The built environment, encompassing our cities and buildings, stands as a pivotal contributor to global carbon emissions. With a staggering 42% of global annual CO2 emissions stemming from construction, maintenance, and demolition activities of buildings, coupled with operational emissions from residential and commercial spaces, this sector demands immediate attention.
Moreover, a city doesn’t just include the built environment. There are other components like transportation as well, which account for an additional 22% of emissions, which complements the urgency for us to reevaluate how we live. This data underscores a startling forecast: by 2060, the global building floor area is set to double. This translates to an addition of roughly 2.6 trillion square feet of new construction, akin to adding an entire New York City to the planet every month for 40 years. This unprecedented expansion is a clarion call for integrating sustainability at the core of urban development to stave off the detrimental effects on our cities and ecosystems.
The scale of global urban development casts a spotlight on Vietnam, where rapid urbanization demands innovative strategies to ensure sustainable growth. Vietnam is currently undergoing a rapid and significant urban transformation. As of 2022, Vietnam’s urbanization ratio was reported to be 41.7%, with projections suggesting an increase to 53.9% by 2023. While HCMC and Hanoi are still the focal points of development, smaller 2nd tier cities are also experiencing a surge in population.
The urbanization rate in Vietnam’s Southeast region and the Red River delta was notably high, recorded at 64.8% and 64.7%, respectively, in 2020. This indicates a concentrated development in these regions, which is pivotal to the country’s economic strategy. This pace of urbanization, if continued with traditional development practices, poses severe sustainability and health risks. For instance, Vietnam’s urban areas are particularly susceptible to climate impacts due to their geographic and climatic conditions, exposing them to sea-level rise, typhoons, and flooding.
To add to the complexity, Vietnam’s urban infrastructure needs to be fully prepared to handle the mass migration to urban centers. The ongoing construction boom in these areas often overlooks the critical need for sustainable planning, leading to increased carbon emissions and greater susceptibility to climate-induced disasters.
As Craig Martin, Chairman of Dynam, highlights to shareholders, “Climate change is advancing more rapidly than initially predicted, posing significant threats to global safety. Vietnam, as one of the top five countries most vulnerable to climate change, encounters both physical and transition risks. The implications are profound, from sea level rise and severe typhoons impacting infrastructure to economic shifts due to climate policies affecting high-carbon industries. Embracing low-carbon city strategies is essential, not just for sustainability but for our lives and the generations after us.”
The need to transition to low-carbon urban development is not just an environmental imperative but a health and safety one as well. Cities that continue to operate on high carbon frameworks suffer from poor air quality and increased heat, which directly impacts the health and wellness of their residents. Chronic respiratory and cardiovascular diseases are more prevalent in these environments due to higher pollution levels. As urban areas grow, integrating low-carbon strategies becomes crucial to ensure city populations’ long-term health and sustainability.
Understanding the Building Blocks of a Low-Carbon City
With urban areas expanding at an unprecedented rate, grasping the fundamentals of low-carbon cities becomes imperative to ensure our urban development aligns with sustainable and health-conscious practices. What is a ‘low carbon city’?
A Low Carbon City is an urban area that integrates sustainable green technologies and practices to significantly reduce its carbon and greenhouse gas emissions compared to conventional urban developments. This approach not only mitigates the adverse effects of climate change but also leads to a more sustainable form of urban living. According to the Chinese Research Academy of Environmental Sciences, low-carbon cities promote a dual approach to sustainability:
- Low Carbon Economics: This involves enhancing the efficiency of energy and water use, reducing carbon emissions through optimized resource utilization, and adopting green technologies.
- Low Carbon Consumption: This aspect focuses on reducing emissions across all facets of urban life, which includes promoting recycling, protecting and expanding natural green spaces, and increasing the urban carbon sink capacity
Numerous countries and cities around the world have developed and implemented frameworks such as Malaysia’s Low Carbon Cities Framework and China-Singapore Tianjin Eco-city to guide their sustainability efforts. Across these various frameworks, there are ten consistent building blocks that can be categorized into two groups.
Core Foundations:
- Decarbonization of the Built Environment: Transitioning to green building materials and technologies to reduce emissions from construction and operation.
- Renewable Energy Adoption: Harnessing solar, wind, and other renewable sources to power urban areas.
