Transcript
Speaker: This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
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Speaker: Welcome to the Business Plan for the Planet podcast, a series centered around ESG insights.
Speaker: In these episodes, you'll hear from experts whose work is at the heart of sustainability-linked trends and opportunities, as well as from businesses that are delivering change for a better future for us all.
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Speaker: Well, hello.
Speaker: My name is Greg Clark.
Speaker: I'm the Group Advisor on Future Cities and New Industries at HSBC, a global bank that is present in 67 markets around the world
Speaker: covering 500 cities and a bank that is absolutely committed to the journey of decarbonisation and sustainable development, more of which later.
Speaker: I'm also very active, both in the UK and globally, on the individual issues facing cities, their transport systems, their built environment, their land uses and much more.
Speaker: And during this presentation, I'll be talking about how cities find the journey towards decarbonisation and how, as it were, climate capital becomes a driver for developing sustainable cities of the future.
Speaker: Now, where I'd like to start is really back in the pre-pandemic year of 2019.
Speaker: And I want to suggest to you that one way of understanding the time that we've been living in is to think of it as the century of the city.
Speaker: If we go back to 1980s,
Speaker: when roughly one third of the world's approximately six billion people was living in cities.
Speaker: And then we project forward 100 years from 1980 to 2080, when we think about 80% of the world's then more than 10 billion people will be living in cities.
Speaker: We're moving to a situation where more or less over a hundred year period, the number of people living in cities is trebling.
Speaker: And the percentage of humanity that lives in cities is doubling.
Speaker: And of course the big variable there is that human population continues to grow exponentially.
Speaker: So what's happening during this hundred year period that is occurring, as it were, before our very eyes, is that humanity is becoming primarily a species that lives, works, dwells and organises itself in cities.
Speaker: Therefore, the future of our cities and how they become sustainable is absolutely a critical question, not just for the human race, but for the planet, for our economies, for how we're organised and for what we need to do.
Speaker: Now, I want to start by suggesting that this century of the city in which we're just entering the beginning of the fifth decade has already been a very interesting century.
Speaker: If you look around the world, we see that we're already at 80% urbanization rates in North America, in Latin America, in Europe, and in Oceania.
Speaker: Whereas in other parts of the world, in China and the Middle East, for example, in the Middle East, just over 70% urbanized.
Speaker: In China, just over 60% urbanized.
Speaker: In the ASEAN countries and the African countries, just under 50% urbanized.
Speaker: And in India, only 34% urbanized.
Speaker: So if you take the idea that there's a kind of natural rate of urbanization that it's possible for a region to achieve,
Speaker: somewhere between 80% and perhaps 90%, as our century continues, may be peak urbanization.
Speaker: What this tells us very quickly, of course, is that in North America, in Latin America, in Europe and in Oceania, we're not far away from peak urbanization.
Speaker: It may even be the case in North America that we're already at peak urbanization.
Speaker: We'll come back to that.
Speaker: But in the other parts of the world,
Speaker: In China, in India, in the ASEAN countries and in Africa, there's a long way to go before the world reaches peak urbanisation.
Speaker: And therefore, we may need to start thinking about the world as being in two distinct hemispheres.
Speaker: Hemispheres that are already almost at peak urbanisation and those that are still urbanising very, very rapidly.
Speaker: Now we'll come back to all of this in a few minutes when we start to talk about the impact of the pandemic on our cities and how they're being reorganized or not by the advanced digitization that's occurred as a result of the pandemic.
Speaker: But let's come back to all of that later.
Speaker: I want to start then by saying that as we're in the century of the city,
Speaker: And this century is also accompanied by growing awareness of the climate emergency and what that means for the future of our planet.
Speaker: And at the same time, the introduction and the growth of new digital tools as part of our fourth industrial revolution.
Speaker: We're in a kind of century long quest here.
Speaker: And the quest goes basically like this.
Speaker: We know that urbanization is a fact.
Speaker: People move to cities because cities provide them with opportunities, with choices, with services and with access to systems that they simply can't get elsewhere.
Speaker: But we also know that we can get good urbanisation where investment in infrastructure, facilities, amenities and other things increases as population increases.
Speaker: Or we can get bad urbanization where the population increases, but the capacity of the city, the carrying capacity of the city to serve that population with infrastructure, with real estate, with digital systems, with food, water, waste, other kinds of utilities, especially energy, where those things don't increase as the population of the city increases.
Speaker: And of course, we see this to varying degrees around the world.
Speaker: Examples of really good urbanization are few and far between.
Speaker: Some people might want to point to Singapore as an example.
Speaker: Others would think about the Nordic cities in Europe.
Speaker: Some might say that the cities in Canada are examples of good urbanization, or maybe some of the cities that are along the coastal areas of the USA.
Speaker: All of this is for you individually to judge.
