ESG and Urban Planning: Creating Sustainable Cities

Environmental, social, and governance (ESG) investing refers to how companies score on responsibility metrics and standards for potential investments¹. It is an increasingly important consideration in urban planning and development. By integrating ESG factors into the planning process, cities can create more sustainable, resilient, and equitable communities. This report explores the integration of ESG considerations into urban planning and development, including zoning regulations, green infrastructure, and community engagement.

What is ESG?

ESG stands for environmental, social, and governance. It refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business¹. ESG criteria consider how a company safeguards the environment, manages relationships with employees, suppliers, customers, and the communities where it operates, and measures a company's leadership, executive pay, audits, internal controls, and shareholder rights¹. It's typically used in the context of investing, although it also applies to customers, suppliers, employees, and the general public².

The three dimensions of ESG are:

• Environmental: This criterion examines how a company performs as a steward of the planet. It may include a company's energy use, waste and pollution, how it conserves natural resources, and how it treats animals³.
• Social: This criterion examines how a company manages relationships with employees, suppliers, customers, and the communities where it operates³. Factors considered include inclusivity, gender, and racial diversity; employee engagement; customer satisfaction; data protection and privacy; service to the community; human rights; and labor standards⁴.
• Governance: This defines a set of rules and best practices, along with a series of processes that determine how an organization is managed and controlled³. It aims to ensure transparency and industry best practices and includes dialogue with regulators. Factors considered are...source

Why is ESG Relevant to Urban Planning?

ESG is relevant to urban planning because it provides a framework for considering the environmental, social, and economic impacts of development decisions. By integrating ESG factors into the planning process, cities can create more sustainable, resilient, and equitable communities⁵. ESG offers a structured approach for cities to assess and address socio-environmental challenges while ensuring good governance⁵. This approach allows cities to progress toward the 17 United Nations Sustainable Development Goals⁵.

Furthermore, there is increasing demand from investment communities and international organizations for the implementation of ESG principles in urban planning and social policy to reduce investment and humanitarian risks⁶. This demand highlights the growing importance of ESG for investors, employees, and businesses alike⁷.

Smart and emerging technologies, such as digital twins and blockchain, can help city governments develop convenient solutions to their socio-environmental challenges within an ESG framework⁵. For example, digital twins can be used to model the impact of different development scenarios on the environment and society, while blockchain can be used to track the provenance of building materials and ensure that they are sourced sustainably.

Examples of Cities Integrating ESG into Urban Planning

These cities demonstrate the diverse ways in which ESG principles can be integrated into urban planning to create more sustainable, equitable, and resilient communities.

Zoning Regulations and ESG

Zoning regulations are a powerful tool that cities can use to promote ESG goals⁹. Zoning dictates where and how nearly everything is built, significantly impacting the environment⁹. By implementing appropriate zoning regulations, cities can encourage density, mixed-use development, and affordable housing while promoting a waste-free environment⁹. Some specific examples include:

• Density: Zoning regulations can be used to encourage higher density development in urban areas. This can help to reduce sprawl, preserve green space, and promote the use of public transportation¹¹.
• Mixed-use development: Zoning regulations can be used to encourage mixed-use development, which combines residential, commercial, and industrial uses in the same area. This can help to create more vibrant and walkable communities¹².
• Affordable housing: There is growing momentum among U.S. cities grappling with the housing crisis to alter zoning codes to allow the construction of more multifamily and affordable housing developments⁴. Zoning regulations can be used to require developers to include a certain percentage of affordable housing units in new developments. This can help to ensure that all residents have access to safe and affordable housing and eliminate social inequalities to combat social stratification, marginalization, and ghettoization².
• Maximum parking spaces: Zoning regulations can set maximum parking spaces allowed per development¹³. This encourages the use of public transportation, walking, and cycling, reducing reliance on private vehicles and promoting sustainable transportation options.

Green Infrastructure and ESG

Green infrastructure is a network of natural and semi-natural areas that provides ecological functions in urban land-use planning¹⁴. It refers to the natural and semi-natural systems that provide ecosystem services in an urban area¹⁵. This includes parks, green roofs, green walls, urban forests, and other natural features. Green infrastructure can help to mitigate the adverse effects of urbanization, such as pollution and heat island phenomena¹⁶. It also helps to purify air and water, thus fostering healthier living environments¹⁶. Green infrastructure plays a crucial role in enhancing climate adaptation and mitigation capacities and reducing the negative impacts of climate change hazards, such as heat waves, flooding, and drought in cities¹⁷.

Green infrastructure can play a vital role in achieving ESG goals in urban planning. Some specific examples include:

• Green roofs: Green roofs are rooftops covered with vegetation. They can help to reduce energy consumption, stormwater runoff, and the urban heat island effect¹⁸. Green roofs also have social benefits by providing space for people to connect with nature, even in urban areas¹⁹. They can be used for gardening, recreation, or simply for enjoyment and can help to improve the overall living standards of a community. Urban farming on rooftops of residential or mixed-use residential properties is a natural enhancement for city dwellers in apartments, offering not only the benefits of nature and natural food but also a space to connect with neighbors and create a real sense of community¹⁹.
• Green walls: Green walls are vertical structures covered with vegetation. They can help to improve air quality, reduce noise pollution, and create a more aesthetically pleasing urban environment. Moreover, strategically designed green infrastructure enhances air quality by acting as barriers to pollutants and promoting air movement²⁰.
• Urban forestry: Urban forestry is the management of trees in urban areas. It can help to improve air and water quality, reduce the urban heat island effect, and provide habitat for wildlife²¹. The ecosystem services provided by natural forests are vital, especially in regulating temperature, maintaining air quality, and retaining rainwater, thus preventing soil erosion, landslides, and flash floods²¹.

