Climate actions and economic significance of citiesMost of the world’s major cities have admitted that climate change presents a physical risk to the businesses operating in their jurisdictions. This "real and current threat" is driving local governments to take concrete action in response, concludes a new report from CDP, formerly Carbon Disclosure Project, AECOM and C40 Cities Climate Leadership Group (C40).

Cities generate over 80% of global GDP, house over half the global population and consume two thirds of the world’s energy. As such – and often additionally due to their locations – they are on the frontline of climate change. $4tn of assets are estimated to be threatened within 16 years.

The climate change strategies and actions of 207 cities including Johannesburg, London, New York, São Paulo, Sydney and Tokyo, have been disclosed to CDP. Three out of four of them say that extreme weather and other effects of climate change threaten the stability of their local economies. Damage to property and capital assets, transport and infrastructure destruction and citizen wellbeing are among the most commonly reported risks.

The report, "Protecting our Capital", claims that 108 cities reported their carbon emissions inventories this year. Amongst them, Denver (USA), London (UK), Madrid (Spain), Durban (South Africa) and Taipei (Taiwan) reduced their emissions by a total of 13.1 million tons CO2 equivalent since 2009, a drop of 12%.

102 cities have climate adaptation plans and many are also adapting to increase their resilience to the impacts of climate change, reporting a total of 757 adaptation activities.

The report argues that there is "significant opportunity" for collaboration between city governments and business to improve climate resilience, backed up by reported increased action across the private sector.

Last year, a record number of financial institutions, representing $92 trillion in assets, asked the companies they invest in to disclose their climate emissions, risks and actions, leading to greater management and accountability.

Data from cities and companies analyzed by CDP establishes that investment in infrastructure and services, and policies and incentives that influence action by others, are improving cities’ economic competitiveness, citing Oslo as an example.

The benefits that business brings to cities, including jobs, tax revenue and services, are one of the drivers motivating cities to upgrade their climate resilience. In a reciprocal fashion, businesses are reliant on public infrastructure and environmental policies to support and guide their operations. Therefore cooperation between cities and businesses leads to better resilience city-wide. Both sectors can benefit from a dialog to engender greater understanding of each other’s climate change risks. Companies can help reduce city-wide risks by embedding local adaptation needs within their business operations.

The report's key findings are:

  • 76% of cities report that climate change could impact business, from shipping and food production to tourism and service industries.
  • 75% of the most severe physical risks from climate change that businesses disclose are also recognized by the relevant city.
  • 79% of cities recognize that climate change creates new economic opportunities as well.
  • 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.

Las Vegas is threatened in multiple ways by climare changeLas Vegas (right) is threatened in multiple ways by climate change. Other examples of cities reporting threats are:

  • The third largest port in Europe, Hamburg, Germany, said that its port will be affected by climate change, and will be more expensive to maintain as a result. The city of Cleveland, USA, reports that the $6.5 billion shipping industry in Lake Erie is also at risk from climate change.
  • Bologna reports that “severe weather patterns will negatively impact agricultural resources used to produce the symbolic foods of Bologna”.
  • Rio de Janeiro reports that most of its finance and services industries are concentrated in the low-lying West Zone area, where, the city says, “if sea levels rise by one meter, which could happen in the next decade, the entire area would be affected.”
  • Taipei reports that the number of days with temperatures above 28°C is increasing, “resulting in business operating costs increasing from higher energy bills for air-conditioning".

But there are also financial benefits of taking action. Research by Siemens suggests that the economic opportunity major cities could gain from upgrading their public transport infrastructure alone is worth around $800 billion per year, due to productivity gains and the development of new economic activities.

Portland, for example, reports that it saves $5.5 million annually through its City Energy Challenge, resulting in cumulative savings of $42 million since the program’s inception in 1991.

Differing perceptions

However, cities and companies seem to attach different timescales to their perceptions of risk, and in only 26% of cases do they coincide in the same city. In Paris, for example, a real estate investor estimated that rising temperatures will not impact its business for another 10 years or more, whereas the city hall reported that the August 2003 heatwave caused over 1,000 deaths and that temperature increases and heatwaves are a current risk. The investor was looking at when the climate risk will impact its tangible assets, whereas the city was considering when it will impact its citizens.

There is a better alignment on the respective estimates of the severity of risks. In Bangkok for example, companies identified frequent and intense rainfall as an "extremely serious" risk to doing business becuase they had to shut down their factories for over a month when the city flooded in 2011, losing nearly $96 million. This assessment was echoed by city itself.

Even so, 72% of risks reported by businesses have a different level of severity for the city government. In Houston, for example, both Chevron and the city recognize that climate change presents risks from storms and flooding, but for Chevron, the risk is seen as less serious to their own operations whereas the city fears an increased risk of storm surges cause flooding, property damage, and power outages, as well as interfering with telecommunication, destroying habitats and adversely affecting human health.”

company-reported risks reduced by city actions

CDP considers this lack of alignment as not significant for a city risk assessment. "What is significant is that cities are identifying the same climate change risks that companies report as posing an extremely serious threat to their business", it concludes.

What help is there for cities?

C40’s Research and Networks programs are working with leading member cities to understand their climate change risks and take adaptation action. C40 is developing a Climate Change Risk Assessment Framework and Tool (CRAFT) that will include a globally consistent taxonomy of city climate hazards to improve communication between global cities as well as to local stakeholders such as businesses, to provide a platform for joint problem solving.

C40 also convenes three active city networks focused on climate change adaptation:

  1. Connecting Delta Cities Network focuses on spatial development, water management, and adaptation to support delta cities;
  2. The Cool Cities Network aims to mitigate the urban heat island effect by increasing the solar reflectance of buildings and pavements;
  3. the Climate Risk Assessment Network is working with cities to build climate resilient cities through best practice understanding and prioritization of climate change risks.

"Protecting our Capital" is published by CDP, an international, not-for-profit organization providing a method for companies and cities to measure, disclose, manage and share vital environmental information, and working with market forces to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them.