Figure 1.29 Targeted Indicator Type, by Level of City Personnel

be oversimplifi ed because of the use of only GDP measurements. Social capital, however, is measured using too many diff erent indicators. Human capital is diffi cult to measure directly. Natural capital indictors are often diffi cult to calculate.

The precise choice of indicators for a city and a specifi c project will vary with circumstances. In general, indicators need to be aff ordable so that they may be measured on a regular basis. Otherwise, what is the point? They also need to be relevant; so, they need to measure the larger changes that cities are trying to eff ect. The relevance varies depending on who is going to be using the indicator. For a city council and its city partners, performance indicators are required that help clarify the intended long-term results or performance. A common performance indicator for manufactured capital is GDP per person; another might be the asset value of cityowned infrastructure. The other capitals tend to be more diffi cult to capture. In the case of natural capital, performance indicators need to address at least the diff erent types of ecological services: sinks (capacity to absorb wastes), sources (capacity to provide useful products and services), and life support (capacity to cycle resources and regulate environments so they support life). In addition to broad performance indicators that measure how well key targets or goals are being achieved, it is helpful to develop a set of indicators for monitoring progress at the strategic level and at the operations level.

Figure 1.29 illustrates how three diff erent levels of indicators correspond to the scope and responsibility of city personnel. As scope narrows, so, too, does the indicator. For example, a new distributed electricity system for a city might need feedback at three levels of detail:

• Performance: percentage of residents in the service territory receiving power from the new system

• Strategic: percentage of buildings retrofi tted according to new energy effi ciency standards

What Makes a Good Indicator?

Affordability and practicality: Can the data be collected easily at little or no cost? Is the analysis simple and easily automated? Relevancy: Do the indicators actually measure the key issues of concern? Do they respond suffi ciently to show that progress is being achieved? Clear explanations and measurement protocols: Is it easy to defi ne what is actually being measured and how? Comparability: Is this a standard measurement from which other measurements may be derived to provide comparisons and benchmarks of performance? Aligned with objectives: Is the effort to measure appropriate given the priorities established in the planning framework?

Figure 1.29 Targeted Indicator Type, by Level of City Personnel

Source: Lahti (2006).

• Operational: average time required to repair outages

Each project may require a family of indicators because decision makers will be interested in diff erent time frames and levels of detail.

Proactive risk management for all threats Standard practice in fi nancial risk management involves an analysis of any investment in terms of sensitivity to changes in the key factors used for determining costs and benefi ts. Each factor has a certain probability of changing

over time, with consequences for the fi nancial bottom line. This assessment of risk based on the known probabilities for change in the direct economic factors is referred to as sensitivity analysis. It is the principal risk-assessment method used in urban development projects, and it is an important and necessary part of due diligence. If a 15 percent drop in ridership is suffi cient to undermine the fi nancial viability of a new transit system, city leaders will want to know the odds of such an occurrence. Sensitivity analysis is not a replacement for good judgment, but it is a good way to educate decision makers about the variables that might undermine the critical viability of an investment. The other well-known method for risk assessment is the Monte Carlo assessment, which expands the analysis to include the possible correlations between changing variables essentially by making many random changes to variables in combination.

What is missing from these standard riskassessment methods is the many indirect, diffi cult-to-measure risks that threaten the viability of an investment. Also missing is the assessment of uncertainties, the factors that cannot be assessed statistically, but that represent signifi cant threats. In a similar fashion to economic analysis, the risk assessment needs to be coupled with methods that expand the scope of the issues or elements examined and rated. In reality, cities today face many threats and hazards that are largely external to fi nancial calculations, but that may nonetheless infl uence the viability of projects. These include sudden disruptions to systems, such as natural disasters (earthquakes, hurricanes, tsunamis, and so on), and the possibility of rapid socioeconomic-environmental change, such as the recent global fi nancial crisis. Over the next 30 years, for example, it is highly likely that we will witness fundamental changes in energy, communication, transportation technologies, climate, demographics, global markets, and environmental regulations. The onset of epidemics is probable, and the availability of critical resources such as water, food, and fossil fuels will likely be problematic. For a city, 30 years is the blink of an eye. The infrastructure investments planned for the near future will need to perform for much longer than 30 years. But will they? How might Eco2 cities assess and improve the overall resiliency of development projects?

Expansion of risk assessment to include resiliency and adaptive capacity Resiliency is a concept traditionally used to describe two characteristics: the robustness of a system (that is, its ability to continue to perform by resisting changing conditions), and the adaptability of a system, (that is, its ability to continue to perform by responding appropriately to changing conditions). Resiliency may be used as a potential design criterion for all urban systems, including built infrastructure, culture, and governance.

The basic idea is that it is possible to manage risk more productively by forecasting the impacts of external forces on urban areas and by designing and operating urban land uses and infrastructure in ways that are inherently more resilient. This means including in any assessment indicators that help designers, managers, and decision makers understand the relative capacity of systems to survive and recover from shocks and rapid change. The World Bank’s primer on climate resilient cities provides information on how cities may eff ectively assess and manage the risks associated with climate change (see Prasad and others 2009).

Elements of resilient design appear to reinforce a number of the ecological design strategies that are so eff ective at improving effi ciency. Remote generating plants, incinerators, treatment plants, and communications facilities are far more vulnerable to catastrophic failure than a network of modular, distributed systems closely integrated into the fabric of the city. Thus, urban security helps reinforce distributed systems, a design strategy already proposed as a way to improve urban resource effi ciency