Goldman Sachs Research

Taking the Heat: Making Cities Resilient to Climate Change

05 SEP 2019
TOPIC: Global Markets Institute

Cities will be on the frontlines of climate adaptation. Building up their resilience has the potential to drive one of the largest infrastructure build-outs in history and will likely require innovative sources of financing.   

  • Although the timing, scope and magnitude of the consequences of global warming remain uncertain, the potential risks are significant. Attention has focused on the need to reduce greenhouse gas emissions, and far more work will be needed here. Even as this work progresses, however, there will also be a need for adaptation efforts that can help the world withstand the potential effects of climate change.
  • Climate change could reshape the earth. Negative outcomes that could make adaptation critical in coming years include higher temperatures, more intense storms, melting glaciers, rising sea levels, shifting agricultural patterns, pressure on food and water and new threats to human health.
  • Cities will be on the frontlines of climate adaptation. Although the need for adaptation is likely to be widespread, we focus here on cities. Because they are home to more than half the world’s population and generate roughly eighty percent of global GDP, cities will find themselves at the epicenter of this challenge. Rapid urbanization in some developing countries will also likely sharpen the focus on cities.
  • Urban adaptation could drive one of the largest infrastructure build-outs in history. Greater resilience will likely require extensive urban planning, with investments in coastal protections, climate-resilient construction, more robust infrastructure, upgraded water and waste-management systems, energy resilience and stronger communications and transportation systems. Despite the uncertainty around the timing and scale of the impact, it may be prudent for some cities to start investing in adaptation now and to do so in ways that allow for maximum flexibility in the future – without committing to any one specific climate projection.
  • Given the scale of the task, urban adaptation will likely need to draw on innovative sources of financing. Even the most economically prosperous cities will likely need to look beyond tax revenues to other sources of funding, including central-government funds, public-private partnerships, institutional investors, insurance and, in developing economies, international financial institutions. “Soft” infrastructure, such as laws, regulations and markets that support financing, will matter too.
  • Adaptation may raise questions of fairness. Urban adaptation may raise questions of fairness – such as which cities can support adaptation and which cannot, or where limited resources should be directed within cities. This is likely to be true even in the most prosperous cities; the fact that many of the problems could prove to be local and specific could exacerbate this dynamic.

Global Markets Institute

Taking the Heat: Making cities resilient to climate change

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Amanda Hindlian
Managing Director, Global Investment Research, Goldman Sachs
Sandra Lawson
Managing Director, Global Investment Research, Goldman Sachs
Sonya Banerjee
Vice President, Global Investment Research, Goldman Sachs
Dan Duggan, Ph.D.
Vice President, Global Investment Research, Goldman Sachs
Michael Hinds
Vice President, Global Investment Research, Goldman Sachs

 

 

 

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