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SDG 11 - Sustainable Cities and Communities: Delivering a Decarbonised World


Key highlights:

  • Currently over 70% of all greenhouse gas emissions originate from urban communities

  • Forecasts indicate that 68% of the world’s population is projected to live in urban communities by 2050

  • Sustainable infrastructure investments are one the rise – but challenges remain to mobilise capital at scale

  • Emerging Markets hold the largest potential for sustainable infrastructure improvements to decarbonise cities and communities – nonetheless investment shortfall of $2.1 tn annually

According to the UNs Sustainable Development Goals (SDG), goal number 11 targets Sustainable Cities and Communities. It aims to reduce the risk of natural disaster, implement national sustainable development strategies (NSDS) as well as promote decarbonisation in city design and transport . One of the most prominent challenges society currently faces relates to inequality and the levels of urban energy consumption emissions. UN backed research has highlighted that over 70% of all greenhouse gas emissions originate from urban areas, indicating the need for drastic change.


By 2025-2030, estimates predict over 630 million people will be living in close to 40 megacities around the globe. Emerging economies will remain the key protagonist of this transformation, with over 95% of urban expansion taking place in developing countries. The future everyone desires includes cities that offer clean energy, access to basic services, a larger degree of equality, affordable housing, green transportation and much more. Alongside economic growth, sustainability is necessary to ensuring a decent quality of life for everyone. Consequently, as our interaction with the planet becomes a critical issue to consider, the question poised is:


How can we make cities sustainable, resilient, inclusive and safe as we promote economic growth?


Balancing Impacts for Society & Planet

With the climate crisis intensifying, we must aim at balancing the social consequences that society will face as well as the environmental consequences our planet earth encounters. If unsuccessful, one will soon find the neglected impact on the planet seriously limiting societies wellbeing all across the globe. The graphic below summarizes this ambition by presenting all Sustainable Development Goals.


The SDGs are not strictly focused on environmental concerns; however, many goals very much rely on an equal balance. One of the greatest challenges since the turn of the century has been the conflict between urbanisation and costly environmentally friendly development. Over 60% of land close to major cities is predicted to be urbanised in the short to medium future, indicating a great opportunity for positive change.


The Role of Sustainable Infrastructure

The concept originally arose following growing demand to make infrastructure and services designed to meet the population's essential service needs (and with a clean carbon neutral footprint). Sustainable infrastructure describes all appliances, equipment and systems that are designed to service societies needs but at the same time have minimal negative impact on the environment. From a wider perspective, sustainable urban infrastructure investment is capable to serve as a source of social wellbeing and financial returns. Likely to promote greater productivity, fuelling economic growth and the size of the job market, sustainable infrastructure is also about promoting decarbonisation in cities – not surprising that investors are now seeking to understand its role in decarbonisation and sustainability when looking at this asset class.


Amongst some of the thematic areas within sustainable infrastructure, those highlighted below are crucial in unlocking long-term sustainable AND carbon free growth:

  • Public transport infrastructure carbon emissions shouldn’t go unnoticed, especially in metropolitan communities. As a prime example, Copenhagen is currently making large investments into developing their public transport system. The city is transforming into one of the most innovative capitals world-wide. The goal is to achieve the carbon neutral balance by 2025. Local projects encourage walking and cycling with 400km of cycling paths, however if needs be, the new metro ring can serve up to 85% of residents per day, whilst running the most efficient electric tube technology that is currently available. This should serve as a good example for other cities, to promote cycling, walking and the use of public transportation, in order to come closer to carbon neutrality.

  • Telecommunications and smart infrastructure are a vital contribution to the digitalisation and inclusion for many communities in both developed and emerging markets. As we live in an ever connected world, the prominence of telecoms, data centre and fibre optic applications will continue to rise as it represents the main backbone for any successful rollout of 4G and 5G infrastructure. Many governments of the Global North are already making or facilitating sector specific investments to improve telecommunications and internet connectivity. As put out in our piece, solving the last mile problem across emerging markets is the also an undisputed goal in enhancing connectivity, increase productivity and innovation, and ultimately reduce economic and data poverty.