Speaker: Nevertheless, we see all over the world lots of examples of bad urbanization.
Speaker: And in Latin America, you can see this very clearly in the megacities where the population has outgrown the capacity of the city by so much that so many people now are living in informal settlements or lead precarious lives with no access to utilities, to infrastructure or to services.
Speaker: and they end up in a kind of urban poverty, which is very difficult to get out of.
Speaker: So urbanisation is a fact, but whether we get good urbanisation or bad urbanisation is a choice.
Speaker: And I think therefore that our focus over the next period of time, the next five decades of this century of the city, is to try to use the tools of digitisation that come to us as an extra ingredient in this century,
Speaker: alongside good government, well-run institutions, careful planning and much more, to create this good urbanisation outcome which brings with it all of the advantages of sustainability.
Speaker: Because under conditions of good urbanisation, our transport systems work efficiently, our built environment knows how to be frugal in terms of resources and so much more then becomes possible.
Speaker: Now, why this matters to cities is not just a question of quality of life choices for residents, but if we think about the climate emergency, the real challenge that the world is now facing, cities can be seen in this context not just as potential victims of climate change, but also as producers of climate change.
Speaker: We know very well now that the emission not just of CO2, but also the emission of NOx and other kinds of poisonous gases gets very concentrated in our cities under conditions of bad urbanization.
Speaker: It's our roads and vehicles, it's our buildings, it's our factories, it's our homes that produce many of the emissions that we're trying to abate.
Speaker: So good urbanization
Speaker: is a route into the decarbonized city and that's important.
Speaker: But at the same time, our cities are likely to be the primary victims of climate change and particularly global warming.
Speaker: We can see, for example, that more than 500 cities in coastal areas, and these include New York and San Francisco, they include Los Angeles, Washington DC, Boston and so many more,
Speaker: that more than 500 coastal cities are vulnerable to a half-metre rise in sea levels.
Speaker: A half-metre rise in sea levels is exactly the rise in sea levels that we get when we hit 1.5 degrees of global warming, the maximum amount of global warming that was originally agreed as the kind of ceiling target at COP in Paris in 2016.
Speaker: Now, I've spent much of the last two weeks in Glasgow at COP26, and of course the challenge here has been to recognise whether we can ever stay at 1.5 degrees, producing that half metre rise in sea levels that makes those 500 cities vulnerable, or whether we're going to have to accept a higher level of global warming at 1.8, 1.9, 2.1, 2.3, many discussions happening about this.
Speaker: Every incremental increase in global warming that occurs raises the level of our seas and oceans to the point that it makes a larger group of cities vulnerable to flooding and all of the destruction that goes with that.
Speaker: So from the point of view of cities, climate change is a two-edged sword.
Speaker: cities contribute to the emissions that produce global warming, but they're also likely to be the victims of global warming, just in the century when people are moving to cities in record numbers and the human race is becoming increasingly urbanized.
Speaker: So all of this leads to
Speaker: I think a primary objective to think about our sustainable future cities being cities that have decarbonisation at their hearts.
Speaker: Now, what does it take to decarbonise a city?
Speaker: This is a question that many scientists and others have been struggling with over the past few years.
Speaker: And the good news is that we begin to have some answers.
Speaker: When you think about how a city is organised, how its land uses, its transport systems, its energy systems and so much more work, we can say that the decarbonising city firstly has three features.
Speaker: Number one, it's clean.
Speaker: Its energy, its water, its waste and its other metabolic systems have been cleaned so that carbon is taken out of them
Speaker: Other poisonous gases are removed and those things are able to operate in a way which is carbon neutral.
Speaker: The decarbonization of energy, the recycling of water, using waste to create energy itself, removing landfill and everything else is a very important part of what we're talking about.
Speaker: This will have the benefit, of course, of cleaning the air in the city and therefore reducing the likelihood of respiratory diseases and other kinds of health challenges that human beings experience when they breathe poor air.
Speaker: So the decarbonized city is clean.
Speaker: The second thing the decarbonized city is, is connected.
Speaker: It's a city where there are multiple forms of transport.
Speaker: Many of them are shared forms of transport, like public transport, buses, bus rapid transit systems, trams, trains, underground railways, overground railways, and so much more.
Speaker: or they're electric, they're electric cars and fleets delivering people and delivering goods to our home, or they're using some other kind of clean technology, perhaps hydrogen, to make deliveries.
Speaker: Now, our cities will also need to be connected by digital systems, deep digital infrastructure that enables it to be possible to undertake all sorts of activities that used to require face-to-face interaction, some of which may now be done effectively using digital platforms as well.
Speaker: So our decarbonized cities have to be clean and they have to be connected.
Speaker: The third thing they have to be is compact.
Speaker: When we think about how our cities are organized, we need to avoid excessive use of land by sprawling and by reducing or rather increasing the size of land taken up.
