Verisk Maplecroft, a UK-based risk management consultancy firm, recently published their Climate Change Vulnerability Index (CCVI) report that shows 80% of the world’s fastest growing cities face extreme climate change risks. While most of these cities are in Africa and Asia, which account for some of the world’s fastest growing economies, the challenges – and solutions - of climate change are also very much close to home. To address these challenges, former New York mayor Michael Bloomberg has committed $70 million to the Climate Challenge program within the American Cities Initiative, an investment intended to support policies that Bloomberg sees as critical. San Diego and Los Angeles rounded out a list of 20 cities that will receive funding to fight the effects of climate change and create environmentally sustainable solutions. According to Bloomberg Philanthropies, “San Diego city officials led by Mayor Kevin Faulconer pledged to work with Bloomberg and his partners to make public and environmentally friendly transit choices more accessible to residents, incentivize land owners to build housing developments closer to public transit access points and implement an energy plan based solely on renewable energy sources.”
Any climate change initiative that San Diego participates in also has an impact on the bi-national territory (and vice versa), as economic and social interdependence increasingly develops between San Diego and Tijuana. Additionally, it has significant implications for infrastructure development across both regions. According to the California’s Fourth Climate Change Assessment (San Diego Region), almost 14 million personal vehicles and buses crossed into the U.S. at San Ysidro and over 900,000 trucks crossed into the U.S. through Otay Mesa (Bureau of Transportation Statistics, 2017). The region is at the forefront of cross-border development due to a history of innovation across numerous industries in California, and as Tijuana is now the sixth largest and fastest growing city in Mexico. Added to these factors, the complex terrain and geographic constitution of the Cali-Baja region makes it particularly vulnerable to climate conditions. They report that temperatures are expected to increase 5-10 degrees (F) by the end of this century, which essentially means greater probability of wildfires and substantial sea level rise, which will affect beaches, sea cliffs, real estate, infrastructure and other amenities. Bi-national coordination can benefit both communities if they can “navigate the complexity posed by different governance and community structures.”
One such collaboration is the Green Tijuana/San Diego Verde project run by Tijuana Innovadora – its main objective is to establish a bi-national agenda on the green economy, among other mutually shared economic and social issues. Specific to San Diego, the region’s main governing body for transportation infrastructure development, SANDAG (San Diego Association of Governments), published a White Paper on Climate Change earlier this year and which outlines the county’s plan to reduce greenhouse gas (GHG) emissions by 2050. Not surprisingly, vehicles make up the most (37%) of the areas GHG, followed closely by electricity (23%) and natural gas (8%). The key reduction measures include:
implementation of 50 percent Renewable Portfolio Standard,
doubling energy savings,
lessening carbon intensity by 18 percent by 2030,
transition to zero and low-emission vehicles, cleaner transit systems, and reduction of vehicle miles traveled.
So what does mean for investors? There are both opportunities and risks when assessing infrastructure projects in particular, and increasingly risk management firms like Verisk Maplecroft are including climate change factors into their investment portfolios. Currently, at least 20 major management consulting firms, including EY, PwC, Booz & Co, Morgan Stanley, integrate climate change adaptations into their projects. The need for such adaptations and assessments will only increase as projects like the Climate Challenge become common. Due to its unique location and focus on innovation, San Diego is getting ahead of the curve and hopefully also making measurable, meaningful headway in curbing the effects of climate change. Ultimately, this introduces additional, sometimes unconventional opportunities for investment -- whether in green energy, blue technology, automotive innovation and mass transportation projects. We will be sharing more about these projects in the weeks and months ahead.