ESG agenda for cities

Cities are the most important centers of social and economic activity in the modern world. However, when the basic needs of individuals and communities are not met and are ignored by local authorities, megacities become epicenters of social and economic inequality.


Cities already account for 75% of global greenhouse gas emissions, and taking into account the fact that the urbanized population is projected to double by 2050, the intensity of the impact of the urban environment on nature will grow exponentially and it will be extremely difficult to cope with the upcoming problems without timely development of effective sustainable development strategies. Poorly managed megacities can negatively affect the natural environment and lead to more pollution, increased waste generation, degradation of the animal and plant world.


Cities consume a large amount of resources, produce waste and pollute the environment, which contributes to a number of global changes, including depletion of natural resources, changes in land use, loss of biodiversity, high energy consumption leads to increased greenhouse gas emissions and increased greenhouse effect. These problems should be taken into account and, if possible, leveled in the long-term construction of urban policy.


The risks of climate change and the increasing needs of citizens are pushing municipal authorities, as well as significant business structures, to gradually transition to a low-carbon and socially oriented economy. In order to improve the quality of life, cities should develop public infrastructure, expand economic opportunities, improve the quality of medical care, while effectively using natural resources and reducing the amount of waste generated.


Sustainable cities imply achieving a balance between the ecological, economic and social components of urbanization. By implementing ESG principles, cities create opportunities for predictable and efficient entrepreneurship, as well as attract investments to solve sustainability problems, improve the quality of life and simultaneously ensure sustainable economic growth. The increasing demand from investment communities and international organizations for the implementation of ESG principles in urban planning and social policy in order to reduce investment and humanitarian risks is evident throughout Europe, Asia and North America.



Special attention is paid to the preservation of environmental values, public well-being, competent management and planning of sustainable development to solve growing problems. Modern residents assess the quality of the urban environment not just by the availability of jobs and housing or the level of wages, but put forward requirements for landscaping and natural connections, the level of social security and the quality of management in general. Ignoring these factors causes a decrease in ESG status and a gradual outflow of the population to more favorable places, the city loses investments, taxes and begins to gradually die out.


By implementing modern solutions, cities and municipalities can use green bonds to finance projects in the field of sustainability and pursuing social goals, improving the quality of life and responsibility to society.  Various corporate solutions are designed for urban planning with an emphasis on environmental friendliness, social responsibility, the use of safe materials, as well as waste management. Of course, here it is not necessary to consider the ESG factor directly from a corporate point of view, but, on the other hand, residents are a kind of clients and employees to whom the city provides services and it must be done qualitatively in order, as in business, to attract finance and resources, as well as to increase competitiveness.


In the process of urbanization, both the health and well-being of people and the preservation of natural urban ecosystems should be taken into account in order to achieve sustainability in the interaction of man and the environment. In planning urban development and to combat social stratification, marginalization and ghettoization, it is important to eliminate social inequalities, as poor areas create a negative environmental and criminogenic effect for the entire city.


Environmental risks are the biggest problem for the infrastructure industry of cities. Modern developers are focusing on building more environmentally friendly green buildings that reduce energy consumption and carbon dioxide emissions, achieving a reduction of 30% or more, minimize water losses and improve the quality of life and health of people.


Green buildings not only have a positive impact on the environment, but also bring numerous benefits to the developer and owner, contributing to lower operating costs, increased property values, higher occupancy and higher rental income.


Five trends in sustainable urban development:

  1. Promoting the agenda of achieving carbon neutrality (zero greenhouse gas emissions).


Cities are facing increasing pressure from investors, tenants, the government and residents to address the growing needs of climate change. As part of this process, it is necessary to ensure the monitoring and reporting of greenhouse gas emissions associated with real estate construction and energy use.


To achieve carbon neutrality in cities, for example, the following measures are taken:

  • In Stockholm (Sweden), by 2040, it is planned to completely switch to renewable energy coming from wind and solar. Bike paths, subways and buses are developing, and personal cars are gradually being replaced.
  • In Helsinki (Finland), it is planned to modernize old houses and introduce stricter standards for the construction of new buildings by 2035 to reduce the consumption of thermal energy for heating.
  • In Copenhagen (Denmark), by 2025, they are going to install solar panels on the roofs of municipal buildings and hundreds of wind turbines around the city, reconstruct old houses, reorganize energy supply and convince residents to abandon personal cars.


  1. Application of non-financial reporting systems and inclusion in sustainability ratings.


To achieve transparent and detailed reporting and measurement of the effectiveness of ESG policies, there are assessment systems and standards such as GRESB, CDP, GRI and SASB that take into account social, economic and environmental aspects. Some of these systems help to evaluate ESG aspects of real estate and urban infrastructure, some industrial production facilities, while others are aimed at evaluation from the point of view of organizations.