The EU Directive on the energy performance of buildings promotes the use of new materials and design features in construction to help reduce GHG emissions in the sector²². Green roofs and walls are examples of green infrastructure solutions that can indirectly minimize emissions. Installations often lead to less energy for heating and cooling and offer additional benefits like water retention, air purification, and biodiversity enrichment. In the realm of green buildings, governance matters on multiple levels. Ethical sourcing of materials, for example, is a key governance issue²³. Companies that prioritize ESG need to ensure that their building materials come from sustainable and ethical sources....source

Community Engagement and ESG

Community engagement is an essential aspect of ESG in urban planning²⁴. It is a critical component of sustainable urban development²⁴. By engaging with the community, cities can ensure that ESG considerations are incorporated into the planning process in a way that meets the needs of residents⁵. Community engagement helps align urban development with sustainable practices, ensuring cities not only grow but thrive²⁴.

Crafting clear, well-defined goals, targets, and action plans is pivotal for effective community engagement aligned with ESG principles²⁵. This strategic process involves delineating specific, measurable, and attainable objectives that resonate with both ESG standards and the specific needs of the community. Some specific examples of how community engagement can be used include:

• Public meetings: Cities can hold public meetings to solicit feedback from residents on proposed development projects.
• Surveys: Cities can conduct surveys to gauge public opinion on ESG issues.
• Focus groups: Cities can hold focus groups to gather in-depth feedback from residents on specific ESG topics.
• Advisory committees: Cities can create advisory committees composed of residents, businesses, and other stakeholders to provide input on ESG-related planning decisions.

It is important to employ diverse communication channels to reach a broader audience²⁶. This includes traditional methods like community meetings and printed materials, as well as digital platforms like social media and online forums, to ensure accessibility and inclusivity. Involving local actors in the planning process is essential for several reasons: Residents often possess intricate knowledge about their neighborhoods that planners may overlook, and projects backed by community input tend to face fewer obstacles and garner stronger local support²⁴. However, community engagement in sustainable urban development can also present challenges, such as awareness issues, resource constraints, and behavioral barriers²⁴.

Benefits and Challenges of Integrating ESG into Urban Planning

Integrating ESG considerations into urban planning can have several potential benefits, including:

• Improved environmental quality: ESG can help cities reduce their environmental impact by promoting green infrastructure, renewable energy, and other sustainable practices⁶.
• Enhanced social equity: ESG can help cities create more equitable communities by promoting affordable housing, access to public transportation, and other social amenities²⁷.
• Increased economic growth: ESG can help cities attract investment and create jobs by promoting sustainable development and improving the quality of life⁶. In addition to social and environmental benefits, ESG brings value to developers: Climate-ready, "healthy" buildings are more valuable, attract and retain better talent, and are future-proofed to protect investments in the long term²⁸. There's also money available through green loans and ESG-focused investments²⁸.
• Specific services offered in ESG agenda development: These services include reducing the carbon footprint and carbon neutrality of territories; urbanization and sustainable development of territories; analyzing the economic effect of climate risks; providing online tools for ESG risk management and ESG data disclosure; and analyzing scenarios for the development of territories⁶.

The LIFE approach can be an effective way to manage the complexities of urban revival programs designed to serve socioeconomic, cultural, quality of life, sustainability, and other goals²⁷. This approach involves integrating ESG principles throughout the project lifecycle, from planning and design to construction and operation.

However, there are also some challenges to integrating ESG into urban planning, such as:

• Lack of awareness: Many city planners and developers are not familiar with ESG principles or how to incorporate them into the planning process.
• Limited resources: Cities may not have the resources to implement ESG-friendly policies and programs.
• Political opposition: There may be political opposition to ESG-related planning initiatives, particularly from those who believe that ESG principles are too costly or burdensome²⁹.
• Data collection: Both new and existing buildings alike will need to address the growing need to collect data accurately and effectively for ESG reporting initiatives³⁰.
• Environmental impact of cities: 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 exponentially⁶. Poorly managed megacities can negatively affect the natural environment and lead to more pollution, increased waste generation, and degradation of the animal and plant world⁶.

Conclusion

ESG is an increasingly important consideration in urban planning and development. By integrating ESG factors into the planning process, cities can create more sustainable, resilient, and equitable communities. This can be achieved through various means, such as implementing zoning regulations that promote ESG goals, encouraging the development of green infrastructure, and engaging the community in the planning process. While there are challenges to integrating ESG frameworks into urban planning, the potential benefits are significant. Cities that prioritize ESG considerations can create more livable, prosperous, and sustainable communities for all residents.

Urban planners and policymakers have a crucial role to play in promoting ESG integration in urban development. They need to be proactive in educating themselves and their stakeholders about ESG principles, advocating for policies that support ESG goals, and developing innovative solutions that address the challenges of ESG implementation. The future of urban planning lies in embracing ESG as a core principle to create cities that are not only environmentally sustainable but also socially equitable and economically prosperous.

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