The report, published by global consultancy Arcadis, measures the social, environmental and economic health of 100 cities around the globe in its 2018 Sustainability Cities Index.
The cities are marked on three pillars of sustainability as set out by Arcadis: people, planet and profit, to generate the overall ranking.
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The poll sees the Capital top the charts in the people sub-index to claim the title of “most liveable city in the world” ahead of London, Paris, Singapore and Stockholm.
The people category considers the social aspects of living in a city that reflect the overall quality of life of its residents. Indicators include “education, health, income inequality, work-life balance, crime, demographics and cultural offerings”.
The city’s lively arts and entertainment culture, the Old and the New Town, both of which are World Heritage Sites, and tourism combine to make it a desirable place to live.
However, thanks to the rising cost of housing and increasing traffic congestion, Edinburgh places third overall behind Stockholm in second place and London in first.
The report advises that the city must address the negative factors to keep it competitive.
Despite performing “relatively well” in the environmental score, placing at 18 out of the 100 cities, the report acknowledges “room for improvement.”
The overcrowded road network that circles and spans the city and the lack of designated recreational space were flagged as causes for concern.
London claimed the top spot as the world’s most sustainable city thanks to a high score in the people and profit pillars, while Kolkata in India ranked 100th.
European cities made up 14 of the top 20 positions. Singapore, Hong Kong and Seoul all ranked highly as did New York and San Francisco.
Leader of Edinburgh Council, Adam McVey said: “Clearly, we’re on the right track. We should all be proud that Edinburgh city sits comfortably within the top five cities in the world in this index and particularly that is rated number one for people.
“Scotland has a highly skilled, well-educated and adaptable workforce with five higher education institutes in the global top 200. Pair this with a high quality of life, where healthcare and higher education are free and crime is low and this demonstrates just some of the strengths which make the country so desirable.
“All this combines to bring a high quality of life for our residents, something which Arcadis has recognised in this report.
“That the data is collected from the perspective of citizens is particularly significant and we will continue build on our potential so Scotland’s cities remain at the forefront in the future.”
Claire Miller, Green councillor for the City Centre, said “I can see why Edinburgh has come out top, as it’s an amazing city. We have to keep working hard to improve the city though, and not rest on our laurels. ”
The Evening News reported in November how the cost of private rentals in the Capital were ‘out of control’ and MSP for Edinburgh and the Lothians Kezia Dugdale called for more social rent homes to be built to combat soaring rental costs and a high demand.