How do smart cities contribute to the fight against climate change?
The way cities are built plays a strong role in reducing the overall carbon footprint. Because urban dwellers tend to live in large, shared buildings, cities are the most efficient human environment. Beyond this, modern buildings in smart cities have better insulation levels, and some even have smart systems that detect when people are in their homes and offices that improve efficiency of heating and air conditioning. As a growing number of older buildings are being retrofitted and brought up to date, a smart city's energy use can be drastically reduced.
Smart cities are also a virtuous circle - they attract more people, more business and better employment opportunities, and also superior cultural and social experiences - which in turn makes them even more attractive. There is also an inherent link between smart cities and lower carbon emissions, because managing this growth puts cities at the front line of reducing greenhouse gas emissions.
Another part of this is the implementation of intelligent mobility and public transport solutions that reduce energy use. Shared and electrified transport systems produce lower emissions, and mean fewer people drive cars. In the smartest of cities, the carbon footprint is even lower thanks to truly smart mobility modes. These can be public transport, or efficiently organised multimodal combination of transport systems, from cars to trains, buses, and trams, through to bike sharing schemes and walking.
How did Covid-19 impact smart cities?
Covid has been a great accelerator, changing the way we work and interact. In response to the pandemic, we are all discovering online meetings as a viable alternative to at least some expensive and time-consuming business trips.
It obviously had a huge impact on the airline industry, with turnover in some cases plummeting up to 80% this year. On the flip side, investment is growing in companies that improve the connectivity we all rely on instead, such as fiber-optic broadband, high speed mobile, and the services that come with them. Then there are a number of services that have proved to be essential during Covid, and will also become essential to the development and quality of life of smart cities. During the spring lockdowns, companies like Uber, Grab and Lyft accelerated the expansion of their business models into food delivery, groceries, and even medical delivery. Companies adapting to change with new technologies and services has been a major impact of the coronavirus pandemic.
Why should climate-conscious investors pay attention to smart cities?
Investors are increasingly directing capital towards climate-oriented projects and assets. We're seeing a wave of institutional investors, from insurance and pension funds, to universities and sovereign wealth funds, reallocating funds to green projects and assets that are ESG graded, or compliant with the ambitions of the Paris Climate Agreement.
And as institutional investors move increasingly down this path, retail investors are following in their footsteps. This trend in the reallocation of capital is slowly eroding investor support for heavily-polluting industries, and shifting instead to the very technologies that make smart cities tick, namely renewables, electric vehicles and all the infrastructure that goes with them, such as EV charging stations, energy storage systems, even urban farming. There’s clearly a parallel between smart cities and climate-conscious investing.
Let me also mention the Social and Governance aspect of ESG investing, which is also central to the way smart cities work. Companies have recognised that if they don’t get this right, they won’t attract the investment, customers and talent they need to thrive. It’s urban consumers who are demanding change. They tend to be the most climate-conscious, but they are also concerned with how businesses can best serve their employees, as well as the community, whether it's the local urban community, or the global community, that they operate in.
In the long term, cities are going to recover from the Covid-19 crisis, and they will thrive. This will be supported by changing investment patterns that support greener, more efficient and better ways of living together. Ultimately, smart cities are the ones that attract people to work, to live, to play. And to do that, they’ll need to be climate-friendly.
Hear straight from Lukas as he equates smart cities to smart investing
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