Taking the Heat: How Cities Need to Adapt to Climate Change

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Cities are currently home to 55% of the world’s population. What’s more is their contribution to the economy: they generate roughly 80% of global GDP. With such a big role on the world stage, it’s crucial that cities adapt to a changing climate – and the projects that will help them do it could drive one of the largest infrastructure buildout in history, according to new research from Goldman Sachs’ Global Markets Institute. 

Authors Amanda Hindlian and Sandra Lawson dig into the details of these projects and case studies from the ground in this episode of Exchanges at Goldman Sachs. Some of their key points are also captured in this Long & Short of It video. And if you really want to delve in, you can read the full report here.

In the meantime, here are a few highlights from the research. 

Improvements are needed for infrastructure and beyond

If you’ve ever experienced a snowstorm in a major city, you probably wouldn’t count on your local transportation systems to get you to where you need to be. But it’s exactly this type of impact that climate can have on infrastructure – from rails to bridges and roads – that highlights the need for upgrades to make them more climate-resilient. 

Beyond these major improvements that require city planning, there are things individuals can be doing to adapt.

Transportation systems aren’t the only infrastructure that needs shoring up. Rising sea levels and storm surges are prompting some cities to plan for the construction of seawalls. Environmental pressures could also drive them to install water-efficient plumbing, rainwater-harvesting systems and grey-water irrigation, among other improvements. There’s also room for smaller scale improvements like flood-protection barriers, embankments, levees and expanded drainage systems.

And backing much of a city’s operations – whether it’s light rail or your building’s elevators – is the US power grid, which while it’s been serving us for over 100 years, arguably needs some work. But upgrading a power grid is no small task. Hardening the grid by updating distribution networks or burying local power lines requires a massive infrastructure buildout.

Beyond these major improvements that require city planning, there are things individuals can be doing to adapt. 

For instance, think about where electronic equipment is stored. Hint: if you’re in a flood or storm surge area, it probably shouldn’t be in the basement. Can your windows sustain high-speed winds? These are the things home and business owners might want to consider. 

In addition to these hard infrastructure upgrades, Hindlian and Lawson note there are also “soft infrastructure” changes that can help cities with adaptation – things like cooling centers, storm shelters and better education about the effects of climate change so that people are more equipped to handle these major weather events.  

There’s opportunity and cost 

While these upgrades are important, they also come with costs that are likely to force even the wealthiest cities to look beyond tax revenues for financing. To fund these upgrades, Hindlian and Lawson believe cities are going to have to draw on multiple sources of financing, including the public sector, institutional investors and public-private partnerships. 

The good news? As cities tackle the uncharted territory that is adapting to climate change, it will help drive innovations in both technologies and financing. Those solutions and best practices can then be spread elsewhere around the globe. 

By the numbers: How municipal bonds are helping finance adaptation across the US

  • ~$200 million – allocated by Miami’s Miami Forever Bond program for climate-related infrastructure and capital improvements for storm water and flood management. 
  • $425 million – a general obligation bond approved by San Francisco voters in 2018 in part to finance the retrofitting and reinforcing of the 100-year-old Embarcadero seawall. 
  • $2.5 billion – bond approved by Houston voters in 2018, a year after Hurricane Harvey, that would go to more than 200 flood-control projects.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.