Other actions, including investments in infrastructure and services support better resilience for businesses and the wider community.

Cities seek to provide an environment that is attractive to business and residents alike. Physical capital, such as infrastructure and public transport, as well as human capital, including education and healthcare, are two major drivers for growth – but resilience to climate change is now a growing factor for cities’ economic competitiveness. The impacts of climate change are increasing and the implications for cities and their role in reducing risks is already taking shape. In the US, for example, an insurance company filed a lawsuit against city and municipal governments for not taking enough action to reduce the impacts of climate change. The lawsuit was dropped in less than two months, but did raise awareness about the need to prepare for climate change.

Our analysis however, shows that cities are already managing the risks from climate change for their citizens and businesses. The 50 cities in which businesses report climate change risks are delivering a total of 295 adaptation actions. The data shows that these actions reduce 66% of the risks businesses also face within the city.

There are a number of ways cities can support increased community-wide resilience with benefits to both businesses and residents. These options fall within two categories:

1) Investing directly in climate resilience
Cities are delivering flood management plans, emergency response systems and targeted projects to protect the most vulnerable populations. They are also investing millions of dollars to upgrade key infrastructure such as transport to better mitigate the impacts of climate change.

2) Enabling business to adapt effectively
Cities also provide information, policies, regulations and incentives that enable businesses themselves to take action to adapt and manage their own risks. These frameworks drive greater coordination between cities and businesses to reduce the impacts of climate change city-wide.

The full CDP Global Cities Report 2014: Protecting our capital contains a number of examples of steps taken by cities that improve both the climate resilience of the highlighted company as well as the city’s population and economy as a whole. These include:
• London – which is using its planning system to improve buildings’ climate resilience
• Singapore – which is providing information and guidelines to reduce the impacts and associated costs of anticipated sea level rise
• New York – which provided US$293 million in funding after Hurricane Sandy to help small-medium sized businesses in the city to improve their climate resilience
• São Paulo – which is investing billions in transport and water infrastructure to improve its accessibility and climate resilience

Larissa Bulla is Head of Cities Program, CDP