Cities and local authorities can champion climate change

13 July 2015

Cities are powerful local authorities and can fulfil the role of global changemakers when it comes to climate initiatives, research by Arup shows. Although many cities do not fully own or operate their assets and functions, almost half set and enforce its policies and regulation, as well as their vision. According to the consulting firm, cities should capitalise on their power to make climate action happen, in partnership with businesses, investors and civil society.

C40 Cities
The C40 Cities Climate Leadership Group is an organisation of 75 affiliated cities set up to help local government authorities in some of the largest metropolitan areas deal with climate change issues in their municipalities. The cities involved are some of the largest in the world, and include Mexico City, Beijing and Amsterdam. The cities combined have an inhabitancy of 550+ million people, and generate 25% of global GDP.

C40 cities

As it stands the hopes for the continued prosperity of everyone on the planet partly rest at the national government level and the policy decisions to come out of the Copenhagen 21 Conference later this year. Yet while broad policy decisions are achievable at the highest level, the implementation of climate initiatives is in certain instances better achieved by local power holders, with cities and their local authorities some of the most powerful. In a recent research report, titled ‘Powering Climate Action’, consulting firm Arup joined the C40 Group as well as the City Leadership Initiative at University College London (UCL) to discover the power level cities have in bringing climate actions into effect.

Local powerhouses
The report highlights that cities are able to exert power locally through a variety of different dimensions of control – from creating vision to defining how assets can be utilised. To find out the distribution of the kinds of powers available to the cities in the implementation of climate mitigation strategies, the researchers used the C40 Powers data that contains data points on powers that cities hold over different sectors of city operations. These powers are expressed along four dimensions, including: own-operate; set-enforce policies and regulations; control budget; and set vision.

Owner-operator power and set enforce policies

From the data available, it was found that only 34% of cities fully own and operate their asset/functions, 28% do not own or operate the cities asset/functions, while 19% have partial control. The power to set and enforce policy and regulations is in the hands of 46% of local authorities, while 31% can influence the setting and enforcement of policy. Of the cities, 14% had no influence on the setting and enforcement of policies.

The level of power in budgetary matters too varies considerably across affiliated cities, with 38% enjoying full control, while 32% have influence over the budget of assets and functions. Just under a third (30%) however says that they have no control over assets and functions. The power to set a vision for the city, including for climate mitigation, is open to 46% of cities and a further 42% can influence the long term vision.

Control budget and setting vision power

Sector powerbase
In terms of setting the policy in specific assets/functions, different cities have different levels of control across the board. Most cities have complete control over city roads, on-street parking, pavement and sidewalks, as well as municipally owned fleets. Airports, inter-city rail and freight, ports and undergrounds, on the other hand, fall for the most part outside the four dimensions of power. Private vehicles are the least in the power of the city, with only vision and regulations applicable.

Local transport assets and functions

With the generation and use of energy a primary generator of greenhouse gasses, the level of power cities have over the generation and distribution of energy supply assets and functions may have considerable effect on the long-term policy initiatives introduced by cities to reduce their carbon footprints. From the research it becomes clear that city leaders have some influence over the way energy flows within city boundaries, with particularly distributed power generation and direct heating-cooling being able to be influenced by city authorities. The report notes that centralised power generation is the furthest from city control, followed by retail power distribution. 

Local energy supply assets and functions

Commenting on the ‘limited’ power of cities and their role in climate initiatives, Paula Kirk, Energy and Climate Change Leader at Arup, says: “When it comes to delivering action, the way cities use their power is more important than the dimensions of power they have. Limited power need not mean limited action for cities; there is enormous potential for partnerships with other cities, private businesses, investors and civil society to further climate action. We hope that the insight in the report helps to improve the measurement, management and strategic planning of climate action in cities, and helping to accelerate meaningful action on climate change.”


Private equity firms ramp up sustainability focus

19 April 2019

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.