Speaker: Because the larger the size of land per capita of population being used, the more expensive the infrastructure requirements are, the less likely we are to be able to use shared systems of connectivity,
Speaker: the more likely it is that we will have expensive forms of infrastructure required and the more likely that our transportation systems and others will be carbon intensive.
Speaker: So compact land uses,
Speaker: Mixed use, medium density buildings, well laid out, possibly using what we would call a polycentric or a multi-centered structure, but maybe just a single center in the city.
Speaker: We have to be much more frugal about our land uses.
Speaker: So cities that are clean, connected and compact are the kinds of cities where we're going to be able to drive out carbon.
Speaker: As long as these are underpinned by some other things.
Speaker: And the first thing, of course, is electrification, moving towards electrification of buildings and of transport systems to drive carbon out of those.
Speaker: The second thing is to focus very much on circularity, trying to use waste and water, building materials and structures, food and other things in circular ways so that a circular economy is merging where these resources are continuously being repurposed and reused in other ways.
Speaker: The third key idea is that, of course, we have to change citizen preferences and behaviours.
Speaker: We have to provide incentive to citizens to make choices that are about a more sustainable future city rather than a less sustainable one.
Speaker: Those choices are to do with mobility, a place of dwelling, they're to do with consumption, choices that citizens are willing to make
Speaker: when they believe that there is a level playing field, when they are incentivized to make good choices rather than subject to perverse incentives to make bad choices, and when they believe that the right kinds of policies are being put in place to make those choices work.
Speaker: An obvious one is this, if you want fewer people to drive around in cars that use internal combustion engines because of their polluting effect,
Speaker: You of course have to invest in alternative forms of transport so that people can make a reasonable choice to do that.
Speaker: This approach to decarbonizing our city also needs to be underpinned by two or three other things.
Speaker: Firstly, new materials technologies, which are very important to enabling our cities to adopt clean materials.
Speaker: Subsequently, thinking about how we use digitization to make our cities work in more intelligent, more responsive, more automated ways.
Speaker: And lastly, of course, they have to be underpinned by the idea of a just transition, a transition that doesn't unintentionally impoverish certain groups of people simply because of the jobs they have, the places where they live, or the lack of choice they have because of income and other things.
Speaker: So when we think about the transition to a decarbonized city,
Speaker: We have to think about how we make that work for all people and don't have the costs artificially being placed upon those people who are least best able to pay.
Speaker: So we do know something now about what the decarbonised city involves.
Speaker: And we also know something about how to finance it.
Speaker: At HSBC, where I work, we're increasingly focused on the three key ideas in how to finance the decarbonised city.
Speaker: One is obviously public finance, where increasingly in the recovery funds that have been developed post-pandemic, we see a strong focus on decarbonisation and producing a future city that is great for everyone.
Speaker: We also, of course, see new public funding models coming forward, particularly new kinds of levies and charges in relation to transport and buildings and other things, mainly along the lines of the polluter pays.
Speaker: The second thing, of course, is that we see a great growth in private finance in this space, particularly with the large numbers of corporates and others that are involved in delivering the systems of the city, whether it's water, energy, food or waste companies, companies that produce new vehicles, corporate real estate or other things.
Speaker: Many of the systems of our cities that need to be decarbonized
Speaker: can be financed directly within the balance sheets of the corporates who run those systems.
Speaker: And then thirdly, of course, we see a big growth in what we might call blended finance.
Speaker: These are forms of finance where public and private come together, usually with public finance being used to stimulate private finance, perhaps by providing guarantees or by providing technical assistance to improve the bankability of projects,
Speaker: or perhaps providing incentives in the form of interest rate discounts, or maybe, for example, playing a subordinated role in some kind of funding mechanism where the public finance takes the first hit.
Speaker: Now, these are all examples of how public funds can be used to trigger and catalyse private funds, and I expect to see more of this blended finance and PPP finance grow over the next two to three decades.
Speaker: Now, let's just pause for a minute and say, what's the benefits of having a decarbonized city or a zero carbon city?
Speaker: For many people, of course, the primary benefit is about driving out carbon and therefore potentially reducing the way in which the planet is being damaged by global warming.
Speaker: And of course, that is the primary benefit, but there are many others as well.
Speaker: When we look at the zero carbon city, we see a city that's more healthy.
Speaker: It has air that is more clean to breathe and therefore we produce fewer respiratory conditions and diseases.
Speaker: We see a city that is more open, more spaces where people can walk, more spaces where they can gather, a city that is less, as it were, cluttered by cars, but is a city that has more civic space.
Speaker: We see a city that is much more likely to innovate in how it produces its buildings and how flexible they are.
Speaker: A city that is more likely to find that its transport systems and its buildings themselves are able to become producers of energy and therefore to be prosumers, as they're sometimes called.
