11 ways cities can adopt an ESG approach to development and management

According to the latest UN Emissions Gap Report, the international community is not likely to meet the Paris Agreement emissions reduction targets needed to limit global warming to 1.5°C due to shortages in necessary policy-making and delays in solutions implementation. At the same time, according to the Global Risk Report 2022, livelihood crises and social cohesion erosion were ranked in the top four risks within the next five years.

Cities, which house almost 60% of the world’s population are also responsible for two-thirds of the world’s energy consumption, and consequently produce more than 70% of the world’s emissions. Further, increased urbanisation trends means that the role of cities in tackling environmental and social issues will continue to grow. Urgent action is required by cities to address these global challenges locally.

An environmental, social, governance (ESG) framework, can offer a structured approach for cities and local governments to assess and address these socio-environmental challenges, while also ensuring good overarching governance. By adopting such an approach cities can also ensure their progressing towards the 17 United Nations Sustainable Development Goals, given their strong correlation. Smart and emerging technologies such as digital twins and blockchain can help city governments develop convenient solutions to their socio-environmental challenges.

An ESG-based approach to a city encompasses ESG-related actions to be taken by local governments across three core and typical city government roles which are: regulations, strategic planning, funding/financing, service provision and monitoring.

The key focus of a city when considering the environmental pillar of an ESG framework should be centered around achieving net-zero targets, through aspects such as clean energy production, water and waste management, and air pollution:

1) Regulations: Accelerate the formulation and adoption of regulations that reduce emissions across different sectors such as mobility, energy, water and waste

New York City has shown strong leadership in enacting regulations to reduce building-related emissions as part of the Climate Mobilization Act, which aims to reduce emissions by 40% by 2030. The new regulations, titled Local Law 97, are focused on large buildings and their energy efficiency. In addition, Zurich recently amended the canton's constitution to include an article calling on authorities to create frameworks for resource treatment and closing the material loop, aiming to reduce waste as well as energy use.

2) Strategic planning: Integrate net-zero and other core environmental objectives into strategic city planning such as city masterplans

Singapore has developed and is implementing their Green Plan, which is a national movement to advance sustainable development in Singapore. The Green Plan seeks to position the nation to accelerate the achievement of their long-term net-zero emissions target through a focus on five key pillars: City in Nature, Energy Reset, Sustainable Living, Green Economy and Resilient Future.

3) Service provision: Ensure adequate and timely provisioning of services that help the city achieve net-zero targets

The Dubai Electricity and Water Authority (DEWA) launched the EV Green Charger initiative, which consists of providing charging solutions across the Emirate and procuring electric vehicles for the authority’s fleet. This initiative has contributed to the achievement of reduction targets of 16% less emissions by 2019, as set by the Dubai Carbon Abatement Strategy, while also helping to rapidly accelerate electric vehicle (EV) adoption in the Emirate.

The key focus of a city when considering the social pillar of an ESG framework should be centered around addressing social cohesion and inclusion:

4) Regulations: Develop policies and regulations to promote local social cohesion and the inclusivity of vulnerable groups

On a local level, the City of Sydney's inclusive and accessible public domain policy set guidelines for designing and upgrading public spaces and infrastructure to ensure equal access for people with disability.

5) Strategic planning: Address local social issues by incorporating them into local strategic plans with a clear implementation plan and tangible actions

Berlin's Diversity Strategy sets out measures to ensure equal opportunities and equal participation for all despite their age, gender, ethnicity and disability. These measures focus on two areas of action – namely promoting diversity in recruitment processes and inclusive public communication.

6) Service provision: Ensure adequate and inclusive provision of municipal services to all members of society

Six local governmental units in Albania were the target of the “Improving Municipal Social Protection Service Delivery” programme by the UNDP, which focused on accelerating the quantity and quality of integrated social care delivery on a local level. The programme focused on improving social services to marginalised populations of Albania and people with disabilities, in addition to children, women, migrants and refugees.

The key focus of a city when considering the governance pillar of an ESG framework should be centered around:

7) Ecosystem governance: facilitating partnerships between different stakeholders such as civil society groups, non-governmental organizations, international multilateral organizations as well as private sector and other governmental entities.

8) Transparency and accountability: ensuring transparency and accountability in the actions taken through timely and open communication of city decisions, budgets and progress updates.

9) Financing and funding: ensuring the efficient allocation of financing and funding to projects and initiatives that promote socio-economic development and environmental protection.

10) Supply chain management: adopting supply chain management policies (e.g. procurement policies) that considers the social and environmental impact of suppliers.

11) Monitoring and oversight: providing effective oversight and monitoring into the performance of the city across different environmental and social parameters.

Environmental: digital twins connected with real time IoT-based (Internet of Things) data are already being leveraged to help city governments with monitoring and managing their environmental plans. Several major US cities are already using digital twin models developed by Cityzenith to help better manage energy consumption and emissions of city buildings, as part of the Clean Cities – Clean Future initiative.

Social: The metaverse offers a solid opportunity to protect marginalised and underrepresented people and promote inclusion and accessibility of services and experiences to a wider population. One example of a city using this is the 'Harmony at London Wall Place', a mini-metaverse experience launched by the City of London. The experience includes AR-powered interactive artwork and music exhibitions that can be accessed and explored at the City's cultural district. Such a use of technology ensures that thousands of people can easily gain access to these experiences, promoting inclusion. As the technology matures, cities and local governments can consider organizing community events and delivering social services on the metaverse.

Governance: Blockchain technology can be applied to smart city management, such as in trading local energy surplus. Neighbours in New York’s Brooklyn are trading excessive solar power generated by their own rooftop panels on a blockchain platform. The self-sufficient microgrid powered by cryptographic technology not only enabled cost-efficient energy transactions, but also contributed to energy resilience in the event of city black-outs, such as hurricanes.