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smart city

The Smart Cities of Tomorrow

March 28, 2019

According to the United Nations, 55% of us currently live in settlements with high population density and infrastructure. By 2050, the UN predicts this to rise to a staggering 68%. So what technological solutions are being implemented to meet the increasing pressure put on the likes of infrastructure?

Ever since the industrial revolution, people have been gradually shifting in residence from the rural to the urban environment. According to the United Nations, 55% of us currently live in settlements with high population density and infrastructure. By 2050, the UN predicts this to rise to a staggering 68%. The number of megacities is also growing. By 2030, it is estimated that the world could have over 40 urban agglomerations each totaling 10 million inhabitants.

Trends like these are putting pressure on infrastructure, causing overcrowding and contributing to a number of environmental hazards. The implementation of technological solutions to meet such challenges has given rise to the concept of the ‘smart city’.

What are smart cities?

When it comes to smart cities, no single definition exists. IBM refers to a smart city as one that “makes optimal use of all the interconnected information available today to better understand and control its operations and optimise the use of limited resources”. For the British Standards Institute (BSI) a smart city allows for the “effective integration of physical, digital and human systems in the built environment to deliver sustainable, prosperous and inclusive future for its citizens”.

At their core, smart cities look to solve many of the challenges that urbanisation and the creation of megacities generate including:

  • Overcrowding and its harmful impacts
  • Climate change and sustainability challenges
  • Safety and security

No singular approach exists

So far, there hasn’t been an all-encompassing method to creating a smart city but rather more innovative ways of solving very specific issues.

For instance, Copenhagen has worked with the Massachusetts Institute of Technology (MIT) to create a smart bike that allows citizens to opt for cycling in the search of a greener and healthier city. San Diego has used technology to launch a connected street lamp network, helping to save money, preserve energy and boost the sense of security across the city.

Countries like China have been at the forefront of development and innovation. One need look no further than Hong Kong’s Smart City Blueprint to get an indication of their growth in this area.

According to one of The Economist’s Intelligence Unit reports, private investment has focused primarily on facilitating the likes of transport and mobility, areas that the public sector has largely dominated.

How will the smart city of tomorrow look like?

As technology evolves so will the opportunities for smart cities. The likes of 5G will have a huge impact on how data is collected, processed and used providing potential answers to current problems.

In their report on smart cities, Deloitte referred to the SmartSantander project in Santander, Spain, as an ‘early peek into how data and citizens can together transform a city in a more environmentally sustainable, economically attractive, and responsive environment that provides a better quality of life to its residents’. Santander has installed sensors, allowing residents to use their smartphones to create and use data. For city officials, this allows for the gathering of real-time data on energy use and waste disposal. The approach doesn’t simply focus on a single challenge or area of life but rather on a more complex set of daily activities.

The smart city of tomorrow will focus on ‘experience’ and look at making daily life more productive, beneficial and enjoyable.

Opportunities for investors

The interest in smart cities lies in the collective advantage they bring, whether it be assisting local governments, widening business opportunities and/or enriching the lives of residents.

For investors, smart cities provide a plethora of opportunities. Funds dedicated to smart cities are on the rise and their approach constantly under refinement. Whilst it used to be driven solely by specialist private investment vehicles targeting companies developing smart solutions that meet the challenges of increasing urbanisation, this is rapidly changing.

Because of the all-encompassing nature of tomorrow’s smart cities, investors can focus on investment targeting:

  • The creation and building of the city and its smart infrastructure
  • The running of the smart city and its day-to-day functions
  • The services of the city and its residents

Investing in large projects that involve a number of different stakeholders comes with its own set of issues, however. In The Economist’s Intelligence Unit report, experts pointed out the reasons why private investment has often lagged behind. Smart cities require the involvement of local governments and different rules and regulations can add pressure on projects financial structure.

However, the report points out that by “combining global best practice with local knowledge, especially in emerging markets”, investors will be able to “manage risk, whether investing in city-led smart city projects or in the companies providing smart city technologies”.

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