In October 2012, Superstorm Sandy led to the death of more than 40 people and caused significant damage and economic losses totalling US$19 billion for New York City and the U.S. East Coast. It demonstrated the extreme vulnerability of one of the world’s key economic centers. Since then, New York’s public and private sectors have been directing resources towards long-term recovery and resilience efforts.
A global financial center at risk
Lower Manhattan, home to 10 percent of New York City’s jobs and 10 percent of its economic output, remains at risk from future extreme weather events, which are likely to become evermore frequent, damaging, and costly as sea- and groundwater-levels continue to rise.
In recognition of the importance of Lower Manhattan and the risks it faces, the City released its Lower Manhattan Climate Resilience Study (which was developed by a team of consultants led by AECOM) in March 2019. The study builds upon previous work and recommendations to identify US$500 million of near-term climate adaptation projects combined with a comprehensive long-term strategy for the study area. It recommends a climate resilience masterplan for the Financial District and Seaport that will examine extending the East River shoreline, an effort estimated to cost US$10 billion.
Lower Manhattan’s need would significantly strain, and potentially overwhelm, the city’s budgetary capacity, and in the absence of federal and state funding, will require new and innovative financing mechanisms to ensure that Lower Manhattan maintains its position as a global center of culture and commerce.
Using innovation to deliver resiliency projects
The Milken Institute, in collaboration with AECOM, convened its final in a four-part series of Financial Innovation Labs late last year in New York. The Lab examined innovative opportunities for public and private funding and financing to deliver the East River shoreline expansion as part of Lower Manhattan’s climate resilience masterplan.
The Financial Innovation Lab brought together government agencies, academics, NGOs, advocacy groups, property owners, insurance industry experts, investors and financial institutions to discuss the advantages and disadvantages of different funding and financing models.
Bridging the gap
Lab participants agreed that to protect Lower Manhattan from the magnitude of climate change, sea-level rise and associated risks, significant investments in infrastructure investments are necessary. The extraordinary capital requirements are likely to strain existing local, state, and federal resources, and innovative public and private funding and financing solutions can help to meet this shortfall. Participants agreed that there is no one solution, but rather a variety of tools will be required.
Participants explored approaches to identify new sources of cross-sector funding and financing, and capture future value generated by resilience projects to help bridge the funding gap. Five key recommendations were made:
