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Are global cities the cause and solution of climate change?

Are global cities the cause and solution of climate change?

Climate Protection - Photo Illustrations


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Tom Walker is the Cohead of Global Real Estate Securities at Schroders.

Climate Protection - Photo Illustrations
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Homer Simpson once famously said: “here’s to alcohol: the cause of, and solution to, all of life’s problems”.

To paraphrase Springfield’s most famous resident, we could say a similar thing about big cities and climate change.

Many see big cities as part of the problem with climate change. They are responsible for high levels greenhouse gas (GHG), emissions. More than half of the world’s population live in cities (a figure that is set to expand in the future), with global cities consuming more than two-thirds of the world’s energy. Cities also contribute more than 70% to global CO2 emissions.

We believe global cities will be an integral part of the solution.  Many cities around the globe are finding innovative solutions to environmental problems. We can play a significant role as investors in global cities as we search for companies that will facilitate this transition as quickly and efficiently as possible.

We look at how cities around the world are responding to the climate crisis after the gathering of world leaders in Glasgow, for the COP26 conference.

London leads the charge

London recently expanded the ultra-low emission zone of its ultra-low emission zone to include the outer area of the city, which is connected to the South and North Circular Roads. The scheme, which is being closely watched by other cities around the world, is based on the principle that the polluter pays, and so drivers of older petrol or diesel internal combustion engine vehicles must pay £12.50 per day to drive in the ULEZ.

The Mayor of London, Labour’s Sadiq Khan, has said that the reason for the extension of the zone from central London to the suburbs is to clean up the city’s air. The ULEZ extension is part of the mayor’s transport strategy for London, which aims to achieve 80% of travel in the city by walking, cycling and on public transport by 2040.

The original, smaller ULEZ had already encouraged people switching to cleaner cars (from 39% in 2017 up to 80% today), and it is hoped that this extension will have a similar effect on outer London.

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Global problems solved by city-led solutions

Other city-led climate initiatives include Beijing’s implementation of China’s National Strategy of Carbon Peaking and Carbon Neutrality and the creation of a local carbon market in the Chinese capital. Beijing also supports the use of a smartphone app that allows residents to arrange door to door recycling services. This has allowed the city reduce carbon dioxide emissions by 235 tons per year.

Climate Kampong, a program in Jakarta that supports community-led strategies for adapting to climate changes in rural communities, is active at 148 locations. In Indonesia, the capital has created a sustainable public transport system that combines many transport systems with one payment to encourage public transport and reduce pollution.

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The city of Istanbul is also seeking to develop Turkey’s first sustainable mobility plan for an integrated city-wide transport system.

Affordable housing is essential as the population expands

Many cities are also developing low-carbon, affordable housing. This includes Washington DC through the city’s Solar for All Programme. To meet the anticipated population growth and higher demand, Nairobi is also looking to build low-carbon housing.

We see a small group of countries and sub-sectors who are leaders in this area and others that are falling behind. There are exceptions, but the general consensus is that the companies from Australia, the Netherlands, and Scandinavia have the best sustainability policies.

These countries have a strong tradition of circular development. This is the process where materials from old buildings are reused to build new projects. They are also more likely to have the highest ambitions and sustainability targets.

It is dangerous to generalize. Some headlines might lead you to believe China is not environmentally conscious. This contrasts with what we have done to Shenzhen.

We believe that this city is one of most sustainable in the globe. This city has pioneered sustainability policies, such as phasing off polluting industries and imposing strict new environmental standards. It’s important to scratch below the surface to see the detail.

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