For example, in Russia there are ratings evaluating the sustainable development of cities, such as:

  • environmental rating of cities from the Ministry of Natural Resources together with Ernst & Young, covering up to 80 cities of the Russian Federation;
  • competition for the most comfortable urban settlement, held by the Ministry of Construction and Housing and Communal Services;
  • rating of digitalization of Russian cities, compiled at the University Skolkovo, evaluating only 15 million-plus cities.


  1. Combating climate risks.


Climate change creates two main types of risks that threaten sustainable investment in urban projects:

  • transition risk is focused on the economic impact – climate policy change and transition to a low-carbon economy;
  • physical risk is the impact of natural disasters on the assets and costs of operating urban property.


The TCFD system helps to assess the economic effect of the implementation of climate risks in a structured manner.


  1. Modernization of existing buildings.


Most of the existing buildings in the process of implementing the principles of sustainable planning undergo significant modernization, are equipped with effective engineering solutions reducing energy consumption, thereby reducing CO2 emissions embark on the path of decarbonization. Much attention is paid to the issue of waste management in order to reduce the volume of their formation, as well as the development of options for processing the maximum possible number of fractions.


  1. Focusing on building materials


The life cycle of a building begins with the production of building materials, passing into the stage of construction, operation, and the subsequent completion of the life cycle of the object. The stage of operation has not only a significant impact on the environment, but also has a great impact on the health of residents. Given that people spend more than half of their time indoors, it is extremely important that developers design and maintain buildings that promote well-being through the use of environmentally friendly building materials.


According to the European edition of STARTUPS & PLACES, the rating of cities that comply with ESG principles is as follows:

  1. London – has the largest number of advanced startups secured by investment and public support;
    Moscow is a leader in the aspect of “management” due to the active promotion of innovations by the government and national corporations, as well as twice ahead of other European capitals in the field of creating EdTech solutions in online education;
    Paris is the second largest startup market in Europe with comprehensive support and an innovative corporate culture;
    Berlin – has the second largest number of business accelerators supporting startups;
    Barcelona is the leader in the number of innovations related to public transport and urban governance;
    Stockholm – directs investments to environmentally oriented startups;
    Munich – stands out in the category of “Innovative Culture” and is distinguished by a significant amount of spending on research and development of approaches to doing business;
    Amsterdam is an innovator in the field of solutions for eco–friendly urban mobility, as well as a leader in promoting international community relations;
    Madrid – stands out in the field of spreading innovative education and the volume of R&D spending;
    Milan stands out for its diversity, inclusivity and strong community of entrepreneurs, as well as leadership in the number of startups created in the social sphere per capita.


In the seventh annual Cities in Motion 2020 index, the IESE Business School compiled a list of cities in the world by level of development, where the top ten included: London, New York, Paris, Tokyo, Reykjavik, Copenhagen, Berlin, Amsterdam, Singapore and Hong Kong. Moscow took 87th place, St. Petersburg -124, Novosibirsk – 159.


In the rating of sustainable development of Russian cities for 2020, the following ten leaders were identified: Moscow Khanty-Mansiysk Tyumen Kaliningrad Krasnodar St. Petersburg Kazan Odintsovo Krasnogorsk Yuzhno-Sakhalinsk and Surgut. The position of the city was determined on the basis of a set of data on demography and population, social infrastructure, urban infrastructure, economic climate and environmental situation.

The main factors contributing to the leadership of these cities are:

  • high investment attractiveness and potential for improvement of modern technological sectors of the economy and digital services;
  • availability of opportunities for obtaining high-quality secondary and higher education;
  • high-quality urban and social infrastructure;
  • attractiveness for intraregional and interregional migration;
  • a diversified labor market — the presence of large industrial enterprises and a developed service sector;
  • relatively high rates of housing construction and renovation of housing stock;
  • the purchasing power of the population is quite high.


HPBS provides the following services in the field of ESG agenda development in cities:

  • Reduction of the carbon footprint and carbon neutrality of territories

Reduction of greenhouse gas emissions from the construction and operation of urban real estate;

  • Urbanization and sustainable development of territories

Creating green areas, reducing resource use and reducing environmental pollution;

  • The economic effect of climate risks. Disclosure of TCFD information

Online tools for ESG risk management and ESG data disclosure;

  • Analysis of scenarios for the development of territories

Climate risk analysis. Assessment of projected climate changes and their economic effect.

Author: Vladislav Rossinsky

ESG Non-financial reporting standards

Mechanism for increasing the ESG rating in construction
Service: ESG Business Transformation
ESG development of the company’s climate strategy

Carbon footprint optimization and compensation concepts