COVID-19 has put much of the world’s focus onto the need for healthcare resilience.
But health is often closely correlated with many other risks that cities or countries must hedge against.
This is particularly true of fast-growing metropolises in emerging markets, where the ongoing healthcare challenge is only exacerbating the pressures that urban population growth and the impact of extreme weather have created.
Increasing the resilience of cities has the potential to drive one of the largest infrastructure build-outs in history, and health preparedness measures will only add to this.
However, the scale of investment needed to create that resilience is well beyond the fiscal capacity of some of the countries most at risk. Achieving it requires new and innovative financing mechanisms.
Since 1950, the number of city dwellers has grown almost six-fold, to more than four billion people. That’s set to rise by another 2.5 billion by 2050, fuelled in large part by rapid population growth in major cities across Africa and Asia.
This increasing population density often goes hand in hand with growing climate risk.
For example, Shenzhen, one of the world’s fastest-growing cities, is also an urban centre at the mercy of climate change, with flash floods threatening to overwhelm its sewer system. Singapore has implemented a SGD5 billion fund for coastal and flood protection. Indonesia is even going to the extreme of moving its capital city to escape rising sea levels.
“Especially in middle-income, emerging markets, we see a confluence of three megatrends: growing populations, climate change and urbanisation, all reinforcing each other,” says James Cameron, Global Head of Power, Utilities, Infrastructure and Cleantech at Standard Chartered.
“The first thing that we think cities need to do is really to understand and quantify what the physical risks and transition risks are: how do you mitigate an increase in heat levels in terms of urban design or building design? What's the risk and the impact of rising sea levels? And then what's the impact of changing weather patterns on some of those risks?”
Tackling the root of the problem
Forest fires, droughts, severe storms and flooding will all become more common if we can’t abate global warming. The impact of these is exacerbated in large urban areas, which are currently also badly affected by COVID-19.
Developing sustainable infrastructure is key. Physical barriers like sea walls, water pumps and overflow chambers can offer frontline protection against an unpredictable climate. Environmental measures such as land recovery and the restoration of wetlands can help push water further out. And clever urban design can embed resilience.
For example, Singapore Changi Airport’s Terminal 5 is being built on land reclaimed from the sea. It is elevated to more than five metres above sea level to keep it safe from flooding, with canals ready to divert water and CCTV cameras monitoring sea levels.
The new airport building mirrors other projects on the island that are adapting to higher temperatures, more intense monsoon and dry seasons, and rising sea levels in the Singapore Strait. These include the creation of green spaces to reduce the formation of urban heat islands in the sweltering city, and desalination plants to protect clean water supplies.
The priority is to create a sustainable city that also offers a high level of liveability for its community, according to Khoo Teng Chye, Executive Director of the Centre for Liveable Cities (CLC) Singapore. A good example is the Marina Barrage, which serves as a tidal barrier, a freshwater reservoir, and a public park.
Khoo points out that the health of a city is a vital aspect of its liveability: “There are three things that matter for a healthy city. The city should be clean and have a good level of public hygiene. Next, there should be adequate healthcare infrastructure that is integrated into the community and has the flexibility to be scaled up in times of a crisis. The right environment for healthy living - with green spaces and sports facilities close to homes, as well as allowing recreational activities in water bodies - also plays a part in shaping the physical and social environment for health across the city.”
Building up urban resilience
To expand these and other measures for building up urban resilience, a projected USD400 billion is needed every year from both governments and the private sector.
Traditionally, the risks and uncertain returns involved in some of the geographies and types of projects would have made it challenging to get the private sector involved − but multilateral involvement has helped to pave the way.
“We’ve been working closely with the likes of the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, and others to try to create more opportunities for private financial institutions, because it’s a huge challenge,” says Khoo Teng Chye. “I think there’s a huge gap between what the needs are for infrastructure − whether it’s for climate change or other development needs of cities − and the availability of capital or finance.”
With an increasing investor focus on environmental, social and governance considerations, there has been much greater interest in financing sustainable infrastructure.
James Cameron explains why: “While it’s in its relative infancy, this growing appetite for climate change-related infrastructure provides attractive opportunities for investors. For example, green buildings promise greater yields for investors, as future tenants will pay higher rents to live and work in buildings that offer a healthier environment with low carbon impacts.”
By the end of 2024, Standard Chartered has committed to providing USD40 billion of project financing services for infrastructure that promotes sustainable development.
“Fundamentally, if financial institutions are going to make a difference and an impact, it really is a sea change in thinking,” says Cameron. “It's not just financing a particular renewable energy project. It's how do you incorporate product development opportunities, consideration and risk around climate; around sustainability and everything you do?”
A sea change in investment
The promise of higher returns and greater transparency has made it much easier to mobilise private capital for sustainable infrastructure investment.
COVID-19 may well reinforce this trend since resilience is all about recovering from shocks – whether it’s a virus, a flood or a tsunami – and maintaining sustainability and liveability.
Khoo Teng Chye stresses that building resilience is not just the job of government and private finance. Critically, it must involve the community as a whole: “It’s not just about getting views or feedback. I think, more important, is involving [the community] upstream and trying to co-create solutions with them. And hopefully, when you recover, you should recover on a path that is even better than before.”
James Cameron agrees. “Sustainable infrastructure financing isn’t a panacea,” he observes. “But it offers vulnerable cities another leg to shore up their future.”
Not only will sustainable infrastructure financing enable investors to ‘do the right thing’ and contribute to a more liveable, greener world, but it also promises to deliver financial rewards through a return on investments.
Industries in Transition
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