Written for ESG Clarity as a member of their editorial panel.

The world’s population is projected to reach 8 billion people on 15 November 2022 and is increasingly urban. The trend for urbanisation is one that will continue, especially in the face of an increasingly hostile natural environment as the climate and nature crises continue to alter rural communities and ecosystems, further increasing migration.

There’s increasing pressure on our cities and urban infrastructure to service and support communities (both social and business activities). These pressures are set to grow as energy and food needs are factored in, alongside health. The global population aged 65 years and above is projected to rise from 10% in 2022 to 16 percent in 2050. An ageing population poses multiple policy challenges including productivity and economic growth, as well as healthcare provision and adaptive infrastructure (such as housing).

So, how are sustainable cities created against this backdrop? Goal 11 in the United Nations Sustainable Development Goal (SDG) framework, articulates the need to “make cities and human settlements inclusive, safe, resilient and sustainable”. The World Bank refers to sustainable cities as “resilient cities that are able to adapt to, mitigate, and promote economic, social, and environmental change”. Urban centres must be transformed “into resilient and sustainable communities that benefit residents by reducing energy costs, improving quality of service, reducing waste, providing better urban environments, and creating economic opportunities”.

Sustainable cities are ecosystems in and of themselves, capable of supporting and nurturing communities and businesses, as well as allowing space for nature to thrive. Urban planning and more responsive urban policy are the keys that unlock the ability to create these spaces either through regeneration of existing cities or through the creation of new cities.

Energy and waste management, education and health provision, public transport and green spaces, decent employment, socio-economic and cultural integration; and localised food production – the opportunities in our cities to invest in their future are endless. It starts with planning, understanding what constitutes a resilient and self-sustaining community and putting in the building blocks upon which the city can thrive.

Energy efficiency

From the basic fabric that currently exists, planners can layer smart energy grids, clean and affordable energy provision and distributed heating – critically important given cities account for more than 70% of greenhouse gas emissions and between 60-80% of a country’s energy demands.

Energy efficiency in buildings is another critically important factor so smart and environmentally friendly building design and insulation are factored into new builds and renovation. Water and wastewater treatment along with the need for green spaces sits alongside energy demands.

Sponge cities present interesting opportunities for investors – these are urban areas with abundant natural spaces such as trees, lakes and parks – among other good planning designs – that are intended to absorb rain and prevent flooding. Sponge cities hold more water in rivers, greenery and soil instead of losing it to evaporation. This means they’re more resilient to drought and can tackle the increasing prevalence of urban based flash flooding.

Better water management increases the water resilience of a city. The provision of energy and water provides the opportunity for more localised food production. Here innovations in agriculture become interesting for investors – vertical farming and hydroponics currently dominate in terms of localised urban food production. The addition of green spaces also introduces areas for nature to thrive, as well as additional opportunities for communities to ‘grow their own’. The latter element helps with access to food for all and also helps to tackle the cost-of-living crisis. Waste management is critical in urban environments, and alongside more general investments in a circular economy at the consumer level, provides investors with more opportunity to support the delivery of SDG 11.

Crime reduction

Homo sapiens have existed for at least 300,000 years, but some of our oldest cities have only existed for a fraction of that time. It’s been documented that the stress of urban living can lead to increasing tension and violence. A 2021 US study looked at the Federal Bureau of Investigation data on murder and non-negligent manslaughter from 290 American cities within 45 different states between 1986 and 2015.

Upticks in urban greenness appeared to correlate with declining homicide rates, with every .01 unit change in average greenness (measured by the normalised difference vegetation index – NDVI) predicting .30 fewer deaths per 100,000 persons in a given area.

Greening our cities, therefore, may also be part of a powerful approach to reducing crime as well as providing much needed localised ecosystem support services such as pollination and water management.

Education, healthcare and housing

Increasing access to quality education, affordable healthcare and housing and decent employment further aids community cohesion and plays a role in dampening crime. Investments in primary healthcare facilities and additional access to education, helps communities learn and grow together.

Mixing the two together can also yield interesting results, as experienced in Holland. In exchange for 30 hours of volunteer work per month, students are able to stay in vacant rooms in a Humanitas nursing home free of charge. What was an idea in response to a policy change by the government unlocked a social innovation that has benefitted both student and dementia patients and created a model that has since been exported to many other countries, with tertiary, secondary and primary school learners.

Providing infrastructure and support for businesses of all sizes is also important for the provision of decent employment and wealth creation and distribution. Investments into new businesses tackling key community issues or into entrepreneurs from underrepresented groups are other powerful ways investors can help support sustainable communities.

Public transport and logistics play an ever-increasing role as cities become bigger and better equipped, especially given the parallel need for increased connectivity between rural and urban areas. The need to manage business and community logistics, as well as tackle noise and air pollution and its associated chronic impact on human health, again, provide opportunities for investors. The electrification of transport, easier, more accessible and localised services that reduces the need for travel, and better digital infrastructure can all play a role in reducing traffic.

Whether we live in an urban or rural environment, it’s time to invest in our cities. They will be front line in the coming years with trends of urbanisation and increasing migration in the face of the climate and nature crises.