This is an excerpt from 'The Future of ESGTech 2024' report.
“By 2050, 68% of the world’s population is projected to be urban,” according to the United Nations. This reinforces the idea that sustainable cities will be important to the overall well-being of humankind.
Beyond the actual objectives, plans, and approaches associated with creating environmentally resilient, socially and economically sustainable, regeneratively-focused cities, there needs to be strong awareness of the human impacts of these initiatives. Who
are the people or organisations that will benefit, or might be impacted in negative ways, by the implementation of these policies? Might behavioural science help guide the creation and implementation of a “just transition” in a given locality?
Experts from the environmental education, social justice, management consulting, and finance fields tell us that it’s important to carefully explore “all the angles” of proposed sustainability and resilience policies and programs in cities around the globe.
We asked two of them to answer the following questions:
- Who are the potential winners and losers when cities change to meet sustainable finance goals and funds are raised to improve the environment of inhabitants?
- What mitigations should be considered? What is the role of behavioural science to inform this change?
Brodie Boland, partner, McKinsey & Company, said sustainability measures have many powerful and positive impacts, when properly planned and implemented, within communities. A major consideration, Boland explained, is to look beyond the direct outcomes of
a particular policy or project to its ancillary benefits as well.
“The focus of sustainable finance investing in cities should be in areas that generate significant co-benefits. Many sustainability efforts also have positive impacts on health, equity, resilience, and economic growth.” Some immediate and lasting benefits
can come from taking sensible and often widely acceptable steps, Brodie said. “Investing in greener buildings can improve the health of those within them, increase transportation access for residents of all income levels, and reduce risks to residents from
hazards such as heat waves or storms. When done right, sustainable cities are better cities.”
However, re-making a city’s infrastructure and operations is not a ‘slamdunk’ exercise for any city. Indeed, none of this is easy, said Laimonas Noreika, CEO and co-founder of European agricultural lender HeavyFinance. “The transformation of cities towards
sustainability is a complex process, and the role of behavioural science is paramount in ensuring a 'just transition.' When cities change to meet sustainable finance goals and raise funds to improve inhabitants' environment, it's crucial to consider who the
potential winners and losers are in this transition.”
There are potential “winners” from the move to more environmentally-centric modes of governance and operation. The Lithuania-based Noreika said winners “may include residents who benefit from improved infrastructure, reduced pollution, and enhanced quality
of life. On the other hand, potential losers might comprise vulnerable communities displaced by urban development or those facing increased costs due to sustainability initiatives.”
Noreika cautioned policy-makers not to neglect an important step: carefully consider ways to mitigate potential harm caused by well-meaning sustainability measures. That’s one area, he felt, behavioural science is critically important, by “providing insights
into human behaviour, decision-making, and preferences. It can inform the design of policies and interventions that minimise negative impacts on vulnerable populations.”
Psychology and behavioural economics can also be important factors in bringing all parties involved on board with solutions. It can help, he explained, “in public acceptance and engagement with sustainability initiatives”, sharing an example of one way this
might work. “Policymakers can design communication campaigns and incentives that encourage proenvironmental behaviours, making the transition smoother and more acceptable to the community.”