  • Mobility has dominated personal freedom for many generations. A key challenge will be to make environmentally friendly automobiles for personal ownership or ride sharing projects. Electric or hydrogen cars are the pinnacle of modern age research in the industry. Which of the two technological strategies is able to dominate in the long-term is still uncertain. As green as electric vehicles might appear at first, an often-overlooked hitch are the toxic contents of the lithium batteries. On a similar note, hydrogen is inefficient and not much cleaner in production than gasoline would be. Current trends indicate a general acceptance of shared mobility and increased use of public transport, which is a step in the right direction.

  • Renewable energy is another key component within sustainable infrastructure. In order to lower the carbon footprint, striving towards a net-zero world, we must make green energy the norm and more affordable. The IEA suggest that energy use in over three thousand major cities accounts for 60% of global energy demand. Hence, the opportunity to integrate renewable energy generation within cities itself becomes a promising project. Solar, Wind and biomass energy are universally applicable methods, whereas Hydro, Tidal and Geothermal energy are location specific. The challenge is not only to focus on energy creation, but also a sustainable distribution network and efficient energy storage mechanisms. A net zero carbon balance being the target across most sectors, with Carbon Capture technologies to acts as deterring and re-emerged as a key decarbonisation method.

  • Carbon Free Heating (and cooling) holds significant potential for cutting urban greenhouse gas emissions. District energy systems have been a backbone in the energy transition potential. Heating and cooling accounts for almost half of global energy consumption. Current systems remain largely reliant on fossil fuels and thus contribute heavily to greenhouse gas emissions and air pollution. Establishing carbon free heating and cooling infrastructure can contribute to green economic growth through, for example, cost savings, reduced GHG emission, higher efficiency, reduced fossil fuel expenditure, local tax revenue; and employment. As one example, City of Berlin aims to decarbonise district heating with new energy transition law.

  • Affordable housing: Urbanization is driving construction. By 2050 the world’s population will require new housing and built environment for over 3.5 billion. Supporting affordable and social housing initiatives, particularly in emerging markets where the affordability gap is the highest, is likely to have a significant impact, including increases in local purchasing power, job creation and new tax revenues. Other themes such as landscape infrastructure, commonly referred to as green areas in cities to absorb CO2, have proven to significantly improve quality of life, minimise air pollution and serve as internal temperature regulators. Government incentives have also promoted green public and private buildings, as well as overwhelming interest by international investors. A pioneer example is Masdar, a planned city south of Abu Dhabi. A one-of-a-kind project, that promises to deliver a net zero-carbon footprint.


Net Zero Carbon Footprint

Net zero is achieved when the amount of CO2 emitted is equal to the amount absorbed from the atmosphere. The UK became the world’s first major economy to set a target of becoming net zero by 2050, and recently the EU adopted a climate change law that legally obliges its 27 nations to collectively slash greenhouse emissions by 55% by 2030. In order to achieve net zero, significant investment efforts will need to be undertaken (yet again, most around infrastructure sustaining urban cities).


For example, in the EU five sectors emit the bulk of the European Union’s greenhouse gases: 28 percent comes from transportation, 26 percent from industry, 23 percent from power, 13 percent from buildings, and 13 percent from agriculture. Across sectors, fossil fuel combustion is the biggest source of GHGs, accounting for 80 percent of emissions.


Today, agriculture and industry represent the biggest challenges. The speed of decarbonisation in these sectors depend on the availability of mature technology and the ability to scale supply chains.


Agriculture is the hardest sector to achieve net zero because more than half of agriculture emissions come from livestock and corresponding emissions and today can't be reduced without technological breakthroughs or widespread societal changes in meat consumption both remain yet to take place. Furthermore, the industrial sector is labelled as the most expensive sector to decarbonise and some would continue to suggest some industries would continue to generate residual emissions.


