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Making the case for investment in resilient infrastructure

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Lisa Dickson, Associate Principal and Director of Resilience for the Americas, Arup, writes a guest blog on financing urban infrastructure and how the case for resilience can be made.

The American Society of Civil Engineers publishes a report every four years that assesses the state of infrastructure in America. In 2017, American infrastructure scored a D+. This reflects both an ever-growing backlog of deferred maintenance and the inability to invest in much needed improvements. In terms of the financial impact, this amounts to nearly 4 trillion dollars, which is more than 20% of US GDP.

Layered on top of this is the ever-increasing impact of climate change. In 2017 alone, the US experienced well over $300 billion dollars of damages that were a direct result of climate. Since 1980, the US has experienced more than 1.5 trillion of weather-based impacts. This results in monies being diverted to reactive, recovery efforts, and less that is made available for strategic development. In short, the endgame is defined by lost opportunities and not growth.

The challenge becomes how to build our way towards a more sustainable and resilient infrastructure system. How do we modify the investment scheme to encourage consideration of long-term, resilient infrastructure? What are the current barriers and how might we reconsider our approach to incentivize investment in more resilient systems? The following is a primer to spur those discussions.

 

Understated risk

One of the primary barriers to investment in resilience is the fact that risk is often understated. Understated risk means that resilience itself becomes fundamentally undervalued. An example of this can be found in how the insurance industry has traditionally assessed flooding risk. An asset’s risk of flooding is calculated for that particular year, then reset. However, if that risk was assessed cumulatively, let’s say over 50 years, that 1% chance of flooding translates into a 39% chance of flooding over the life cycle of the asset. An owner’s overall perception of risk and motivation to act would likely change significantly if risk were considered in this way.

 

Ownership of risk

Another challenge is an understanding of who actually owns that risk and how much of it may or may not be subsidized by other public agencies or insurance. This lack of clarity fundamentally undermines the sense of relevancy and personal investment. However, recently proposed federal legislation has started to introduce the concept of proactively identifying and reducing some of those vulnerabilities, or risk a reduced payout from FEMA following a natural disaster. In the larger market, both Moody’s and Standard & Poor’s are starting to consider how climate preparedness (or lack thereof) may influence a city’s overall bond rating. Finally, the Task Force on Climate Disclosure is providing guidance to private entities to disclose their risks to climate change – not only with respect to emissions, but with a much more focused approach to physical adaptation and preparedness considerations. In fact, some are predicting that these disclosures may become mandatory, much in the same way that entities must now disclose their pension liabilities.

 

Funding versus Financing

Although often used interchangeably, there is an important difference between funding and financing. While financing focuses on how the “deal will be brokered” (e.g. will it be a long-term loan, with what type of interest rate, etc.) funding focuses on what monies will be used to pay back that debt. There is a plethora of financing options that readily exist to broker infrastructure investments. However, the challenge is to solve for the revenue stream that must be generated to pay back that debt.

Funding can be raised in many ways including tolls, taxes, availability payments and user fees. However, exacting these revenues is much more about making a convincing argument about the overall value of that benefit and, in the end, the return on investment for those that are paying into the system. Funding is essentially tied to society’s perceived value of a resource or service. Value is an inherently subjective measure – and it is not always rational. We just need to look at how water, an essential live-giving resource is priced (or valued) in relation to other non-essential resources.

This is where governance comes in. Governance plays a significant role in how that value is captured and monetized at a societal level. It is the linchpin to many of these funding challenges and must be addressed at the same time as we solve for the technical and economic challenges of investment in resilience.

