Can coastal cities turn the tide on climate change flooding risk?

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Climate change is increasing the destructive power of flooding from extreme rain and rising seas and rivers. Many cities around the world are exposed. Strong winds during storms and hurricanes can drive coastal flooding through storm surge. As hurricanes and storms become more severe, surge height increases. Changing hurricane paths may shift risk to new areas. Sea-level rise amplifies storm surge and brings in additional chronic threats of tidal flooding. Pluvial and riverine flooding becomes more severe with increases in heavy precipitation. Floods of different types can combine to create more severe events known as compound flooding. With warming of 1.5 degrees Celsius, 11 percent of the global land area is projected to experience a significant increase in flooding, while warming of 2.0 degrees almost doubles the area at risk.

When cities flood, in addition to often devastating human costs, real estate is destroyed, infrastructure systems fail, and entire populations can be left without critical services such as power, transportation, and communications. In this case study we simulate floods at the most granular level (up to two-by-two-meter resolution) and explore how flood risk may evolve for Ho Chi Minh City (HCMC) and Bristol (See sidebar, “An overview of the case study analysis”). Our aim is to illustrate the changing extent of flooding, the landscape of human exposure, and the magnitude of societal and economic impacts.

An overview of the case study analysis

In Climate risk and response: Physical hazards and socioeconomic impacts, we measured the impact of climate change by the extent to which it could affect human beings, human-made physical assets, and the natural world. We explored risks today and over the next three decades and examined specific cases to understand the mechanisms through which climate change leads to increased socioeconomic risk.

In order to link physical climate risk to socioeconomic impact, we investigated cases that illustrated exposure to climate change extremes and proximity to physical thresholds. These cover a range of sectors and geographies and provide the basis of a “micro-to-macro” approach that is a characteristic of McKinsey Global Institute research. To inform our selection of cases, we considered over 30 potential combinations of climate hazards, sectors, and geographies based on a review of the literature and expert interviews on the potential direct impacts of physical climate hazards. We found these hazards affect five different key socioeconomic systems: livability and workability, food systems, physical assets, infrastructure services, and natural capital.

We ultimately chose nine cases to reflect these systems and to represent leading-edge examples of climate change risk. Each case is specific to a geography and an exposed system, and thus is not representative of an “average” environment or level of risk across the world. Our cases show that the direct risk from climate hazards is determined by the severity of the hazard and its likelihood, the exposure of various “stocks” of capital (people, physical capital, and natural capital) to these hazards, and the resilience of these stocks to the hazards (for example, the ability of physical assets to withstand flooding). We typically define the climate state today as the average conditions between 1998 and 2017, in 2030 as the average between 2021 and 2040, and in 2050 between 2041 and 2060. Through our case studies, we also assess the knock-on effects that could occur, for example to downstream sectors or consumers. We primarily rely on past examples and empirical estimates for this assessment of knock-on effects, which is likely not exhaustive given the complexities associated with socioeconomic systems. Through this “micro” approach, we offer decision makers a methodology by which to assess direct physical climate risk, its characteristics, and its potential knock-on impacts.

Climate science makes extensive use of scenarios ranging from lower (Representative Concentration Pathway 2.6) to higher (RCP 8.5) CO₂ concentrations. We have chosen to focus on RCP 8.5, because the higher-emission scenario it portrays enables us to assess physical risk in the absence of further decarbonization. (We also choose a sea-level rise scenario for one of our cases that is consistent with the RCP 8.5 trajectory). Such an "inherent risk" assessment allows us to understand the magnitude of the challenge and highlight the case for action. For a detailed description of the reason for this choice see the technical appendix of the full report.

Our case studies cover each of the five systems we assess to be directly affected by physical climate risk, across geographies and sectors. While climate change will have an economic impact across many sectors, our cases highlight the impact on construction, agriculture, finance, fishing, tourism, manufacturing, real estate, and a range of infrastructure-based sectors. The cases include the following:

For livability and workability, we look at the risk of exposure to extreme heat and humidity in India and what that could mean for that country’s urban population and outdoor-based sectors, as well as at the changing Mediterranean climate and how that could affect sectors such as wine and tourism.
For food systems, we focus on the likelihood of a multiple-breadbasket failure affecting wheat, corn, rice, and soy, as well as, specifically in Africa, the impact on wheat and coffee production in Ethiopia and cotton and corn production in Mozambique.
For physical assets, we look at the potential impact of storm surge and tidal flooding on Florida real estate and the extent to which global supply chains, including for semiconductors and rare earths, could be vulnerable to the changing climate.
For infrastructure services, we examine 17 types of infrastructure assets, including the potential impact on coastal cities such as Bristol in England and Ho Chi Minh City in Vietnam.
Finally, for natural capital, we examine the potential impacts of glacial melt and runoff in the Hindu Kush region of the Himalayas; what ocean warming and acidification could mean for global fishing and the people whose livelihoods depend on it; as well as potential disturbance to forests, which cover nearly one-third of the world’s land and are key to the way of life for 2.4 billion people.

