Building sustainable cities

Harvard Business Review

July – August 2013

By 2050 the number of people living in cities will have nearly doubled, from 3.6 billion in 2011 to more than 6 billion. Yet the world’s urban areas are already overcrowded and, particularly in developing countries, suffer from shortages of clean water, electricity, and other resources essential to the support of their exploding populations and fragile economies.

The problems created by rampant urbanization are among the most important challenges of our time. They also represent one of the greatest opportunities—and responsibilities—for the private sector. Business is uniquely positioned to shape the sustainable, economically competitive cities of the future.

Many corporations and investors assume that fixing cities is the purview of government, and that government will act. But governments around the world are stuck—financially, politically, or both. They can’t be relied on to single-handedly address the problems of urbanization or to conceive solutions, such as efficient electrification and reliable public transit, that will drive economic growth. Implementing those solutions requires large amounts of capital, exceptional managerial skill, and significant alignment of interests—all of which are often in short supply in city governments but abound in the private sector.

In my research and in consulting engagements with municipal governments, urban planners, corporations, and entrepreneurs in the United States, Europe, Latin America, and Asia, I have seen many different business strategies for addressing the challenges posed by rapid urbanization and scarce resources. Often they center on expanding supply—providing more water, more electricity, more roads, more vehicles. But increasingly businesses are discovering how to create and claim value by improving resource efficiency—through energy-performance contracting, for example, and other strategies that overcome business barriers, reduce waste, and stretch resources. This article provides a framework for identifying and pursuing such opportunities.

The framework rests on three pillars: new business models that generate profits by optimizing the use of resources; financial engineering that encourages investments in efficiency (see the sidebar “What Is Financial Engineering?”); and careful selection of markets. Although any given company’s approach will depend on its capabilities and objectives and the market it is entering, the broad strategies provided here are relevant both to obvious players such as infrastructure companies and vendors of turbines, trains, and other equipment, and to companies in larger sectors such as information technology, financial services, and building products. Whatever the industry, strategic investments in resource efficiency as cities are being built or rebuilt can generate value for companies over the long term while enhancing the cities’ competitiveness, livability, and environmental performance.

A company or an investor could target an array of resource-management initiatives. Of these, I argue, water, electricity, and transit projects deserve the greatest focus. Businesses that have water to process food and materials, whose lights and computers are reliably powered, and whose goods can get to market and employees can get to work quickly and efficiently are clearly at an advantage. Similarly, citizens with ready access to clean water, whose children have light by which to read and study, and who can commute efficiently and affordably have a foundation on which to thrive. All the other services a competitive city provides—functional housing, schools, hospitals, stores, police and fire departments, heating, cooling, waste management, and so on—depend on a reliable water, electricity, and transit infrastructure.

The Efficiency Opportunity

To understand where the opportunity lies, consider how resource-efficiency initiatives measure up on both technological and financial sophistication. The products and services that new cities will require, and that provide the return investors and entrepreneurs need, optimize both. A company’s offerings can be positioned according to these characteristics on an “efficiency matrix.” Technological sophistication increases from left to right, while financial sophistication increases from bottom to top. Low-tech commodity solutions, such as the purchase of insulation in a simple transaction between buyer and seller, would inhabit the bottom left quadrant; sophisticated programs such as demand-response optimization in electricity would inhabit the top right.

The matrix is useful for determining the current strategic position of a company’s products, services, and investments, but it’s most valuable for envisioning where the company might profitably head. New value can be created and captured by moving either horizontally or vertically within any quadrant. However, companies that shift their business models and offerings into the upper right quadrant stand to gain the most—and will also have the greatest impact on the resource needs of the world’s burgeoning cities. Often that means playing the role of coordinator or figuring out how to finance a service—something the individual players cannot do on their own. It is in that quadrant that a company’s offerings are more differentiated, favor multiparty solutions, and are likeliest to create value for all the participants.
Original article can be found online

Meet and greet the mayor

The Austin Chronicle

July 8, 2013

Although City Council is informally on hiatus until August – and several members annually spend at least a couple of weeks in cooler climes – the work goes on in steamy Austin. This week features a Council “meet and greet” with former Chicago Mayor Richard M. Daley: Tuesday, Council Chambers, 1pm

Daley is now executive chairman of Tur Partners LLC, whose cryptic name, according to its web site, designates “an investment and advisory firm that partners with global businesses to drive expansion into new and existing markets.” But Tur apparently has its fingers in a number of municipal pies, and elsewhere is described as sometimes engaged in consulting on “sustainable development.” That’s its current task in Austin, where it was hired to help the Parks and Recreation Department develop a “long-term plan” for the city’s Downtown parks. Daley is in town to mark the release of the first fruit of that project, a report titled “Town Lake Metropolitan Park Redevelopment Study.”

