The concept of Smart Cities offers the promise of urban hubs leveraging connected technologies to become increasingly prosperous, safe, healthy, resilient, and clean. What may not be obvious in achieving these objectives is that many already-existing utility assets can serve as the foundation for a Smart City transition. The following is a broad discussion on the areas of overlap between utilities and smart cities, highlighting working knowledge from experience at PG&E.
Redefining Urban Risk and Resiliency
In today’s increasingly interconnected and rapidly changing world, social, technological and sustainability issues bring new dimensions to risk and have a major impact on the development and competitiveness of our urban centers. This results in urban risk management becoming more complex and increasingly important to the long term health and growth of urban economies.
The need to improve the risk management of urban economies raises many questions. How exposed are our cities to risk? What are the potential impacts to the long-term success of cities facing risks such as fiscal instability, poor air quality, flooding, or lack of affordable housing? Are cities adequately informed and prepared to manage them? Are large, extreme and unexpected or ‘black swan’, events once thought unpredictable, really masking unpreparedness?
Cities not only have to manage known risks, but also have to become better prepared to manage predictable ‘grey swan events’. As a step in this direction, cities have to look beyond their traditional definitions and approaches towards risk management. They have to start building economic risk resilience into their management systems in order to anticipate, respond, absorb, and quickly recover from high impact events.
Emerging factors in the rapidly evolving urban risk landscape include integrated financial markets, information interconnectedness, integrated global supply chains, as well as those resulting from the rise and adoption of disruptive technologies, taking place alongside societal shifts and complex regulatory environments.
One of the clearest examples lies in the global financial crisis of 2008-09, which severely impacted financial markets in the United States, Europe, and Asia and had widespread impact across economies. Collapsing, complex chains of debt, exacerbated by a lack of proper financial and regulatory oversight, clearly underscored the critical importance of an internationally agreed upon tax standard as well as the relevance of maintaining healthy and transparent financial centers.
While the global financial crisis was defined as an unpredictable ‘black swan’ event, it can be argued that the root of the crisis lay in the failure to detect interconnected risk events and lack of financial integrity and oversight, which eventually led to systemic banking crises across the world. Cities as the main drivers of economic activity, as well as the major financial hubs globally, suffered the biggest shockwaves to their financial infrastructure, threatening its urban economic resilience.
From this, we can see that in the same way that unmitigated risks, threats and disasters erode resilience, they can also serve as a boost to cities that respond with effective, long-term solutions to these events, thereby creating a resiliency culture and reputation of immense value. The social, fiscal, and political stability of cities help to determine their attractiveness and competitive edge.
All too often, the agenda is focused on developing smart cities with a technology-enabled infrastructure but where does ‘urban resilience’ fit on the radar of city mayors? Urban resilience, reframed in terms of the vulnerability and adaptive capacity of cities, is indeed an area that foreign investors, multinational banks and creditors are paying attention to.
Approaching the resilience issue from a property and financial perspective, Resilient Cities, a three year study by UK-based global property group Grosvenor, sought new ways of measuring the long-term resilience of 50 of the world’s most important cities as a means of better planning and managing its portfolio.
JLL’s Cities Research Center is another case in point. Launched in 2014, the online resource center provides a unique perspective on cities and real estate for clients and international investors looking beyond the traditional investment metrics. In addition, JLL’s Global Real Estate Transparency Index, now in its 10th year running, reveals which countries provide the most favorable operating environments for investors, developers and corporate occupiers. This spotlight on urban risk and resilience comes as capital allocations to real estate grows, and as investors demand further improvements in transparency, even among the world’s most transparent real estate markets.
Resilient Cities Attract Investment
The shift is now being led primarily by long-term investors – sovereign wealth funds, institutions and pension funds – that see resilience as a way to preserve capital over the course of 10 to 20 years. According to Invesco’s 2016 Global Sovereign Asset Management Study, sovereign funds are increasingly deploying their capital to real estate as an investment class.
Chris Brooke FRICS, Managing Director of Hong Kong-based consultant Brooke Husband and Senior Vice-President of RICS, notes that Asia-Pacific investors are also realising that they need to “model the factors over and above the pure real-estate play”. He believes that it will get to a point when institutions will not put money into funds that do not invest responsibly through sustainable measures, contributions to the community as well as energy and water management.
“We’ve seen the way Singapore has responded by providing a framework that accommodates more headquarters – it’s become more of a capital markets hub,” comments Brooke. Indeed, this observation has been borne out by the latest results of the Euromoney Country Risk 2016 survey which shows that Singapore has surpassed Norway and Switzerland to be the least risky country in the world for investments, taking the top spot for the first time in the 20 years that the survey has been ranking countries based on their investment risks.
Cities at the top of the list share these common traits:
- Strong banking sector with monetary stability
- Socio-economic and political transparency
- Quality soft and hard infrastructure
Under the pressures of intensified global competition, cities are coming to terms with new dimensions of risk and resilience in their overall competitiveness matrix – on top of delivering quality of life, livability, distinctiveness, public transport accessibility and resource efficiency. To remain resilient and relevant, cities need to build up their resilience attractiveness and hold themselves to the highest standards of best practice. Cities are in need of qualified and credentialed professionals who ascribe to the practice standards demanded by investors for their long-term portfolios.
Professionals working to international professional standards for the built environment bring confidence to markets by providing a framework of ethics, transparency, quality and consistency that attract investment to world class cities. With strong investment, cities are much better prepared to face the resilience challenges that lay ahead in this highly disruptive era.
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Spotlighting innovations in urban sustainability and connected technology
When the idea of smart cities was born, some ten to fifteen years ago, engineers, including me, saw it primarily as a control system problem with the goal of improving efficiency, specifically the sustainability of the city. Indeed, the source of much of the early technology was the process industry, which was a pioneer in applying intelligent control to chemical plants, oil refineries, and power stations. Such plants superficially resemble cities: spatial scales from meters to kilometers, temporal scales from seconds to days, similar scales of energy and material inputs, and thousands of sensing and control points.
So it seemed quite natural to extend such sophisticated control systems to the management of cities. The ability to collect vast amounts of data – even in those pre-smart phone days – about what goes on in cities and to apply analytics to past, present, and future states of the city seemed to offer significant opportunities for improving efficiency and resilience. Moreover, unlike tightly-integrated process plants, cities seemed to decompose naturally into relatively independent sub-systems: transportation, building management, water supply, electricity supply, waste management, and so forth. Smart meters for electricity, gas, and water were being installed. GPS devices were being imbedded in vehicles and mobile telephones. Building controls were gaining intelligence. Cities were a major source for Big Data. With all this information available, what could go wrong?
If you want a healthier community, you don’t just treat illness. You prevent it. And you don’t prevent it by telling people to quit smoking, eat right and exercise. You help them find jobs and places to live and engaging schools so they can pass all that good on, so they can build solid futures and healthy neighborhoods and communities filled with hope.