Over the past decade, many municipalities have developed resiliency strategies to prepare for more intense and frequent weather events. A successful resiliency strategy evaluates risk and provides a framework to prepare for long-term infrastructure development and community growth. Planning for resiliency is also a necessity for the private sector. Investment strategies need to account for the physical impacts of a changing climate and the proliferating trends in sustainable investments in order to maintain and generate value over time.
By 2050, cities are predicted to be home to two-thirds of the world’s population. Cities can be uniquely vulnerable to natural disasters; however, investing in resiliency strategies can deliver major impact for a city’s growth. Resilient cities proactively protect themselves from natural hazards, build self-sufficiency and become more sustainable. They also benefit from less property damage, business interruption and revenue loss. This is paramount to ensure that residents and property owners feel secure in their day-to-day lives.
Planning for resiliency is one facet of a broader environmental, social and governance strategy, and it may soon be required in annual reporting. The proposed SEC rule, as written in draft form, would require companies to disclose risks from physical climate-related hazards, such as fires or floods, by location and by share of assets exposed. Under the proposed rule, filers would have to disclose strategic, financial and operational impacts as well as their governance and risk management processes.
Constructing a climate-aware portfolio by including physical risk evaluations can be a meaningful driver of long-term resiliency. A climate-aware portfolio should look outside of the physical boundaries of individual properties and consider how local jurisdictions are or are not preparing for climate risks. A municipality that has made little investment toward resiliency could catalyze a property’s transition to becoming a stranded asset.1 Jurisdictions that have been intentional in their investments in resiliency have seen the benefit of proper planning. Boston recently developed its Resilient Harbor Vision in anticipation of potential sea level rise, extreme heat and flooding.2 In Iowa, the Department of Transportation, Iowa State University and the Iowa Flood Center were able to prevent flooding using climate forecasting and streamflow modelling to forecast peak discharge flows from two basins that previously flooded major roadways.3
Organizations such as Resilient Cities Network and ULI have developed tools to assist screening for a resilient investment. The Resilient Cities Network developed the Resilient Infrastructure and Diversity and Equity Scorecard, which assesses risks and equity components of an investment from the outset. And ULI recently launched its second iteration of a Resilient Land Use Cohort, which includes a network of community members and experts from selected U.S. cities and advises members on the impacts of climate change and enhancing social equity through land use and development strategy.
As more communities manage future risk, collaboration will be essential. Over the past year, the passings of the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act have enabled at least $500 billion in green technology investments.4 These pieces of legislation should result in significant research and development to support resiliency in the U.S. To capitalize on new funding opportunities, municipalities, climate experts and the private sector must overcome coordination challenges and be ready to act.
The earlier an investment is made for purposes of resiliency, the more cost- and time-effective that investment will be. Every dollar spent toward hazard mitigation provides exponential dollars in future benefits. A safe, resilient community results in greater confidence and security in assets and investments.