 

 

The perceived revenue challenge

Finally, there is a widely held sentiment that there is insufficient funding to address the lack of resilience in our infrastructure systems. However, there is a competing school of thought which argues that public entities – cities, in particular – have sufficient revenue at their disposal to solve for all of this. The issue is more of how that revenue is captured and distributed and not about whether it even exists. In their book on The Public Wealth of Cities, authors Dag Detter and Stefan Folster argue that American cities have sufficient wealth within their jurisdictions. In their estimation, cities own 90% of the GDP (approximately 15 trillion dollars) – greatly exceeding the current $3.7 trillion in municipal debt. Examples of Singapore’s and Hong Kong’s urban wealth funds are used to illustrate how similar structures could be translated in the US. The key is to optimize the underperforming utilities and real estate holdings, while at the same time shifting attention from short-term spending to investments that are focused on improving the quality of life. If these public assets were managed in such a way, the authors argue that a city could easily generate a net yield of 3% or more to solve for other issues. In their assessment, the primary barrier to enacting this is governance.

 

About our guest blogger

Lisa Dickson is an expert in translating the risk of climate change into resilient solutions within the built, social, public health and natural environments, including economic considerations.  She is Associate Principal and Director of Resilience for the Americas at Arup. Lisa has led multiple climate change projects including work for the City of Boston, Washington D.C., City of Cambridge, Massachusetts, the Army National Guard, Logan International Airport, several coastal municipalities, in addition to her current work with Partners Healthcare and New Jersey American Water. She has been invited to the Pentagon and National Guard Headquarters in DC to advise them on her work related to climate security.

 

This article was first published on 5 July 2018 at NewCities

Categories: Featured

Resilience to extreme events – Hawai’i’s response to the Kilauea eruption

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When a volcano erupts, constant communication between leading scientists and emergency responders and planners is absolutely essential. Guest blogger, Michael S. Bruno, from the University of Hawai‘i at Mānoa, shares his thoughts on the response of Hawai‘i in terms of resilience to the current events.

O’ahu is far enough away from the Big Island that we have been relatively unaffected with just some smoke when the wind shifts from that direction. The residents of the region around the volcano however are going through a very difficult time. For our university’s campus in Hilo (close to the volcano), this is a very nervous time as students are in the midst of final exams, and many of them and their families live in the vicinity of the volcano.

Our faculty is very active in the response to the eruption. Our research program in this domain of science is one of the best in the world and the State of Hawaii’s State Volcanologist is one of our senior faculty, Professor Bruce Houghton.

Professor Houghton and his research team have been on the volcano since the very early stages of the eruption, and they monitored the underground lava flows that eventually led to the fissures and damaging lava flows many km from the volcano summit. They are still there today, trying to ascertain the volcano’s next move. For the latest news from local sources see Hawaii News Now, or Vox.

In addition to our volcano experts, we have teams of meteorologists and atmospheric modellers working closely with Federal and State of Hawaii officials to predict the possible movement of dangerous sulphur dioxide gases from the eruption. The movement can change dramatically with the frequent wind shifts we see in the area, and so the danger to surrounding communities can elevate over a timespan of only minutes.

This is certainly a time when the constant communication between teams of leading scientists and emergency responders and planners is absolutely essential.

When I arrived at the University of Hawaii I was struck by the very close relationship between the university and the State. This event is demonstrating the value of the trusted relationship that has developed over years of working together. It has resulted in a well-informed response to the event, including advance evacuations from the community before the roads became impassable, and ongoing, real-time planning for further action should the conditions change or worsen.

Michael is on the Resilience Shift Board as well as being the University of Hawai‘i’s Vice Chancellor for Research, and Interim Vice Chancellor for Academic Affairs.

Images below show shots Michael took of the volcano last year. Featured image is copyright National Parks Service Hawai’i  (nps.gov) and shows surface flows on the coastal plain.

Categories: Featured News

The engineer’s journey to resilience – what’s yours?

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Xavi Aldea

How has resilience become a popular topic among engineers from different backgrounds? In our experience, engineers have followed different routes in their journey to resilience. Mostly, this is about broadening classic engineering approaches, breaking down ‘silo’ thinking and incorporating a connection with other disciplines – which, in many cases, are not necessarily close to engineering at first sight. In other words, engineers have had to think bigger in order to achieve their goals.