We chose these cities for the contrasting perspectives they offer: Ho Chi Minh City in an emerging economy, Bristol in a mature economy; Ho Chi Minh City in a regular flood area, Bristol in an area developing a significant flood risk for the first time in a generation.

We find the metropolis of Ho Chi Minh City can survive its flood risk today, but its plans for rapid infrastructure expansion and continued economic growth could be incompatible with an increase in risk. The city has a wide range of adaptation options at its disposal but no silver bullet.

In the much smaller city of Bristol, we find a risk of flood damages growing from the millions to the billions, driven by high levels of exposure. The city has fewer adaptation options at its disposal, and its biggest challenge may be building political and financial support for change.

How significant are the flood risks facing Ho Chi Minh City and what can the city do?

Flooding is a common part of life in Ho Chi Minh City. This includes flooding from monsoonal rains, which account for about 90 percent of annual rainfall, tidal floods and storm surge from typhoons and other weather events. Of the city’s 322 communes and wards, about half have a history of regular flooding with 40 to 45 percent of land in the city less than one meter above sea level.

In our analysis, we quantify the possible impact on the city as floods hit real estate and infrastructure assets.¹Flood modeling and expert guidance were provided by an academic consortium of Institute for Environmental Studies, Vrije Universiteit Amsterdam, and Center of Water Management and Climate Change, Vietnam National University. Infrastructure assets covered include both those currently available and those under construction, planned, or speculated. Knock-on effects are adjusted for estimates of economic and population growth. We simulate possible 1 percent probability flooding scenarios for the city for three periods: today, 2050, and a longer-term scenario of 180 centimeters of sea-level rise, which some infrastructure assets built by 2050 may experience as a worse-case in their lifetime (Exhibit 1).

Today: We estimate that 23 percent of the city could flood, and a range of existing assets would be taken offline; infrastructure damage may total $200 million to $300 million. Knock-on effects would be significant, and we estimate could total a further $100 million to $400 million. Real estate damage may total $1.5 billion.
2050: A flood with the same probability in 30 years’ time would likely do three times the physical damage and deliver 20 times the knock-on effects. We estimate that 36 percent of the city becomes flooded. In addition, many of the 200 new infrastructure assets are planned to be built in flooded areas. As a result, the damage bill would grow, totaling $500 million to $1 billion. Increased economic reliance on assets would amplify knock-on effects, leading to an estimated $1.5 billion to $8.5 billion in losses. An additional $8.5 billion in real estate damages could occur.
A 180 centimeters sea-level rise scenario: A 1 percent probability flood in this scenario may bring three times the extent of flood area. About 66 percent of the city would be underwater, driven by a large western area that suddenly pass an elevation threshold. Under this scenario, damage is critical and widespread, totaling an estimated $3.8 billion to $7.3 billion. Much of the city’s functionality may be shut down, with knock-on effects costing $6.4 billion to $45.1 billion. Real estate damage could total $18 billion.

While “tail” events may suddenly break systems and cause extraordinary impact, extreme floods will be infrequent. Intensifying chronic events are more likely to have a greater effect on the economy, with a mounting annual burden over time. We estimate that intensifying regular floods may rise from about 2 percent today to about 3 percent of Ho Chi Minh City’s GDP annually by 2050 (Exhibit 2).

Ho Chi Minh City could experience five to ten times the economic impact from an extreme flood in 2050 versus today.

Ho Chi Minh City has time to adapt, and the city has many options to avert impacts because it is relatively early in its development journey. As less than half of the city’s major infrastructure needed for 2050 exists today, many of the potential adaptation options could be highly effective. We outline three key steps:

Better planning to reduce exposure and risk
Investing in adaptation through hardening and resilience
Financial mobilization to mitigate impacts on lower-income populations

For additional details on these actions, download the case study, Can coastal cities turn the tide on rising flood risk? (PDF–4MB).