Speaker: And at the same time, we find a city that's much more likely to create jobs in the green economy, to stimulate new enterprises, to build new clusters of firms.
Speaker: that are likely to work together, whether it's on circularity or whether it's on other aspects of the future economy, which is decarbonized.
Speaker: So the zero carbon city is not just an environmental policy for a city.
Speaker: It's a policy about behavior change.
Speaker: It's a policy about job creation.
Speaker: It's a policy about savings and it's a policy about public health.
Speaker: Now, as we think about the role of digital technologies in all of this, this is where our 21st century opportunity to complete the century of the city, but with using digital tools becomes much more exciting.
Speaker: You see, digital tools have emerged so quickly over the last two decades that we now have the combination of AI platforms, Internet of Things platforms.
Speaker: Clearly, we have big data, cloud computing, edge computing and so much more that provides us with a set of applications for how we manage our cities that we didn't have previously.
Speaker: Now, we could begin with PropTech and say that these are, of course, the digital platforms through which our buildings become more efficient, more comfortable, more flexible, and much more able to produce their own energy and to be energy efficient.
Speaker: Or we could be thinking about Plantech, the digital platforms that enable us to think about land uses much more intelligently and to combine different kinds of land uses in the same place, as well as to speed up decision making about land use, enabling our cities to be more flexible, more agile.
Speaker: We might be thinking about transit tech, that interesting set of platforms that enable us to optimize the way in which trains and buses and trams and vans and so many more vehicles are able to operate together as a kind of integrated fleet, reducing waste and increasingly optimizing the performance of the vehicles individually, as well as the way in which the fleet meets the requirements from the traveling public.
Speaker: Now, there are others too, of course, Infratech, GovTech, Urbantech, so many more digital platforms that have emerged that are consistent with this idea of a clean, connected and compact city.
Speaker: These digital tools are the means of acceleration in that journey towards the zero carbon city that I described earlier.
Speaker: Now, all of this, of course, is very exciting.
Speaker: as we move towards the fifth and sixth and seventh decades of the century of the city, we have the chance to recognize that the opportunities that have arisen from the recent pandemic are ones that actually can point in the same direction as the future city I've been describing, which is organized around decarbonization.
Speaker: You see, one of the effects of the pandemic has been to accelerate digitization, all of those tools I just described being part of that.
Speaker: It's accelerated the desire for decarbonization, but it's also created a new set of choices for people in certain parts of the world about where they live, how they work, when they travel, how they consume, and what all of this adds up to in terms of a new lifestyle equation.
Speaker: Now, I said right at the beginning that the parts of the world that are already 80% urbanized, North America, Latin America, Europe and Oceania, these are the places where I think we will see the biggest changes occur as a result of the post-pandemic changes that we're seeing in digitization and particularly in North America.
Speaker: where of course there is a strong preference for population mobility, for rapid technology adaptation and for mobile working, we will see, I think, this allowing us somehow to spread population out in a more distributed version of urbanization, which could be a new form of good urbanization.
Speaker: In Latin America and in Europe, I think what we will see is the move towards multi-centred cities, where, as it were, the dispersal of population will happen within the metropolitan area, not between the metropolitan area and other places necessarily.
Speaker: Now, the post-pandemic city in those parts of the world that's still rapidly urbanizing in India and Africa, in the Middle East and ASEAN and China, I think that we will see that post-pandemic, we'll use these digital tools that the pandemic has encouraged us to optimize much more to get the existing model of cities to work much more efficiently.
Speaker: So the use of PlanTech and PropTech, TransitTech and GovTech and all of these other platforms will, I think, prove that it's possible to combine rapid urbanization, which induces, of course, increases in economic productivity, with rapid decarbonization, which will enable us to have cities that, as they grow and become more productive, are actually simultaneously able to reduce their carbon footprint.
Speaker: If you like, for the first time, these digital tools offer us the opportunity to decouple urban population growth and economic growth from the growth in carbon emissions.
Speaker: And as we look forward to the sustainable cities of the future, we can, I think, begin to organize around a new equation where digital technologies makes it possible for us to have the kinds of cities that we want organized in ways that can be optimized and be efficient, and at the same time, continuously drive out carbon emissions, producing a city which is healthier, better to live in, more fun,
Speaker: and more innovative.
Speaker: So I leave you with this thought that the pandemic has induced an acceleration in digital technologies that enable us to tackle the big quest of our time, which is to couple the global urbanization that is a fact with the principles of good urbanization that enable us to produce in the longer term the zero carbon city that we all so badly need.
Speaker: Thank you very much.
Speaker: This has been a special podcast in the business plan for the planet series.
Speaker: More episodes will follow shortly.
Speaker: So please do keep an eye out for those.
Speaker: For more information on the program, visit business.hsbc.com forward slash sustainability.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint, Banking and Markets.
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