According to the report, the “Auditorium Shores Improvements Project will be led by PARD, actively coordinated with the Austin Parks Foundation and C3 Presents, the organizer of the Austin City Limits Festival, and also outside consultants. … APF is current working with advisory firm Tur Partners LLC, in close connection with PARD and the City of Austin, on a comprehensive analysis of city plans, policies and initiatives relating to Austin’s Public Park System, with a particular focus on long-term redevelopment plans for Town Lake Metropolitan Park.”

The project, which begin in late 2012, is intended to help create “a long-term vision and execution plan for developing Town Lake Metropolitan Park.” The current report provides “preliminary findings”; the final report, to be issued in April of 2014, “is intended to act as a suggested road map for the city of Austin in developing Town Lake Metropolitan Park into a best-in-class facility that serves as a parks centerpiece for the city as a whole.”

NewsDesk expects we’ll learn more this week during the meet-and-greet, and we’ll have more to say about the report in due course. But it already raises one question: Shouldn’t the former Democratic Mayor of Chicago know that the name of that body of water in the middle of Downtown Austin is “Lady Bird Lake”?

Original article can be found online

Updated article can also be found online

Bi-national cooperation helps save the Great Lakes

The Huffington Post

July 9, 2013

2013-07-08-MayorDaleyGLSCLI.jpg
Co-Founder of the Great Lakes and St Lawrence Cities Initiative, former Mayor Richard M. Daley of Chicago, addresses attendees at the initiative’s tenth annual meeting. (image credit: Superior Watershed Partnership and Land Trust / Carl Lindquist)

 

Recently at Shedd Aquarium, world-renowned Canadian astronaut Julie Payette shared views of the Great Lakes from her former vantage point in space, in honor of our new At Home on the Great Lakes exhibit opening.

As she scrolled through sky-high images of Chicago, Green Bay, Toronto, Rochester, one thing became clear. Even from thousands of miles above the atmosphere, the satellite pictures reflected the uniqueness of each city along the Great Lakes, revealing the distinct ways that the lakes shaped the evolution of every community on their shorelines — and the ways our cities shape the lakes in turn.

The nuances of our geographical landscapes are mirrored up-close by how our Great Lakes communities understand conservation issues. Last week marked Independence Day in two countries that have cooperatively maintained our border for more than a century — which may help explain why, when it comes to the Great Lakes, we’re united in our efforts to save them despite so many diverse demands on the basin. One example? This June marked the 10th anniversary of the Great Lakes and St. Lawrence Cities Initiative (GLSLCI). Founded by Mayor of Chicago Richard M. Daley in 2003 and led by Executive Director David Ullrich, the bi-national initiative has grown into the leading municipal voice for protection, restoration and celebration of the Great Lakes and Saint Lawrence River.

This bi-national leadership is critical because, as Payette noted during her talk, watersheds do not conform to political or municipal boundaries. As a result, GLSLCI continues to demonstrate that when it comes to getting Great Lakes restoration done, cities are often where the rubber meets the road. Together, the 103 mayors speak for the unique identities, needs and priorities of the more than 16 million people they represent, in order to develop solutions for Great Lakes issues that integrate the entire basin’s environmental, economic and social concerns.

At this June’s GLSLCI annual meeting in Marquette, Mich., the mayors shared their cities’ unique perspectives on the Great Lakes’ most pressing issues, including climate change adaptation, the coastal impacts of historically low water levels, mining and economic development. While extremely necessary, this work isn’t always easy. After all, we have to establish common ground between eight states, two provinces, countless communities and federal, state, provincial and tribal and First Nations governments. Fortunately, there are many cross-border organizations working to reflect these stakeholders’ diverse perspectives, including the GLSLCI, Great Lakes CommissionInternational Joint Commission and Council of Great Lakes Governors.

While these groups continue their efforts, we also need you. Saving our Great Lakes can only happen if all points of view are considered, and your voice matters. In every Great Lakes community, there are opportunities to get involved with the lakes. Whether you attend a city shoreline planning meeting or volunteer for a beach restoration day, you’ll be adding your energy to a bi-national conservation effort.

No matter what you do, do something: Now is your chance to share your thoughts on the next five-year plan for the Great Lakes Restoration Initiative. Public comments are due July 12; click here to submit yours or click here to send an email.