The Chemicals, Steel and Cement Industries specifically, have repeatedly expressed their concerns about the net zero ambition. Internal industry commitments have indicated a reduction of up to 60% of total emissions by 2050, leaving much room for improvement. Companies in the sector claim current green technology is too costly, in relation to the small improvements they would guarantee.


Focus on Emerging Markets

Eight of the top ten megacities are located in emerging countries, clearly indicating that most potential for development in cities and communities is to be found in emerging markets (EM) . Currently, most megacities have poor and inefficient infrastructure as well as outdated, broken-down or even no means of public transport. All data indicates that sustainable infrastructure investments can make a very large impact in terms of social and economic benefits. However, access to funding remains the key challenge:


Annual Investment Shortfall in Emerging Markets to meet SDGs by 2030

As highlighted in our previous SDG 7 publication, due to the lack of foreign institutional investment in EM, it seems very likely that the UNs SDGs - including the goal of sustainable cities & communities will not be met in most developing economies. A study by the International Finance Cooperation (a subsidiary of the World Bank) has attempted to explain this rather dramatic shortfall of EM investment through unstable political systems that make risk calculations vague as well as the very limited amount of precise resources that are available for research.

Source: IEA, IMF Fiscal Policy & Dev Jan 2019, FactSet, Bain & Co, Global PE Report 2020


Experts often reiterate that emerging market investments show greater resilience to economic cycles and low correlation with other asset classes. Cash flow can therefore be made more predictable, making stable but risk adjusted returns for international investors possible. The message is a clear one: “Investment should be directed towards EM”, because around 5bn humans currently live-in developing economies and World Bank data suggests that more than 90% of all future urban population growth will occur in Africa, Asia and Latin America. The 2021 Energy Review report by the IEA states that “Emerging Markets account for 2/3 of all CO2 emissions world-wide”. As many of these economies still find themselves at basic levels of development, they subsequently bare the most potential with relatively small amounts of investment stimulus required.


Areas to watch for

  • Affordable and sustainable transport infrastructure continues to be of interest. Broad benefits include increasing mobility, employment opportunities and reducing the environmental impact of cities.

  • Provision and protection of access to safe and inclusive green and public spaces remains a public concern. Unplanned urban sprawl makes it difficult to protect spaces that are crucial to minimising air pollution and maximising quality of life for citizens.

  • Concern over air pollution is expected to grow as scientific research reveals more about adverse consequences on health.

  • An increasing number of regions will develop and implement integrated policies for inclusion, resource efficiency and disaster risk reduction.

  • Further research and development should be lead through an integrated approach that includes the perspective of the global South, rather than a neo-colonial externally imposed agenda.


Closing Remarks

We must acknowledge that in order to attain sustainable cities and communities, we must promote much more foreign direct and domestic investment. The drive towards goal 11 targets has resulted from the ambition to make cities and human settlements inclusive, safe, resilient and sustainable. However, major challenges have been posed by unplanned urban sprawl, excessive resource use and worsening pollution. We foresee huge potential for small investment stimuli to work towards solving these issues in emerging markets whilst delivering high returns. As the world becomes increasingly urbanised, investments in SDG 11 will become all the more crucial to communities and rewarding to investors.

Sources:

https://www.un.org/sustainabledevelopment/cities/

https://sdg-tracker.org/cities

https://ec.europa.eu/eurostat/web/sdi/sustainable-cities-and-communities

https://www.blueorchard.com/investment-expertise/sustainable-infrastructure/

https://www.pwc.com/gx/en/industries/assets/pwc-increasing-private-sector-investment-into-sustainable-city-infrastructure.pdf

https://www.mckinsey.com/business-functions/sustainability/our-insights/how-the-european-union-could-achieve-net-zero-emissions-at-net-zero-cost

https://irena.org/publications/2016/Oct/Renewable-Energy-in-Cities