Building better cities: from Los Angeles to Copenhagen

Rising urbanisation, in broad terms, has been a demographic talking point for years but data from the United Nations show just how quickly this is actually happening. Today, around half of us (55%) around the world live in cities but by 2050 this proportion is expected to reach as high as 68%.

With some 6.5 billion people living in such environments within 30 years and our current cities emitting 50-60% of global greenhouse gases (GHG), a sustainable future is impossible without significantly transforming how we build and manage urban spaces. Building better cities is therefore one of our 20 sustainable investment themes at Liontrust and serves as something of a nexus point, with the developments required stretching across many other themes and encompassing all three of our mega trends: Better resource efficiency (cleaner), Improved health (healthier) and Greater safety and resilience (safer).

Before exploring this in more detail, it is worth outlining the context: as with many of our themes, the basis is in some fairly alarming figures but therein lies the opportunity. The UN’s 2018 Revision of World Urbanisation Prospects document predicts over two-thirds of people living in cities by 2050 and this ongoing shift from rural to urban areas, combined with overall population growth, could mean an additional 2.5 billion city dwellers by that point.

This would mean a doubling of the urban environment and equivalent to 70 million people moving to cities every year for the next three decades, with close to 90% of this increase taking place in Asia and Africa. Rapid growth up to now, as a result of rising populations and increasing migration, has already led to a boom in mega-cities (defined as having more than 10 million inhabitants) in the developing world. In such an environment, slums are becoming a significant feature of urban life, with more than 800 million people worldwide currently in such conditions and this number likely to mushroom if we move forward without change.

Today’s cities only take up around 3% of the planet’s land surface but have a disproportionate impact on the environment, linked to as much as 60% of GHG emissions as stated but also consuming three-quarters of primary energy – and these figures can only increase. As a counterpoint, cities are also where people can often be at their best and are responsible for 75% of global GDP; when done well, they can encourage tighter community cohesion and be inherently low impact in environmental terms.

This ‘done well’ is obviously the key point and the driver behind our Building better cities theme, which focuses both on developing current infrastructure to make it more efficient and improving what has gone before when building new urban areas. Many developed world cities will have to invest in some retrofitting to limit environmental impacts but, from a broader perspective, sustainable development will increasingly depend on successfully managing global urbanisation. As evidence of that, cities are considered one of four global systems that can accelerate climate action in terms of both mitigation and adaptation; as the IPCC laid out in its Special Report for Cities back in 2018, ‘climate science must be accessible to urban policymakers, because without them, there will be no limiting global warming to 1.5°C’.

Positive news on this front is that city administrators and mayors tend to be more progressive than governments and are already forming coalitions such as the C40 Cities Climate Leadership Group, a collection of 96 cities (including Boston, Copenhagen, Durban, Hong Kong, Jakarta, London, Los Angeles, Mexico City, Milan, Paris, Seoul, and Tokyo) representing 25% of global GDP and one in 12 people worldwide. Founded in 2005, C40 is focused on tackling climate change and driving action that reduces GHG emissions, while also increasing the health, well-being and economic opportunities of urban citizens.

Comparing a couple of cities in the C40 illuminates the huge differences in place even now: if a citizen of Los Angeles, which is built on the concept of urban sprawl and the hegemony of the car, moved to Copenhagen, where around half of travel is by bike, they would cut their carbon emissions by 75%. It is also worth noting that most of the great tourist cities can be explored by foot: Paris, for example, has its compact urban cells (arrondissements) where you can largely get around in 20 minutes and the contrast to a city like Los Angeles, where the layout locks in a high energy system, is stark.

As reflected in the dual aim of C40, better cities are not just about adapting to climate change and should also be designed to ensure the benefits of urbanisation are fully shared and inclusive. Policies to manage urban growth need to support access to infrastructure and social services for all, focusing on the needs of everyone for housing, education, healthcare, decent work and a safe environment.

Given the investment scope of Building better cities, we see this theme as a prime example of how employing capital today with progressive, sustainable companies can define and shape the world people inherit and inhabit in the future.

For a comprehensive list of common financial words and terms, see our glossary at: liontrust.co.uk/benefits-of-investing/guide-financial-words-terms

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About the author

Peter Michaelis, Head of Sustainable Investment team, Liontrust

Peter Michaelis joined Liontrust in April 2017 following the acquisition of Alliance Trust Investments, where he was Head of Investment. Peter has been managing money in Sustainable and Responsible Investment for over 19 years. After completing a PhD in Environmental Economics, Peter started his career working for the Steel Construction Institute as an Environmental Engineer. He then moved to Henderson Global Investors where he was able to use his experience as a Sustainable and Responsible Investment Analyst and Assistant Portfolio Manager. In 2001 he moved to Aviva Investors, where he was promoted to lead Portfolio Manager on a number of its Sustainable and Responsible Investment funds, before being made Head of Sustainable and Responsible Investment.

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