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Climate Risk Is Rising. Is Our Infrastructure Ready? · C-Suite Perspectives

• 0:00
  Welcome to C-Suite Perspectives, a signature series by The Conference Board.
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  I'm Alex Heil, senior economist at The Conference Board, and the guest
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  host of today's podcast episode.
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  Today we will discuss how companies are designing for resilience and
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  infrastructure in a changing climate.
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  Joining me is Greg Stonehouse, chief strategy officer for HDR.
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  Welcome, Greg.
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  Thank you, Alex.
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  It's great to be here today.
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  It's great to have you.
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  Both our backgrounds are certainly in this resilience and infrastructure space.
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  But for the audience that may not be familiar with HDR, can you just
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  give us a sense of what is behind the three letter abbreviation?
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  What is HDR?
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  Sure.
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  HDR is the initials of our original founders and subsequent
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  generation of founders.
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  We are a 100% employee-owned architecture and engineering firm that was founded in
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  1917, headquartered in Omaha, Nebraska.
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  We're very proud of our employee ownership model.
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  We are one of the five largest employee-owned companies in the entire US.
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  And that employee ownership is really what drives and shapes our culture, because
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  every one of our employees has a stake in who we are and how we serve our clients.
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  Great.
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  That's very helpful.
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  Thank you.
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  Let's talk resilience.
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  When we talk about designing for resilience in the context of
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  climate change, what does that mean for infrastructure today?
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  What does that mean in terms of what is changing now compared to
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  infrastructure a generation ago?
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  Yeah, great question.
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  Designing resilient infrastructure is really no longer optional, Alex.
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  Infrastructure is the backbone of our communities and creating resilient
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  infrastructure is how we strengthen that backbone to protect our communities
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  in the face of what is becoming a widening array of increasingly
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  unpredictable circumstances and events.
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  When I was in college, almost 40 years ago now, we learned to design hard
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  physical infrastructure that solved a very distinct, well-defined problem
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  in the most efficient manner possible.
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  Now with development and urbanization across the US, over time, more and more
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  impervious surfaces erode our systems resilience to the changes in the climate.
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  We're experiencing more frequent and more intense precipitation events on one side.
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  Additionally, as population growth has driven population and migration
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  toward regions of the country that have water scarcity, even slight changes
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  in temperature can create more intense drought conditions and have a much more
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  dramatic effect on our water supplies.
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  So today, rather than looking toward resilience as what used to be an
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  additional service to your project, we're integrating resilience into
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  all our designs to try to help the owner capitalize on asymmetrical
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  opportunities and benefits that might be achieved through taking just a
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  more holistic view of a project.
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  Resilience efforts are reducing our economic losses and they're ensuring
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  that essential services remain available as climate extremes intensify their
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  impacts upon our infrastructure.
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  That certainly resonates with me in my 10 years at the Port Authority
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  here in New York and New Jersey.
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  Resilience and resilient infrastructure became more and
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  more of an important topic.
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  10 years is a relatively short period of time but certainly it's true that over
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  the last generation plus, this has now become at the forefront of design efforts.
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  What kind of projects are we talking about?
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  I think intuitively a lot of listeners can probably relate to flood walls and making
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  transit stops more resilient when it comes to precipitation and flooding events.
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  Can you just add to the list a little bit?
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  What else are we talking about?
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  It's becoming everything.
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  It's roadways.
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  Just to take it down to a very microscopic view, even the individual catch basins
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  at a low point under a viaduct on a roadway where the size of the inlets
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  to allow the flow of a more intense and or more frequent storm event.
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  It's also in building construction.
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  It is creating more energy-efficient and resilient buildings that are
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  using materials-- glasses, steels, timber-- that are less intrusive upon
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  the environment and upon our natural resources but also consume less energy
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  and create a smaller carbon footprint over the lifecycle of a project.
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  It's bridges, it's power facilities, it is port facilities
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  in terms of sea level rise.
