Asian cities in eye of environmental storm – global ranking

Companies operating and investing in Asian cities are going to face an increasingly stiff test to their resilience. According to the first instalment of our Cities@Risk series, which ranks the world’s 576 largest urban centres on their exposure to a range of environmental and climate-related threats, 99 of the world’s 100 riskiest cities are in Asia, including 37 in China and 43 in India.

Our data reveals Jakarta is the riskiest city, but across the globe 414 cities – with over 1.4 billion inhabitants – are deemed to be at high or extreme risk from a combination of pollution, dwindling water supplies, extreme heat stress, natural hazards and vulnerability to climate change. With rising emissions driving weather-related risk and populations growing in many cities across the developing world, the risks to citizens, real assets, and commercial operations are only going to rise.

1.4 bn

city dwellers facing high or extreme environmental risk

Of course, companies and investors with a focus on assets such as real estate cannot just pick up and relocate to a ‘safer’ city. And given our analysis shows no cities are entirely risk free, it is vital that organisations conduct granular assessments of environmental risk so they are best placed to overcome disruption from chronic climate risks and significant natural hazard events.

Indian cities on the environmental frontline

The global index, which draws on nine of our risk indices to evaluate the liveability, investment potential and operational risk landscape of cities with a population over 1 million, reveals that India has 13 of the world’s 20 highest risk locations. The capital, Delhi, is rated as the second highest risk city globally and is followed by the likes of Chennai (3^rd), Agra (6^th) and Kanpur (10^th). Close behind are Jaipur (22^nd), Lucknow (24^th), Bengaluru (25^th) and Mumbai (27^th).

Pollution is the main threat to the health of the country’s huge urban populations, with Indian cities making up 19 of the 20 most at risk in our Air Quality Index. Noxious air caused almost one in five deaths in India in 2019, resulting in economic losses of USD36 billion; meanwhile, water pollution is responsible for almost USD9 billion in annual health costs and causes 400,000 deaths each year.

The worst-performing city in the ranking, Jakarta, is also plagued with dire air pollution, but compounding this are perennial threats from seismic activity and flooding. It is also subsiding at such a rate that Indonesia’s president, Joko Widodo, is seeking to relocate the capital. A similar mix puts its Indonesian counterparts Surabaya and Bandung in 4^th and 8^th place respectively, while also contributing to Pakistan’s two most populous cities, Karachi (12^th) and Lahore (15^th), featuring in the top 20.

Outside Asia, the Middle East and North Africa (MENA) has the largest proportion of cities categorised as high risk. Extreme water stress and the impact of natural hazards, such as earthquakes, means populous Turkish and Iranian cities dominate the region’s worst-performing urban areas. And while Lima is the most at-risk city in the Americas – and the only non-Asian city in the top 100 – diverse threats in Mexico City, Santiago and Los Angeles leave them not too far behind. Meanwhile, the most at-risk cities in Europe score at a similar level to those in Africa – but they face a range of very different threats, highlighting the importance of exploring what’s driving those risks.

East Asian cities most exposed to natural hazards

The picture changes when looking solely at the impact of natural hazards and the exposure of economies, populations and transport infrastructure. Asia is still most at risk, but the cities are different. Topping the list are flood-prone Guangzhou and Dongguan, followed by Osaka, Tokyo and Shenzhen, which face a host of threats from earthquakes to typhoons.

African cities’ low-risk scores stand out in comparison to those of major world cities, such as New York, London or Rio de Janeiro. Some MENA cities have a similarly low level of risk – the Abu Dhabi, Dubai and Sharjah emirates all face lower natural hazards risks than Helsinki, Europe’s least exposed city.

Flooding and seismic risks are the key threats to Europe’s higher risk cities, which share a concentration of highvalue assets and infrastructure, a trait mirrored by major centres in Asia and the Americas. Typically, major cities in North America, Europe, China and Asia Pacific are also better placed to respond to and recover from natural disasters than their counterparts in Africa, MENA, Latin America or much of Asia, according to the data.

Pollution clouds health outlook for huge numbers of urban citizens

Focusing on air and water pollution gives a more even spread of risk; at least outside Asia, which again is home to the highest risk cities in the graphic below. The ‘airpocalypse’ in urban areas across China and India is well documented, but high levels of water pollution go more under the radar. Together, China and India account for 286 million of the 336 million people living in cities at extreme risk for pollution; include high-risk cities and their total rises to 642 million.

The air quality in European cities is relatively benign in comparison, with the possible exceptions of Warsaw and Milan. But again, poor water quality across the continent heightens its cities’ risk profiles, leaving Paris and Moscow straddling the high-risk mark. This is the same situation across MENA and the Americas, although most Canadian cities boast reassuringly clean air and water.

Climate change amplifying environmental risks – Africa most vulnerable

A significant danger for many cities is how climate change will multiply weather-related risks. Higher temperatures and the increasing severity and frequency of extreme events such as storms, droughts and flooding will probably change the quality of living and economic growth prospects of a large number of locations.

As shown in our Climate Change Vulnerability Index, African cities will come off worse given the continent is not only most exposed to climate extremes but is also least able to mitigate their impacts. Africa’s two most populous cities, Lagos and Kinshasa, are among those at highest risk, while South Africa’s relative wealth and lower exposure cushions its major urban centres. The rest of the world is not immune though. Other major population centres facing extreme risks from climate change include Caracas, Karachi, Manila and Jakarta, alongside Yemen’s war-torn Sanaa.

Conversely, COP26 delegates will be pleased to see Glasgow is the city with the least to fear from climate change.

Europe and Canada offer safe havens from environmental risk

So where should organisations look for less risky cities? In general, Europe is the right answer – the continent is home to 14 of the 20 least risky cities, including Krasnoyarsk in Siberia (576^th), Oslo (575^th), Glasgow (573^rd), Helsinki (569^th) and Copenhagen (563^rd). Vancouver (574^th) and Ottawa (571^st) gate-crash Europe’s domination.

But companies can’t simply move to Europe: they need to consider factors such as the labour market, security, the human rights situation and government support to name just a few (we’ll be covering those issues in upcoming instalments of our Cities@Risk series). But operators needing to stay close to regional markets and suppliers do have options.

Cairo looks a good alternative for MENA, with one of the only low-risk water stress scores in the region and comparatively better water and air quality. In South America, Uruguayan capital Montevideo, Paraguayan counterpart Asunción and Argentina’s Rosario rank alongside Copenhagen and Montreal in the global list. Even in India, while choices are slim organisations looking to mitigate environmental risk could consider Kolkata, which is towards the lower end of the high-risk bucket. Otherwise, Asia’s lowest risk cities are Mongolia’s Ulaanbaatar and, perhaps more practically, Shizuoka in Japan.

ESG risks rising up the resilience agenda

Equally, companies need to recognise the costs of remaining in an area of high environment risk from increased power demand for cooling and air filtration or from sourcing reliable, clean water supplies.

What our analysis shows is that environmental risk needs to be a central consideration when it comes to improving the resilience of your business, investments or real estate portfolio. By identifying material risks and stress testing operations and strategies against different future scenarios involving those threats, you’ll gain a clearer view of the costs and benefits of investment decisions.

Organisations unable to account for the full spectrum of environmental threats and impacts will face some difficult conversations.

Aligning climate risk assessments with the recommendations of the Task Force for Climate-Related Financial Disclosures (TCFDs) is a great start. But with investors and regulators increasingly concerned about broader ESG issues, organisations unable to account for the full spectrum of environmental threats and impacts will face some difficult conversations.