Could Bristol’s flood risk grow from a problem to a crisis by 2065?

Bristol is facing a new flood risk. The river Avon, which runs through the city, has the second largest tidal range in the world, yet it has not caused a major flood since 1968, when sea levels were lower, and the city was smaller and less developed. During very high tides, the Avon becomes “tide locked” and limits/restricts land drainage in the lower reaches of river catchment area. As a result, the city is vulnerable to combined tidal and pluvial floods, which are sensitive to both sea-level rise and precipitation increase. Both are expected to climb with climate change. While Bristol is generally hilly and most of the urban area is far from the river, the most economically valuable areas of the city center and port regions are on comparatively low-lying land.

With the city’s support, we have modeled the socioeconomic impacts of 200-year (0.5 percent probability) combined tidal and fluvial flood risk, for today and for 2065. This considers the flood defenses in existence today; some of these were built after the 1968 flood, and many assumed a static climate would exist for their lifetime (Exhibit 3).

By 2065, a 200-year flood in Bristol, United Kingdom, could be twice as extensive compared to today.

We find:

Today: The consequences of a major flood today in Bristol would be small but are still material. We find that the flood area would be relatively minor, with small overflows on the edges of the port area and isolated floods in the center of the city. Our model estimates that damage to the city’s infrastructure could amount to $10 million to $25 million, real estate damage to $15 million to $20 million, and knock-on effects of $20 million to $150 million.
2065: In contrast, by 2065, an extreme flood event could be devastating. Water would exceed the city’s flood defenses at multiple locations, hitting some of its most expensive real estate, damaging arterial transportation infrastructure, and destroying sensitive critical energy assets. Our model estimates that damages to the city’s infrastructure could amount to between $180 million and $390 million. It may also cause $160 million to $240 million of property damage. Overall, considering economic growth, knock-on effects could total $500 million to $2.8 billion, and disruptions could last weeks or months (Exhibit 4).

By 2065, a 200-year flood in Bristol, United Kingdom, could produce 18 times more infrastructure damage and 30 times more knock-on effects.

Unlike many small and medium-size cities, Bristol has invested in understanding this risk. It has undertaken a detailed review of how the scale of flooding in the city will change in the future under different climate scenarios. This improved understanding of the risks is an example that other cities could learn from.

However, adaptation is unlikely to be straightforward. It is difficult to imagine Bristol’s infrastructure assets being in a position more exposed to the city’s flood risk. Yet the center of the city, formed in the 1400s, cannot be shifted overnight, nor would its leafy reputation be the same today if the city had not oriented the growth of the past 20 years to harness its existing Edwardian and Victorian architecture. Unlike in Ho Chi Minh City, most of the infrastructure the city plans to have in place in 2065 has already been built.

In the immediate future, Bristol’s hands are likely largely tied, and hard adaptation may be the most viable short-term solution. In the medium term, however, Bristol may be able to act to improve resilience through measures such as investing in sustainable urban drainage that may reduce the depth and duration of an extreme flood event.

Bristol is already taking a proactive approach to adaptation. A $130 million floodwall for the defense of Avonmouth was planned to begin in late 2019. The city is still scoping out a range of options to protect the city. As an outside-in estimate, based on scaling costs to build the Thames Barrier in 1982, plus additional localized measures that might be needed, protecting the city to 2065 may cost $250 million to $500 million (roughly 0.5 to 1.5 percent of Bristol’s GVA today compared to the possible flood impact we calculate of between 2 to 9 percent of the city’s GVA in 2065). However, the actual costs will largely depend on the final approach.

Bristol has gotten ahead of the game by improving its own understanding of risk. Many other small cities are at risk of entering unawares into a new climatic band for which they and their urban areas are ill prepared. While global flood risk is concentrated in major coastal metropolises, a long tail of other cities may be equally exposed, less prepared, and less likely to bounce back.

For additional details, download the case study, Can coastal cities turn the tide on rising flood risk? (PDF–4MB).

About this case study:

In January 2020, the McKinsey Global Institute published Climate risk and response: Physical hazards and socioeconomic impacts. In that report, we measured the impact of climate change by the extent to which it could affect human beings, human-made physical assets, and the natural world over the next three decades. In order to link physical climate risk to socioeconomic impact, we investigated nine specific cases that illustrated exposure to climate change extremes and proximity to physical thresholds.