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  It's virtually everything that we experience and use every day but don't
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  often really recognize as something that can be so easily impacted by minor shifts
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  in our environment and our climate.
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  And the minor shifts, they expect it to become large shifts
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  over the rest of the century.
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  I think that's certainly all true.
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  From an economist point of view, all the resilient design features, they
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  basically prevent future damages by making those infrastructure items
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  more resilient and able to withstand some of these extreme weather events.
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  Does that come with a cost premium?
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  If you are the owner of assets, is that something you need to start planning?
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  That the cost- benefit calculus pencils out because of the
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  avoided losses in the future.
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  But is there something that would suggest resilient design is more expensive?
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  Not necessarily.
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  It can come with an additional cost but I think what we're also
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  trying to do is view these through a lens of opportunity as well.
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  We had a project; it was a redevelopment of an industrial site
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  in a major US city and a brownfield site that was prone to flooding.
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  Rather than just installing gray concrete, gray infrastructure, what
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  is a concrete solution to that?
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  We used a green solution, a sustainable infrastructure solution
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  to create a project that solved the flooding problem and cleaned up the
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  brownfield environmental property.
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  But we did so in a manner that created green space.
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  It created park space.
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  It used elevated walkways so that even during a heavy precipitation
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  event the park could still be used, people could still walk across
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  pedestrian pathways that were elevated.
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  And it did so in a manner that was actually done at a less expensive cost
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  than the gray infrastructure, but it also brought additional benefits of
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  park space, of recreational space.
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  And ultimately it precipitated economic development in the area,
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  in the neighborhood around that.
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  So the intangibles that can come, whether it does require a little bit
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  of extra cost or even if it can be done at a savings, we should view these as
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  investments and try to find the return on the investment that maybe extends beyond
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  the boundaries or the limitations of the project site that we're dealing with.
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  That's a very good point.
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  I also think that with these kind of improvements and with these investments
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  the way you described them, you know that sometimes the use of the
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  site might be different than before.
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  In terms of sea level rise, you have to embrace essentially higher sea
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  levels and it turns into a design effort to make the site usable from
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  various angles, even if there might be more impactful future climate events.
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  That's a very good point.
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  For the people that are a little bit in the weeds, if you're thinking
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  about this from the planning and the design stage, how does HDR think
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  about some of these different risks and can you give us a sense of how
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  some of these risk assessments, some of the climate modeling, how the nuts
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  and bolts get turned into project plans, prioritizations of projects,
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  some of the real technical aspects.
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  Previously, reliable weather data for the variables like temperature,
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  rainfall, wind pressure, snow loads, those over probably the past 30 or
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  40 years have become a bit obsolete.
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  Climate disasters, weather disasters in the US now are regularly approaching
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  $200 billion a year in damages and we're displacing upwards of 2
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  million to 3 million people per year, even if it's on temporary basis.
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  Because of those implications, there's much more awareness and more intense
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  focus on creating resilient solutions that help can help us avoid that.
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  As a result, I would say our approach is reflecting a shift in the industry,
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  where it's no longer that add on, it's a core design parameter.
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  Resilience is a core design parameter that we use in evaluating the
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  project and try to quantify the problem so that we can come up with
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  redundant and resilient solutions.
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  We have added climatologists and meteorological sciences within HDR in
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  the last 20 years and these folks are the ones that we bring into a project
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  to help us try to quantify the problem.
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  They're leaders in the industry.
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  They're engaged in our industry, professional associations with their
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  peers to advance tools and advance the science that can inform future decisions
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  and help advance design standards.
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  Now, a little more specifically to your question.
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  We use tools like triple bottom line analysis, where we can better quantify
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  the social, the environmental, and the economic implications of design solutions.
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  That helps us to facilitate transparent conversations and drive
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  and advance solutions around the design outcomes without making it a climate
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  change conversation, if you will.
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  We don't all necessarily agree on the science and we don't necessarily
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  have to, but collectively we've got a responsibility to move forward in
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  a manner that develops strategies and mitigates climate risk but also unlocks
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  opportunity and enables our utilities and our clients to champion sustainability
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  and resilience within their communities.
