Economic viability
Cities enjoy unprecedented prospects as hubs of economic opportunity and engines of national growth. However, cities are facing extraordinary challenges.
Among these, the most pressing challenges include: climate change – valuable assets are potentially vulnerable to threats from climate change but they also play a central role in actively combating and adapting to climate change impacts; demographic imbalance – often dramatic and diverse in different countries and continents, from sharp growth prevailing in many emerging economies, to aging and declining populations in several of the richer economies; finally, the current economic turbulence – this is likely to have long-lasting impacts, particularly on the ways we finance urban investment requirements, and determine and evolve policy contexts.
Against this background, we suggest that a comprehensive yet focused strategy is needed if local and central governments, including investors and stakeholders, aim to be effective in their responses to these challenges. The present financial crisis has produced a significant global tightening of credit which has made it more difficult for investors to leverage debt in order to finance sustainable urban investments. As a consequence, high cost considerations may ultimately discourage decision-makers and private investors from investing in innovative systems as the better alternative for urban infrastructure provision.
We need therefore a holistic vision in the analysis of economic, financial and policy challenges and in the design of ways to address these complex challenges. The key element is the necessity to understand that the urban capital assets, including the natural capital assets, are integrated and interdependent elements in the urban context, and therefore we propose the concept of effective management of assets as key for devising a focused response, where “assets” encompass both the material and the immaterial sphere, and “management” refers to both investment to renew and adapt assets and also to the sustainable operation and use of existing resources.
From this perspective, economic viability is a vital contributing factor to creating sustainable, low-carbon, resource secure, liveable environments. However, fully understanding the interactions of these elements eludes us. What is required is a re-envisioning of city financial models that are not constricted by current urban investment silos (e.g., waste, energy, health, education, transport) and that maximise urban capital assets (e.g., human capital, natural capital and fixed capital). Such an urban green portfolio approach goes beyond the simple (and limited) urban returns of investment. Cities must be globally competitive and we need to unlock investment via innovative financial and business models.