Original article can be found online

Sustainability Exchange for cities to collaborate on best practices

Energy Manager Today

July 11, 2013

Sustainability Exchange logo

Former Chicago Mayor Richard Daley has launched The Sustainability Exchange, a partnership for municipalities to efficiently study, design and implement clean and sustainable technology projects in collaboration with technical, legal and financial experts. Mayors of cities like New Orleans and Phoenix have announced their support for the initiative.

Daley’s idea was that since cities across the country face the same challenges, they need not face it alone. The exchange aims to unite cities in an innovative partnership for the adoption of best practices in sustainability, and the delivery of measurable, data-driven results.

He launched it in June with his investment firm Tur Partners and has begun discussions with several cities on signing up.

It will focus on four areas – energy efficiency, water and wastewater treatment, waste management, and public transportation. By sharing information among participating cities and leveraging guidance from academic institutions, think tanks and technology experts, the exchange plans to help cities identify and implement best practices in these areas.

After analyzing the data and operations for different cities, potential projects will be identified. The exchange will help with local procurement processes by providing cities better information for adopting solutions, and enabling cities to tell vendors what they need, rather than asking vendors what they can provide.

It will help raise awareness among potential project vendors and financing partners across the nation, which it says will increase competition among technology and service providers and financial institutions, creating a more efficient, less expensive procurement process.

Cities that invest in smart-grid technology and infrastructure, called “connected cities,” experience an annual GDP growth rate that is 0.7 percent higher, an unemployment rate that is a full percentage point lower, and office occupancy rates 2.5 percent higher than less advanced cities, according to a 2012 study by Jones Lang LaSalle.

The financial services firm says this correlation between smart grid applications and cities’ economic performance underlines the strong relationships between public sector infrastructure custodians and power suppliers.

Original article can be found online

Daley, investment firm offer cities advice on cost-savings upgrades

The Chicago Tribune

July 5, 2013

Las Vegas Begins Replacing 6600 Streetlights With LED Fixtures

Former Mayor Richard M. Daley and his investment firm Tur Partners have started another company, The Sustainability Exchange, to advise cities on how best to squeeze savings out of infrastructure retrofits and upgrades.

Daley and Tur’s chief executive, Lori Healey, have organized the exchange as a social enterprise known as an L3C, or a low-profit, limited liability company. It operates much like an LLC but adds one key advantage: Grant-making nonprofits can invest rather easily. (Typically private foundations only make grants to other charities.)

Daley and Healey launched the company last week and have yet to ink their first client. But Healey and Tur principal Michael Reinhold, the exchange’s president and chief operating officer, said they are in discussions with several cities, and they explained the problem they want to solve.

“We went to a medium-sized city who prides themselves as doing very well in sustainability,” Healey said. “And they were on their third consultant who was evaluating what type of system they should use for converting their streetlights to LEDs,” lights that use less energy than traditional incandescent bulbs. Healey added: “And one of the mayors we talked to didn’t know which consultant to believe because he felt they were always trying to sell him something from their own stable of (LED) products.”

Reinhold added that in Massachusetts the streetlights are owned by utilities, further complicating upgrades.

“So the first thing a city has to do is buy back the streetlights from the utilities,” he said. “They have to model out what the expected costs of that are, go through a whole analysis, and once they do that, they have to decide what kind (of LED) to use, what other features to put on it, what hours the lights will stay on, and so on and so forth.”

The exchange would help cities make all of those decisions and solicit bids from vendors to do the job — at no charge. The exchange would make money by taking a cut of the cost-savings from the new bulbs over several years.

“Why we think this makes sense — not necessarily for the Chicagos, New Yorks and LAs, but for smaller cities — is that by joining together on these projects they can drive down individual costs,” Healey said. “Financing becomes cheaper by bundling things together, and you get much bigger interest from bigger sources of capital.”

Daley’s name and network are opening doors to city officials and experts. In addition to LED lighting, Reinhold said, he envisions the exchange consulting on retrofits for government buildings; fleet conversions to electric and hybrid vehicles; anaerobic digesters, which convert waste to energy; upgrades to wastewater treatment facilities; and recycling programs.

Cities nationwide are moving to cut costs through more energy-efficient operations — and have succeeded to varying degrees, depending on political will, budget considerations, and staff interest and expertise. New York, for instance, is moving to require composting of food scraps. And while Chicago has a plethora of green roofs, it struggled for years to expand recycling citywide.

On the business end, small, venture-backed technology companies lack the lobbyists needed to persuade city officials to adopt new technologies, and they don’t have the money to wait out long procurement decisions.

“So much money is stuck in clean tech (startups), and venture capital firms can’t get it out,” Healey said. “You know why? Because they can’t get the technology adopted at the municipal level.”