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  The goal, I think, Alex, is really to obviously ensure that our
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  infrastructure remains functional and safe in a climate that may look very
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  different tomorrow than it looked yesterday or five or 10 years ago.
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  From what you're saying, HDR has really gone through a transition in the levels
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  of skills, sophistication, quantitative analysis that you bring to projects.
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  What about the other side of the procurement of infrastructure?
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  To what extent are cities and utilities in the process of rethinking their
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  planning efforts, planning for resilience?
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  You mentioned the collaboration, has that changed in equal terms?
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  Are we now basically looking at a situation where cities, states,
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  municipalities, any other entities that are in charge of infrastructure
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  have resilience as their main focus or is this still something where you
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  have to really push the "Look, this is what you have to do because ultimately
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  this is in your best interest?"
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  I think that varies from client to client.
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  It probably varies a bit geographically, Alex.
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  It certainly varies from smaller clients to larger clients.
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  I think smaller municipalities probably get by on a much tighter
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  budget and sometimes are driven to focus on the solutions that address
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  the challenges that they have today.
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  So we have to work with them, maybe in some cases a little more closely, to
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  help them to appreciate the potential benefits and the value of a little bit
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  of additional investment or maybe some redirection of that investment in an area
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  that might provide a more resilient or longer-term, more sustainable solution.
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  I think you'll also see that you get sometimes competition within
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  departments within an existing city.
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  For example, they manage their budgets within a silo and they don't capitalize
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  on the potential mutual benefit that can come with creating a more holistic
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  solution that could expand across the street department, the water
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  department, the utility department, and even the public safety side of things.
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  Silos like that, based on my experience in the public sector, certainly
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  they can be very much obstacles.
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  Even if everybody acts with the best intentions, it still can be something
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  that is not optimal by the time you actually get to the implementation phase.
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  That's a very good point.
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  You mentioned some of this already, but everybody thinks, "Oh yeah, we need to
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  protect existing infrastructure. We need to harden it, we need to make it resilient
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  when it comes to extreme weather events." What about nature-based solutions?
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  What role do those play in the redesign of infrastructure and assets going forward?
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  They're playing a larger and larger role.
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  In the last, probably, 20 years, we've really expanded our
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  appreciation for the value that natural solutions can provide us.
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  As I mentioned, I'm down here on the Gulf Coast in Pensacola, Florida,
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  and those barrier islands along the intracoastal waterway are nature's way
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  of protecting the coastline against those extreme storm and weather events.
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  Again with population growth and migration, probably post-World
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  War II, it's now shown us the implications of intense development
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  along that coastal environment.
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  Now we're doing a lot of work to reestablish and reinforce natural
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  solutions to absorb the impact of the seas and of the storm surge that results
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  from these intense weather events.
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  We've got different solutions right along the beach.
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  You have the reestablishment of the grasses and the dunes that can
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  naturally absorb that wave action.
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  As you move a little further into the coastal zone, into the estuaries, you'll
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  see a lot of oyster beds and a lot of near shore oyster bed reestablishment
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  that really softens the impact of those events against the waterfront, if you
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  will, where the city meets the estuary.
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  We're seeing a lot of that in terms of nature-based
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  solutions in the coastal zone.
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  I'll also say on the architecture front, our architects are first in the
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  world in health care architecture and they're doing a tremendous amount of
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  net-zero building design and trying to build hospitals, high-tech facilities
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  that provide a critical public safety social benefit in our communities
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  but do so in a net-zero manner.
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  But we've even gone beyond that.
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  When we get involved in the planning of a health campus, for example, we're
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  now implementing regenerative design.
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  When we get beyond just the footprint of a hospital building but can look at
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  a campus, we're doing a lot to bring an ecological benefit, to create green
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  space to have net-positive effects on the ecology, on human welfare,
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  health, and on society in general.
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  These technologies and approaches are evolving but they're
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  becoming more and more prevalent.
