In focus

London regains top spot in Schroders’ Global Cities Index


London has returned to the top spot in the Schroders’ Global Cities Index after scoring highly in its response to climate change in comparison to other cities in the index.

This year, the index has introduced a transport score into the ranking, with a particular focus on mass transit systems. As a result, car-reliant Los Angeles fell from first place last year to 14th position.

Cities in the Schroders’ Global Cities Index are scored on four metrics: economic, environmental, innovation and transport. The ranking identifies cities with a combination of economic dynamism, excellent universities, forward-thinking environmental policies and excellent transport infrastructure.

Global-cities-chart.jpg

The newly-introduced transport score has been designed to complement the environmental score, introduced at the last update in February 2020, as efficient transport is now seen as essential in providing social mobility. The index now has a heavy tilt to these two environmental and social factors. These two new scores give greater credit to cities that have sound environmental policies and good mass transit systems.

“We weren’t surprised to see London regain first place in the Index," said Hugo Machin, a fund manager at Schroders who compiled the index. "Whilst there has been uncertainty generated by Brexit and the resulting political environment, its underlying fundamentals remain attractive to investors."

"With an economy that continues to attract multi-national companies and highly skilled talent, a high quantity of green spaces, access to clean and reliable water, as well as reliable energy and dependable public transport, London has retained its popularity with investors.”

Risers and fallers

The introduction of a transport score and the recent introduction of the environmental score has diluted the economic score. The result is a downgrading of cities that are simply populous.

The negative impact has been on large industrial cities in China and large cities in North America reliant on road transportation. These cities tend to be post-industrial in nature. In the US, Chicago, Houston and Atlanta all dropped out of the top 30

A city that has an efficient system for moving people, goods and data around will be more economicaly sustainable as inhabitants access more potential jobs. The transport score analyses data of five transport modes: sea, road, train, bus and air.

Los Angeles performed particularly badly due to low score for access to rail, a key transport mode for the index. The city lacks a comprehensive rail network and the average walk time to a rail terminal in the city is 61 minutes.

Medium-sized cities, particularly in Europe, now rank higher. Stockholm, Madrid, Copehagen, Munich and Manchester all benefit from good public transport systems and improving environmental policies. They have also have sufficient scale to provide good employment opportunities.

Negative effect of the global pandemic

The Covid-19 crisis has had a profound impact on global cities. With many people forced to work from home during the pandemic, office owners will now have to compete even more aggressively for customers. Improved broadband speeds and communiction platforms, as well as the rise of flexible office providers, threaten traditional landlords.

“When the global pandemic subsides, cities will remain centres of innovation and entertainment," said Hugo Machin. "The best cities will continue to evolve, encouraging the development of open space and greener buildings. Human settlement requires planning and the majority of employment requires human interaction and the sharing of ideas.

"Cities that understand this will be best placed to thrive when competing for talent and capital. The aim of the Schroders’ Global Cities Index is to quantify what makes a city successful."

Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.