Original article can be found online.

Chicago’s Richard Daley starts urban partnership

Crosslands Bulletin

July 1, 2013

Cities can share information and explore alternative financing for sustainable infrastructure projects.

Five city mayors, all Democrats, have come out in support of a new for-profit social enterprise aiming to finance sustainable technology projects.  The chair and leading force behind The Sustainability Exchange (TSE) is the former, six-term mayor of Chicago and Democratic party boss Richard M. Daley.Daley is affiliated with the Katten Muchin Rosenman law firm.  He is also a senior advisor to JP Morgan Chase where he will be chairing a joint project with the Brookings Institution called the Global Cities Initiative.  Daley is executive chairman of Tur Partners, the investment and advisory firm where TSE’s Vice Chairman Lori Healey is CEO.  Both TSE’s COO and vice president are former employees at Tur.Helping to launching TSE are mayors of New Orleans, Phoenix, Parma, Ohio, Newton, Massachusetts, and South Bend, Indiana.  TSE will focus on four areas: energy efficiency, water and wastewater treatment, waste management, and public transportation.  It is a designated low-profit limited liability company, or L3C.  The structure allows foundations and other socially responsible and impact investors to support TSE’s operations though debt and equity investments, as well as grants.“The L3C is the natural legal platform for TSE.  It preserves the financial advantages and governance flexibility of the traditional limited liability company while placing social mission ahead of profits,” say Marc Lane, the author of the L3C law in Illinois.

There are 850 L3Cs according to interSector Partners, an L3C consulting firm.

For information contact TSE, 900 North Michigan, Suite 1730, Chicago, IL 60611, USA.  Tel: +1 312 768 4795; Fax: +1 312 212 3001; E-mail:info@TSEcities.com.

Original article can be found online

Mayors Across the Country Announce Support for New Sustainability Initiative – The Sustainability Exchange

FOR IMMEDIATE RELEASE

June 24, 2013 

Media Contact: Ashleigh Wayland

Ashleigh.Wayland@resoluteconsulting.com

O: 312-768-4764 / M: 703-582-2231

Enabling partnership provides the ability to efficiently study, design and implement comprehensive clean and sustainable technology projects

LAS VEGAS – Today, Mayor Greg Stanton (Phoenix, Ariz.), Mayor Mitch Landrieu (New Orleans, La.), Mayor Setti Warren (Newton, Mass.), Mayor Tim DeGeeter (Parma, Ohio) and Mayor Pete Buttigieg (South Bend, Ind.) announced their support for and their community’s potential relationship with The Sustainability Exchange (TSE). TSE is an innovative new partnership that enables municipalities to efficiently study, design and implement clean and sustainable technology projects in collaboration with technical, legal and financial experts.

Developed under the leadership of former Chicago Mayor Richard M. Daley, and informed by discussions with mayors nationwide, TSE unites cities in an innovative partnership for the adoption of best practices in sustainability and the delivery of measureable, data-driven results.

“Healthy cities require a partnership between government, the business community, and a vibrant non-profit sector. Cities around the world share similar challenges. Making our infrastructure more efficient and reliable, reducing operating costs and protecting our environment are goals we all share. Cities should not have to face that challenge alone. TSE is a resource that brings these groups together and helps cities with sustainability at every stage. By working together, cities are more effective,” said former Chicago Mayor Richard M. Daley, chairman of The Sustainability Exchange.

TSE is built to help municipal governments solve a daunting challenge: developing a more sustainable, modern infrastructure in a difficult budgetary and political environment. As many cities struggle with dedicating the time, expertise and resources necessary to evaluate and implement cutting-edge solutions, TSE will provide a dedicated bridge between complex private sector technological innovation and public sector needs.

“Cities are continually facing challenges in finding solutions to improve sustainability and efficiency,” Mayor Greg Stanton said. “As a Mayor who is deeply concerned about long-term sustainability I am always looking for ways to address Phoenix’s needs. The Sustainability Exchange is an exciting possibility which could offer a new approach. This is why I have instructed my Senior Policy Advisor for Sustainability to lead further discussions with The Sustainability Exchange. We are always searching for ways to improve Phoenix’s quality of life, and I am enthusiastic about the possibilities a collaboration with The Sustainability Exchange has to offer.

TSE will focus on four areas: energy efficiency, water and wastewater treatment, waste management, and public transportation. By sharing information among participating cities and leveraging guidance from academic institutions, think tanks and technology experts, TSE will help cities identify and implement best practices in these areas.