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  The earlier that we can get involved in the planning, the more we can
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  have an impact on leveraging those dollars and turning that investment
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  into something that goes beyond just providing, in the case of a hospital,
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  just a health and wellness solution.
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  Those are all really good points.
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  It's interesting how they all play a role, regardless of where you
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  look across the country, really.
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  You mentioned Florida and some of the nature-based solutions there.
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  The same conversation is ongoing here in New York City where I'm located.
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  It's about the Billion Oyster Project.
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  It's about the sand dunes along the Jersey Shore.
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  Really, a spotlight was pointed at it after Hurricane Sandy hit.
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  Some of these conversations are much broader than just building hard assets
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  these days, which is a great point.
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  Yeah, they are.
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  Your Billion Oyster P roject in New York is one that we're very passionate about.
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  HDR also has a foundation and we've actually contributed to that project and
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  have quite a bit of involvement in that.
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  So that's one that's near and dear to our hearts as well.
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  That's interesting.
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  We're going to take a short break and be right back with more of my
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  conversation with Greg Stonehouse.
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  Welcome back to C-Suite Perspectives.
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  I'm your host, Alex Heil, senior economist at The Conference Board.
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  I'm joined by Greg Stonehouse, chief strategy officer for HDR.
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  So, Greg, before the break, we started talking a little
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  bit about different sectors.
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  You mentioned health care.
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  Let's talk in a more focused way about that.
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  What about some of the different sectors that HDR works with, like transportation,
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  water, health care, energy?
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  How can you apply lessons from one sector to another?
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  What is your firm's approach to working across these different industrial
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  sectors to make sure that the overall outcomes presumably are optimized?
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  I can attack that question from a couple different angles.
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  But just in terms of context, I'll start off with the fact that 40% of
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  our global population exists within what we call the coastal zone and the
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  definition of coastal zone varies.
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  But even here in the US, 40% of our population are in coastal counties,
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  15% of that population is within the first five miles from the shoreline.
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  When we look at that, we have a lot of infrastructure that is packed into a
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  very narrow band right along the coast.
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  That's some of our most intense and dense infrastructure systems.
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  We have drinking water and wastewater treatment facilities.
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  We've got major transportation routes.
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  Our maritime services, our ports facilities connect our sea transportation
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  to the rail hubs at these locations.
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  And where the people live, they want their hospitals and their universities.
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  To your question on sharing solutions across sectors.
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  All of these have linear systems, right?
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  We've got water system conveyance, we've got power and energy
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  transmission lines, and we've got major highway and rail corridors.
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  The approaches that we take to attacking these linear systems are very consistent
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  and similar from one sector to another.
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  We recently completed a comprehensive physical assessment for a rail network
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  that spans across North America to strengthen their system-wide resilience.
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  We look at databases, we use the same climate models and we use similar
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  data sets to integrate those into a single platform that enables a
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  client to visualize their exposure to rainfall and flooding and extreme
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  heat across all their facilities.
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  We can bring tools that are very applicable across these multiple sectors.
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  The other thing is that we work really hard to be intentional about not only
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  sharing resources from our various service lines but pushing holistic approaches.
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  We employ a group of folks who sit in what we call our cross-sector services and
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  they work to engage across all sectors.
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  We have climate scientists, data analysts, strategic communications
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  resources, environmental scientists, and even real estate experts that can
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  all collaborate across our different business services to build unified and
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  flexible decision support systems that can be employed across all sectors to
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  direct resilient investment strategies.
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  Yeah, that's interesting.
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  One of the areas that works across sectors that you just mentioned
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  is strategic communications.
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  I could imagine that there's a lot of communication also with the
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  communities, with local stakeholders.
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  Can you speak a little to the engagement that is necessary
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  to make projects successful?
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  Because it's one thing to stay on the planning side and crunch the numbers
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  and demonstrate what this means in terms of the benefits and costs of a project.
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  But there's another dimension and it is actually engaging with the various
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  stakeholder groups in the community.
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  Yeah, you're exactly right.
