Is it time to prioritise adapting transport infrastructure for the physical risks of climate change?

Cost-saving before decarbonisation.  

With global economic and geo-political issues affecting the markets, firms and operations are increasingly turning their attention towards cost savings, without recognising that transforming to sustainability is a prerequisite to achieving long-term financial benefit. Implementing sustainability within operations and strategy is increasingly critical to adapt to an ever-changing climate, and to maintain reputation in the market – both of which can lead to financial savings and shareholder support.

Transport is a complex industry which interacts with many other sectors like information and technology, construction, the public sector, financial services, and energy, to name just a few. Many of the notable names within the sector are private organisations, driven by revenue and shareholders. As transport can be considered a public service, most transport projects receive partial funding from government, although private sector organisations usually deliver and manage projects under a public sector tendering system. As a result, the transport sector is highly dependent on these public-private partnerships. The efficiency of programme delivery also relies on the effectiveness of a given partnership, technical implementation, and due diligence for projects, risks and impacts.   

Infrastructure requires big capital expenditure and strategic investment, with projects often costly to build, operate, maintain, and decommission (where applicable). As a result, the infrastructure sector has lower operating margins than other sectors, which can decrease appetite for long-term capital expenditure and private investment. Shareholders usually look for quarterly and annual returns when assessing performance of their portfolio, although stakeholders tend to look beyond just share value and returns, and increasingly to the environmental, social, and governance factors impacting their investments. Given climate change and socioeconomic risks are increasingly impacting financial markets and the nature of investment risks, ‘impact investing’ focuses on environmental and social impacts of the investment portfolio, but also vice versa (referring to double materiality).  

Infrastructure investments go beyond offering shareholder value and instead enable long-term supply chain resilience, economic growth, and socio-economic transformation of cities, regions and countries, especially in emerging markets. In addition, all 17 United Nations Sustainable Development Goals (UN SDGs) have some link with sustainable infrastructure, whether it is for environmental conservation, social inclusion or economic prosperity. For many countries and jurisdictions, infrastructure investment means attracting further foreign direct investment and offering job opportunities to the local population. Conversely, infrastructure is also a hard-to-abate sector: it is carbon-intensive due to complex supply chains, material use, energy-intensive industrial processes and asset management required to reap both economic and decarbonisation benefits in the medium to long term. Unlike other industries where longer-term investment in decarbonisation can run alongside business-as-usual, the infrastructure sector can be considered ‘mission critical’ to link economies and the society at large – so, long-term, strategic and impact-oriented investment is crucial.

Infrastructure resilience vs. climate change.  

In an alarming revelation, the 2023 London Climate Resilience Review revealed the capital could experience multiple 45C days in the near future which, according to Mayor Sadiq Khan, will render the London Underground totally inoperable. In fact, most critical infrastructure, which needs to be invested in with a long-term impact vision, will be unable to withstand the imminent extreme heat and weather patterns of increased physical (and increasingly urban) risks of climate change. Considering temperatures breached 40C in London for the first time on record in July 2022, it’s likely that the “near future” is within the next 10 years. This will have profound implications on the accessibility and safety of the transportation system, due to overheating and systemic failures (i.e. challenges in storing batteries, fuel and operating roads).  

Impacts on global infrastructure and resilience  

Another striking example is the challenges extreme heat poses for airport and seaport/canal operations, with potential ramifications on global connectivity and economy. For instance, major airports have increasingly had to tackle molten tarmacs and critical infrastructure in the dry season, and airport authorities largely resolve this issue at their own cost. As the weather patterns shift due to climate change, many countries with aging infrastructure unable to withstand above-average temperatures, will face further disruptions to the movement of both people and goods. This includes the UK.  

Like aviation, global shipping also faces unique climate challenges, where ports and canals increasingly suffer droughts. This has the potential to decrease the container ship capacity handled at key inter-continental crosspoints (i.e. Panama Canal, Suez Canal) at the heart of global trade, and hence the economy. According to the United Nations Conference on Trade and Development (UNCTAD), approximately 12% to 15% of the world’s seaborne trade passes through the Suez Canal and a further 5% through the Panama Canal. Yet, both regions are increasingly affected by extreme temperature, decreased precipitation levels, and increased risk of drought; lowering water levels and putting further strain on cargo and container movement potential. Recent research from Yale University showed that climate change leads to more extreme and frequent El Niño, a phenomenon of climate pattern affecting weather around the world, resulting in extreme weather and significant changes in the weather patterns. Considering infrastructure systems at a given location are designed and built to withstand ‘normal’ weather conditions, any climate and weather extremes could push critical infrastructure beyond structural safety and operability threshold.  

What can transport businesses do next? And how can Capgemini help?  

We need connected and smart infrastructure systems, which prioritise climate change adaptation to manage tangible assets. This also includes data centres needed to maintain the digital flow of information (i.e. intangible assets) to enable sustainable and seamless transportation of people and the goods. At Capgemini, we leverage our deep expertise in providing key sustainability service offerings and technology-agnostic solutions to improve the reporting needed to transform business operations and respond to the climate challenges within the transportation sector.  

Here’s how we’re currently doing it:

• Sustainability Strategy & Governance: We help travel & transport organisations accelerate sustainability by defining actionable strategies, developing measurable commitments, creating comprehensive transformation roadmaps, and choosing smart investments to deliver tangible value through proactive governance of stakeholders and the planet at large.   
• Sustainable Products: We create and redesign products by holistically considering the planetary boundaries and climate resilience, product lifecycles, current and pending regulations, cost constraints and commercial value to enable climate technology, sustainable product design, and next generation mobility.    
• Sustainable Operations, Manufacturing and Supply Chain: We drive transparency and resiliency while unlocking innovation across the entire transport value chain by leveraging data and technology to tackle issues such as responsible procurement, supply chain traceability and climate change resilience.   
• Sustainable Technology: We enable Green IT initiatives to reduce digital and technological impact, whilst embracing sustainable transport technologies and improving service delivery and customer experience.   
• ESG Management & Reporting: We help measure commitments, monitor progress, identify opportunities and report on ESG performance to provide transparency to customers, citizens, stakeholders and regulatory bodies by securely harnessing the power of data across the entire transport ecosystem.