06 May 2020

Smart Cities – Defining the trend, describing the transition

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As part of our guest blog series on thematic investing, MSCI and Lukas Neckermann share their views on Smart Cities. With the rapid urbanisation megatrend heavily impacting the lives of generations to come, read on to find out how Smart Cities will play a critical role in adapting to change.

Urbanisation and the growth of “megacities”

Ancient Rome could be described as the world’s first ‘megacity’ with a population of more than 4 million people, according to the Augustine census. Moreover, through its planned infrastructure and services, it helped define how cities could operate and be structured. Today, there are 33 megacities (now defined as urban areas with over 10 million residents) globally, and the U.N. has projected that this figure will grow to 43 within the next decade.1 These estimates place the vast majority of the new megacities in emerging markets.

Against a backdrop of accelerating urbanization and new city development, there has been a parallel growth in the number of companies seeking to develop solutions that may support the efficient and sustainable operation of a city in a technologically ‘smart’ way. The emphasis is on the everyday services and activities that facilitate the growth of a city, improve its citizens’ quality of life and address key challenges inherent with any influx of new residents and activities into an urban area including:

Environmental issues: pollution, noise, water supply, energy production, etc.

Land-related issues: pressure on land and housing, management of effective land use and urban sprawl

Public health concerns: mortality, infection control, sanitation and food safety

Studies have shown that to curtail such potentially negative effects, cities should limit their population growth rate to 1% p.a. However, developing countries, in particular, have experienced significantly higher rates.2

1 U.N., World Urbanization Prospects: The 2018 Revision
2 https://worldpopulationhistory.org/urbanization-and-the-megacity

MSCI Smart Cities

MSCI would like to thank Lukas Neckermann, Managing Director of Neckermann Strategic Advisors, for useful discussions and insightful analysis of this megatrend which have greatly facilitated the preparation of this article.

Lukas Neckermann is the author of three books: “The Mobility Revolution” (2015), “Corporate Mobility Breakthrough 2020” (2017) and “Smart Cities, Smart Mobility: Transforming the Way We Live and Work” (2018).

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