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  We used to just call it strategic communications because we had to
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  communicate what the project was going to be to the client, or not to
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  the client but to the stakeholders.
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  Probably 30 years ago, it was about informing them of
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  what was going to happen.
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  It has become much more exactly what you said, engagement.
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  It's not just to the residents that are affected by a project.
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  It's the stakeholders that are directly and indirectly connected with it.
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  It's much more about engagement and using that strategic communications to
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  secure informed consent and get that buy-in, to give them the information that
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  they need to get their input, to have a more of a give and take versus just
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  distributing information to help us come back, reshape, refine, and improve the
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  solution in a matter that actually earns consensus from the stakeholders that are
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  involved and affected by the solution.
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  We use those folks very actively.
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  We try to employ them on a lot of our projects.
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  We probably initiated the strategic communications team maybe a little over a
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  decade ago and that team has grown to over 200 professionals within our organization.
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  So it's a very large group that brings a lot of skills and perspectives and,
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  quite frankly, helps our engineers to view their projects through a
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  different lens so that we can provide much more holistic solutions that
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  are the connective tissue of society.
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  Our projects used to be just solving a very technical problem and now
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  we're realizing much more that the strategic communications folks are
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  the connective tissue that connect our solutions to the communities in
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  which they're built and delivered.
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  That's absolutely critical for the success of a project.
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  In terms of the success of a project, sometimes barriers continue to exist
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  and they might be of various types.
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  Funding can be one of them.
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  Have you seen any particular funding strategy work better?
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  What are your takeaways, based on your experience, when it comes to
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  funding resilience projects and resilient infrastructure additions?
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  Are there takeaways that you could talk about there?
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  There are.
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  The first one that I will say is much more collaborative funding,
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  leveraging dollars from federal resources, from state resources, and
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  combining those with local resources.
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  There are certainly organizations out there that provide grant funding
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  that can help to create a bit of a force multiplier to deepen the
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  benefit that a project might deliver.
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  There's a lot of that going on.
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  There's also a lot of effort on the agency side of things to validate
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  the grants in terms of improving the selection process that they use, to
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  refine the metrics that they use to select and allocate grant dollars.
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  And then ultimately measuring the performance of those projects that
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  are implemented from those grants in order to track the outcomes and
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  measure the performance and the improvement in project resilience
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  over the life of a grant organization.
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  I think what you're describing as this much more comprehensive
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  multipurpose funding stream, that sounds like a very applicable strategy.
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  In the spirit of slowly wrapping up our conversation.
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  There is one topic I just want to bring up briefly and that's innovation
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  in engineering, design of projects.
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  From my perspective, and to be perfectly clear, I'm not an engineer.
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  I flunked out of mechanical engineering in college.
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  It was miserable and I chose economics instead.
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  But it certainly seems to me that we are now moving toward a world where there's
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  greater recognition that just building a higher wall to keep out water is probably
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  not going to be the right approach.
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  I think that we need to really think about this.
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  Living with, for instance, if we're talking about flooding, some of the
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  flood waters, having infrastructure that deals with it differently than
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  a traditional approach might suggest.
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  What's your view in terms of the degree of innovation that we're
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  actually finding in the industry?
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  I think we are in an interesting time with the advancement of technology
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  and AI and machine learning.
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  I think it is creating some real opportunities for us.
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  We have been in an environment over the last probably 30 or 40 years,
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  in the digital industrial revolution when we started to use computers
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  and technology to operate systems and collect massive amounts of data.
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  What we didn't do really was connect all that in a manner that
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  enabled us to then analyze trends and take action from that data.
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  So we've got a massive amount of data out there.
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  Now, for example, if we look at a major metropolitan city that has
• 26:04
  more intense rain events, we do these cloudburst analyses where we can
• 26:08
  now predict much more accurately the intensity of a storm, when that storm
• 26:14
  is going to hit, and even localize that down to the neighborhood that it
• 26:18
  might impact most using climatologists and more meteorological sciences.