But what are the engineers’ goals? To put it simply, and according to the Royal Academy of Engineering, engineers ‘make things, they make things work and they make things work better’. They also ‘use their creativity to design solutions to the world’s problems’. In today’s world, the inherent complexity of infrastructure and urban systems, together with the added uncertainty arising, for instance, from climate change, raises a question on the classic boundaries of engineering, which are not enough to allow engineers to ‘make things work better’.

Breaking those boundaries, however, requires initiating a journey which can be quite different depending on the engineering experience and discipline that different people come from.

This journey begins in the top left of this diagram. This is what engineers have been taught in university – technology and safety.

Through their careers, engineers can travel through different paths which ultimately make them realise that resilience matters.

Path A:

A Civil Engineer who designs infrastructure and/or does quantified risk assessments. They become interested in resilience once they recognise future uncertainty and the limitations of sensitivity analysis/scenario modelling. In addition, they become aware of interdependencies between different systems, which adds more complexity to their usual risk assessments. Additional complexity can also be added because they realise infrastructure is part of a wider system, which includes people.  In our team, that would be Juliet Mian.

Path B:

A Civil or Structural Engineer who designs and/or plans infrastructure. They have already embraced Environmental Impact Assessments and Social Impact Assessments, and are comfortable with the role of engineering in sustainable development. In the next step, they also recognise people as part of the system, and understand the importance of equity in addressing global challenges. This means that they are already thinking in a holistic, integrated way, and they recognise that resilience is the way to approach this complex system. Because of their sustainability background, they are well aware of uncertainty resulting from climate change and planetary boundaries.   In our team, that would be Jo da Silva.

Path C:

Sustainability engineer who assesses the environmental impact of infrastructure by understanding how it connects with its surrounding environment. They have already embraced carbon footprint, water footprint, Life Cycle Assessment and/or Social Life Cycle Assessment and are comfortable with the role of engineering in sustainable development. In addition, they are also aware of the uncertainty resulting from climate change and planetary boundaries. The next step is adding the complexity of the 21st century infrastructure, which requires thinking in a holistic and integrated way, and recognising that resilience is a way to approach complex systems. In our team, that would be Xavier Aldea.

As long as you get there in the end…

In the end, we can probably say that all roads lead to Rome – incorporating complexity, uncertainty, vulnerability and essentially challenges and global change drivers of the 21st century leads to the need to expand classic engineering boundaries to allow engineers to continue to do their job, no matter where they started – and hopefully that will allow them to continue to make the world a better place.

What’s your journey?  Why not draw it and send it to us as an image so that we can see your path to resilience?

Categories: Featured

Turning theory into practice to kick off 2018

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For us, 2018 is about making things happen. With exciting developments happening in our projects, we are reaching out through workshops and events to work with collaborators across the globe. We are seeking additional partners to develop proposals with through our current call for applications with more to come later this year.

Categories: Featured News

‘Almost dangerous’: let’s collaborate!

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This post discusses the potential barriers to collaboration across infrastructure sectors.

Categories: Featured

Language: let’s talk some more

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The language of resilience may be getting in the way of efforts to work together. This post explores the potential issues.

Categories: Featured

Infrastructure resilience: where do we start?

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In setting out an ambitious programme to catalyse change in terms of how resilient critical infrastructure is planned, procured, delivered and maintained in practice – how do we know where to start, and what we really need to do?

Categories: Events Featured

Welcome Blog

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Hello and thank you for visiting us at the Resilience Shift. This is our first blog post.

We are a small team of resilience “veterans” – if you can call those with experience in a field that is only a decade or so old “veteran”. We are dedicated to catalyzing a shift in how designers and engineers, asset owners and operators, insurers, investors and regulators play their role in creating a more resilient future.

Categories: Featured News