Will MTR Sink With The Polar Express?

By Ronald Leung 23 December, 2021

Is MTR prepared enough to avoid going underwater? CWR's Leung raises 6 questions for the company to ponder

Boarding the Polar Express to the North Pole to find Santa has been the childhood dream of many. But it can no longer be realised because as the world is fast passing multiple ice tipping points, there will be no sea ice to lift the train.

Coastal threats significantly increase flooding risks for railways & their stations

Yet climate impacts do not affect railways in the North Pole only. As the world gets warmer, coastal threats including faster sea-level-rise (SLR) and stronger typhoons will significantly increase flooding risks for railways and their stations – horrific images from New York and Zhengzhou can testify.

HK is extremely vulnerable…

…is MTR prepared enough to avoid going underwater?

This is bad news for MTR as Hong Kong is extremely vulnerable to rising seas and intensifying typhoons – even modest typhoons (recently Lionrock & Kompasu) caused city-wide severe flooding. With stations and railways covering the entire HK, is MTR prepared enough to avoid going underwater?

Here are 6 questions to ponder…

1. Has MTR upped its current flood prevention measures?

A major risk for HK is typhoon-induced flooding. CWR’s research shows that an unlucky Mangkhut today (i.e. Mangkhut strikes at a slightly different angle during high tide) would hit HK with 6m storm tides. This would inundate land up to Queens Road Central, leaving most entrances of MTR’s Central station flooded in the Central Financial District.

It is unlikely that they’ve factored this worst-case scenario

MTR has currently built most of its entrances 450mm above street level and equipped them with a 1.2m high flood board, which has worked well so far as we have yet to witness major flooding. Yet as many stations were built a long time ago, it is unlikely that they factored in this worst-case scenario.

What makes matters worse is that a Mangkhut like T10 typhoon could hit Hong Kong every year by 2050 – can MTR withstand the inundation of its stations once per year? What about the rails and electronic installations; can they resist saltwater intrusion?

These questions need urgent answers especially as storm tides in the future will be even higher due to SLR…

2. Has MTR stress-tested its portfolio against worst-case SLR & storm surges?

The latest IPCC AR6 warns that SLR of 2.3m by 2100 (and 5.4m by 2150) cannot be ruled out. Together with the average daily high tide of ~2m, Hong Kong could face SLR of 5-6m by 2100 – the map above will then become permanent.

Because don’t forget that unlike storm surges, SLR is permanent – which means existing flood prevention measures that expect water to eventually retreat will not work. Adaptation measures that completely blocks water from the coast will have to be installed.

MTR needs a comprehensive stress test to identify hotspots

So what if an extreme typhoon hit when SLR has reached 2m? The answer is HK will be hit by a staggering 11m storm tide. If you are standing near HSBC & Standard Chartered headquarters on Queens Road Central, you will be hit by 5.69m waves – that is equivalent to 3.5 people’s height!

These worst-case scenarios will no doubt deal a huge blow to MTR’s operations or even incapacitate its entire operations. To safeguard its critical infrastructure, MTR needs to undergo a comprehensive stress test of its portfolio to identify hotspots and adapt accordingly. Yet it is a mystery whether it has done it and factored in the worst-case scenario.

3. Has MTR collaborated with the government & other corporations to build coastal resilience?

If MTR conducted the stress test as CWR did, it would have realised acting alone is far from enough.

MTR cannot act alone…

…govt & other property developers also need to adapt…

…but govt has yet to publish any plan

In addition to protecting all stations’ entrances along the coast, it also needs to waterproof roads connected to them including outdoor pedestrian walks and shopping malls. This implies not only MTR but also the government and other property developers need to have adequate adaptation plans in place.

The government needs to lead this holistic city-wide planning. Other coastal governments are taking actions – Singapore pledged to invest S$100bn in adaptation and the UK’s Environment Agency warned “Adaptation… are now just as important as action to cut carbon emissions… it was a case of adapt or die”.

As we have yet to see the HK government projecting such long-term vision publicly, it pays to ask why MTR is not working with other stakeholders to ensure the government moves faster? Shouldn’t one of the most vulnerable companies be the most active one in advocating for no-regret adaptations?