“The City of New Orleans is always working with a singular focus; to facilitate, link and leverage all available resources in order to increase efficiency and address our most pressing needs,” said Mayor Mitch Landrieu. “I am excited about The Sustainability Exchange and their commitment to engage mayors and cities in creating sustainable, creative solutions. This type of collaboration has great potential to provide innovative, intriguing and worthwhile opportunities for municipalities big and small.”

TSE’s internal structure will reflect its innovative approach to delivering sustainable solutions and its mission. TSE is a designated low-profit limited liability company, or L3C. An L3C combines aspects of traditional businesses with the mission-oriented, educational and social improvement purposes of TSE.

The structure allows foundations and other socially responsible and impact investors to support TSE’s operations though debt and equity investments, as well as grants. Through the L3C, TSE is able to dedicate resources, such as in-depth data analysis and best practices review, to cities at no initial cost and share information with cities nationwide.

“The L3C is the natural legal platform for TSE. It preserves the financial advantages and governance flexibility of the traditional limited liability company while placing social mission ahead of profits,” said Marc J. Lane, author of Illinois’ L3C law.

After analyzing cities’ data and operations, potential projects are identified. TSE will enhance local procurement processes by providing cities better information for adopting solutions – allowing cities to tell vendors what they need, rather than asking vendors what they can provide. TSE will help raise awareness among potential project vendors and financing partners across the nation, boosting competition among technology and service providers and financial institutions and creating a more efficient, less costly procurement process.

“It’s fitting that during Sustainability Month that we’d take another step in advancing our goal of making Newton a leader in environmental sustainability. I am proud to join with former Chicago Mayor Richard

M. Daley and the current mayors of a select group of cities including Phoenix, New Orleans, Parma and South Bend in launching The Sustainability Exchange (TSE). We’re proud of Newton’s record as a sustainability leader. But there’s always more we could be doing. TSE offers municipalities the opportunity to invest in proven clean and sustainable technologies without the considerable time and resources now necessary to get a project off the ground. As a mayor, I’m thrilled to connect with my colleagues across the country and work together to solve our shared sustainability challenges,” said Newton Mayor Setti Warren.

TSE’s Best Practice Partners will ensure that any project proposed by TSE reflects feedback of the best and brightest minds and most respected institutions in sustainability. TSE’s Independent Review Board will provide an additional layer of resources for participating cities. Comprised of experts in the fields of urban planning, sustainable infrastructure, emerging technology, public service and project finance, the Independent Review Board will review all recommendations to provide objective analysis, ensure projections are data-driven, and outline strict accountability.

“Cities across the country are trying to provide better services while saving taxpayer dollars. To meet that challenge, municipalities must find ways to operate more efficiently and effectively to improve the quality of life for residents. The Sustainability Exchange offers intriguing possibilities in meeting that challenge by working with cities to find creative approaches toward increasing sustainability efforts while reducing long-term costs,” said Mayor Tim DeGeeter, Parma, Ohio.

TSE’s ultimate goal is the wider adoption of sustainable practices by America’s cities and towns.

“I’m excited to begin working with The Sustainability Exchange. South Bend has made tremendous strides in adopting more sustainable practices and policies, and TSE offers us ways to do more for less. By connecting us with private sector experts and greatly reducing the cost and time it takes to undertake projects, TSE can help keep South Bend on the cutting edge of municipal sustainability. South Bend is already the economic engine of northern Indiana. Through our collaboration with TSE, South Bend has the opportunity to connect with businesses and entrepreneurs from across America and throughout the world,” said Mayor Pete Buttigieg.

***MEDIA NOTE: Can coordinate direct conversations with Mayors from participating cities.

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About The Sustainability Exchange

The Sustainability Exchange (TSE) is a partnership that enables municipalities to efficiently study, design and implement clean and sustainable technology projects in collaboration with technical, legal and financial experts. By sharing information among participating cities and with guidance from academic institutions, think tanks and technology experts, TSE will help cities identify and implement best practices in energy efficiency, water, waste management, and transportation. TSE is a designated low-profit limited liability company, or L3C. An L3C combines aspects of traditional businesses with the mission-oriented, educational and social improvement purposes of TSE. Through the L3C, TSE is able to dedicate resources, such as in-depth data analysis and best practices review, to cities at no initial cost and share information with cities nationwide. TSE unites cities in innovative partnership for the adoption of best practices in sustainability and the delivery of measureable, data-driven results. TSE’s ultimate goal is giving every community in America the opportunity to invest in its own future by harnessing the benefits of proven clean and sustainable technologies. For more information visit, www.TSEcities.com.