- Mobility and Transportation: Shifting towards sustainable transportation options like public transit, cycling, walking, and electric vehicles.
- Waste Management: Implementing robust recycling programs and waste reduction strategies.
- Protection of the Natural Environment: Preserving biodiversity and expanding green spaces within urban settings
Strategic Enablers:
- Low-Carbon Centric City Planning: Enacting zoning laws and planning strategies for sustainable development.
- Active Community Engagement: Involving residents in sustainability initiatives to foster a sense of ownership and participation.
- Supporting Policies and Regulations: Developing policies that enforce environmental standards and encourage green practices.
- Economic Livelihood: Ensuring that sustainability measures also promote economic growth and job creation.
- Green Financing: Investing in projects that have positive environmental impacts through innovative financial models
Transitioning to a low-carbon city presents significant challenges, but Vietnam is making notable progress. Research from the Institute for Environment and Resources at Vietnam National University in Ho Chi Minh City highlights that motorcycles and other road transport contribute over 20% to the city’s total greenhouse gas emissions. With the eagerly awaited launch of the Ho Chi Minh City metro slated for this summer, coupled with increased initiatives to encourage the use of electric vehicles, the city is moving towards reducing its carbon footprint.
Decarbonization of buildings, one of the biggest contributors to emissions, is no easy feat – but there are proven solutions. McKinsey’s research reveals that in a diversified commercial real estate portfolio, only 10 percent of the assets are responsible for 80 percent of the risks associated with climate change. Decarbonizing buildings requires investments but also opens doors to lower energy and operating expenses, as well as a potential green premium on rental income. Therefore, real estate developers and policymakers will need to prioritize and be strategic on how initiative changes.
Additionally, Vietnam has become a focal point for green financing, attracting substantial investments in sustainable infrastructure. Green financing in Vietnam, particularly in renewable energy and sustainable projects, is rapidly expanding. A McKinsey report shows a notable increase in project finance from $3 billion in 2018 to $38 billion in 2021. This growth highlights the public and private sector’s commitment to meet its net-zero emissions targets by 2050.
HSBC’s third installment of Transition Pathways gauges developers’ and investors’ sentiment toward net zero across various assets. Through this research, they found that 97% of real estate companies say net zero is commercially important to their business. Still, financing, policy, and legislation remain the top challenges influencing net-zero strategies.
However, “As one of the largest foreign banks in Vietnam, HSBC is aware of the property sector’s needs to develop sustainably to support the country’s transition to net zero. Though decarbonization in this sector is highly dependent on several factors, banks like HSBC can play an enabling role given our experience in other markets towards setting targets and actions to reduce financed emissions, support energy supply decarbonization, and the addition of smarter building construction and renovation processes," says Tim Evans, Chief Executive Officer, HSBC Vietnam.
As Vietnam forges ahead with its ambitious climate goals, the urgency to embed low-carbon principles into urban development becomes increasingly evident. Nguyen Thi Thanh My, Deputy Director of the municipal Department of Natural Resources and Environment, said in its action plan on climate change response for 2021 - 2023, with a vision to 2050, the city looks to cut down 10% of GHG emissions by 2030 and work towards a low-carbon economy.
As cities like HCM continue to evolve and expand, integrating low-carbon development into every facet of urban planning is not just a policy goal but a necessary evolution to ensure the creation of resilient, healthy, and sustainable urban environments capable of meeting the challenges of the 21st century. This strategic approach will not only improve the quality of life for its residents but also serve as a model for similar nations navigating the complexities of sustainable urbanization in an era of dramatic environmental change.
The 2024 Vietnam ESG Investor Conference by Raise Partners and Vietnam Innovators by Vietcetera
Join us in the two-day conference to engage with investors and funds, business leaders, Vietnamese and international governments, start-ups, experts, academia, and the media to spark meaningful collaboration and accelerate green and inclusive growth in Vietnam.
When: 8:30 AM - 4:30 PM, 16-17th May 2024
Where: New World Saigon Hotel76 Le Lai Street, District 1, Ho Chi Minh City
Thank you to our sponsors: Dynam Capital and Vietnam Holding (Title Sponsors) and New World Saigon Hotel(Venue Sponsor).