4. Are MTR’s directors breaching their fiduciary duty by ignoring coastal threats?

What do we call it when directors fail to acknowledge and safeguard a company from a “virtually certain” risk? A breach of fiduciary duties.

Shouldn’t directors that fail to acknowledge SLR risks be held accountable?

So when IPCC said “it is virtually certain that global mean sea level will continue to rise over the 21^st century” and 2m by 2100 & 5m by 2150 cannot be ruled out, shouldn’t directors that fail to acknowledge, assess, and disclose SLR risks be held accountable?

Despite mentioning climate change various times in the annual report, MTR includes no climate-related risks as “key focus areas” in the risk management section of its annual report. This means SLR, which could inflict material financial damages, is being neglected across the board.

Not only could the directors be personally liable, but such negligence could also damage MTR’s reputation and increase the chances of a credit crunch…

5. Has MTR considered global reputation risks? 

Although the HK government is MTR’s major shareholder, the company is expanding its business overseas and generated 46% of its revenue from Australia, Sweden and UK in 2020. All these locations are more climate conscious than HK (for Australia its states are, but not the federal government…).

How can govts trust MTR to build climate resilient railways/properties in their cities?

This means they will lay more emphasis on companies’ climate awareness and resilience when deciding whether to award business contracts to them. Yet if MTR is not even protecting its major infrastructure (i.e. those in HK), how can these governments trust it to build climate resilient railways/properties in their cities?

Failing to acknowledge, assess and adapt to rising sea levels could pose a significant reputational risk to MTR thus damaging its revenues from overseas operations – is this the risk that MTR is willing to bear?

6. What if capital from the finance sector dries up & assets are devalued?

Another major financial risk comes from the finance sector.

With ~one-fifth of MTR’s debt coming from banks, can MTR survive a credit crunch?

All central banks in MTR’s business locations (HK, China, Australia, Sweden and UK) have started or plan to use NGFS’s climate scenarios to stress test their domestic financial institutions (FIs) against physical and transition climate risks. This means banks may look to de-risk their portfolios by not lending to vulnerable companies. With around one-fifth (23.3%) of MTR’s debt coming from banks, can MTR survive a credit crunch?

Also, as stress testing has already started, values of risky assets will face devaluation. MTR is particularly vulnerable as most of its assets, either railways or properties, cannot easily be relocated or sold. This will eventually affect both MTR and its biggest shareholder’s (aka the HK government) financial health.

MTR plays a key role in a net-zero & climate resilient Hong Kong

The reason why we are asking MTR these tough questions is because it plays a key role for HK to achieve net-zero by 2050. A CWR report to be released early next year found that if one in ten people in the US, EU and China take a train instead of a 15-minute car journey every day for a year, it could save ~551Mt of emissions = UK’s 2015 emissions!

The report has more of these planet-saving habit tweaks so subscribe to our newsletter and watch this space! But this spoiler illustrates how important railways are to achieve a net-zero future – that is why MTR needs to step up climate resilience so HK has a chance to meet its net-zero pledge.

Further Reading

• 3 First Steps To Protect HK From Rising Seas – The IPCC AR6 warnings on rising seas bring bad tidings for Hong Kong. If you are 20 & younger, HK could become the new Atlantis in your lifetime unless we take action now. See 3D maps of areas submerged and get on top of what you need to do to survive, adapt & thrive
• 3 Ways To Deal With The Deep Uncertainty Of Sea Level Rise – SLR uncertainty is here to stay but it can be minimised as discussed at SIWW 2021. CWR’s Ronald Leung & Dawn McGregor share what the climate & planning experts advised
• The Adaptation Principles: 6 Ways to Build Resilience to Climate Change – Adaptation cannot be an afterthought to development as climate change will impact the macroeconomic situation. World Bank’s Dr Stephane Hallegatte, Dr Jun Rentschler & Dr Julie Rozenberg share 6 principles
• Existential Coastal Threats: 8 Things You Must Know – Rapid SLR will happen sooner than we think, yet we are still driving investments to vulnerable locations. CWR’s Debra Tan shares 8 things you need to know about the existential threat from SLR – from glaciers in the mountains to ice sheets in our poles, permafrost + more

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