• 26:24
  But when we combine that with the historical operation of our sewer
• 26:29
  and our stormwater system, we can move water around in different ways
• 26:34
  and accommodate that event using what we call real-time control.
• 26:38
  We can operate the system in advance of an event to try to create a little
• 26:42
  bit of a buffer in the system to enable that intense rain event to hit
• 26:47
  that neighborhood and give capacity in that neighborhood for that water
• 26:51
  to get out of there more quickly, to prevent and at least mitigate
• 26:55
  a potential wet weather event.
• 26:57
  The innovation that we're seeing now is really coming from our better use of
• 27:02
  historical information and our ability to synthesize that and make projections and
• 27:07
  predictions more on a real-time basis.
• 27:10
  Certainly in the planning phase, we can now look at storm surge inundation using
• 27:14
  scenario planning to help a coastal city try to make sure that they are predicting
• 27:19
  at various levels of storm surge what transportation routes they may need to
• 27:24
  keep open, what they can do to create some flexibility and maintain access.
• 27:29
  And what level of protection they may need to provide emergency storm
• 27:34
  protection for a hospital, for example, to provide some sort of a flood hardening
• 27:39
  around an individual building within the downtown area in a severe storm
• 27:43
  to make sure that they can keep it operational and keep it up and running.
• 27:48
  There's a lot of innovation going on right now relative to our
• 27:51
  abilities to make that happen.
• 27:53
  I'm so glad you brought this up because data is critical, from my
• 27:58
  perspective, also going forward.
• 28:00
  It's certainly true that this all connects.
• 28:04
  We have now real-time opportunities to measure and track the performance
• 28:11
  of assets, transportation, water, energy, and otherwise.
• 28:15
  This becomes an integrated effort, not just planning with big data
• 28:20
  but also steering the operations, especially during extreme weather
• 28:24
  events, in the right direction.
• 28:26
  It's a great point.
• 28:27
  To wrap things up and to maybe end on a positive note, what makes you hopeful?
• 28:32
  What makes you optimistic that we will be able to address some
• 28:36
  of these resilience challenges?
• 28:41
  Unfortunately, Alex, climate change has become so politicized, both
• 28:45
  globally and here within the US, and it can even change dramatically
• 28:49
  from one administration to the next.
• 28:52
  I would say the good news for our industry is that most of us live in
• 28:56
  the middle of that spectrum where we recognize that our clients are in need
• 29:00
  of resilient solutions and they expect an approach that is environmentally,
• 29:06
  socially, and economically sustainable.
• 29:10
  Because of that, our design standards continue to evolve to
• 29:13
  incorporate energy modeling and benchmarking and reduction targets.
• 29:19
  We are designing facilities that not only do carbon-balanced solutions
• 29:25
  but create net-positive environments.
• 29:27
  And now we've got the data and the tools and the collaboration to make
• 29:32
  smarter decisions, not just bigger ones.
• 29:34
  When I look introspectively at the demographics within our organization,
• 29:40
  I will say that the generations of our employee owners that are following the
• 29:44
  boomers and the Gen Xers are extremely passionate and engaged and committed to
• 29:50
  what we at HDR refer to as "cathedral building." It's conceiving and building
• 29:55
  something that may not be complete in the foreseeable future but we build it for
• 30:00
  future generations whom we may never meet.
• 30:03
  I would say that combining that mindset, the continuing evolution of our industry's
• 30:09
  perspective, the advancements in innovation, and our employees' passion
• 30:14
  for doing what is right gives me optimism that we can build systems that don't
• 30:18
  just withstand the future but they help us shape the future for the better.
• 30:23
  Great.
• 30:24
  Those are very wise words.
• 30:25
  Greg, thank you so much for joining us today.
• 30:28
  Thank you.
• 30:29
  It's great to be with you today, Alex.
• 30:30
  I appreciate it.
• 30:32
  And thanks to all of you for listening to C-Suite Perspectives.
• 30:36
  I'm Alex Heil and this series has been brought to you by The Conference Board.