From 1980 to 2080 humankind is making a spectacular and historic trek from being 39% to 70% urbanised, and cities are now the dominant way of life. This is the metropolitan century.
Two billion more people will be added to the world’s cities between now and 2050. We are already a third of the way into this century. This means that over the next 50 years, a new global urban system is being set in train; 600 leading cities, and 30 mega-regions, connected by trade routes, advanced mobility, and digital connectivity. In the developing world this involves the expansion of established cities, the fast growth of new cities and the rediscovery of ancient trade routes as catalysts and maps for future development. In the developed world it is a process of metropolitanisation: where larger cities grow and neighbouring cities connect-up to form inter-linked agglomerations.
The population shift of the metropolitan century is synchronised with four other key trends: global population stabilises at just under 10 billion according to UN demographers, the climate imperative drives new energy, real estate, waste, water, food, mobility and urban management; exponential technologies spur new science, medicine, trade & transactions, data, automation, enterprise, and the efficiency of integrated city systems, and the global centre of economic gravity shifts decisively to south and east. Cities connect these trends and make it possible to synthesise their effects and capture feedback loops.
Other things being equal, cities are good for us. A new science of cities is gradually emerging. We know more than ever before about what makes cities work.
- The World Bank’s 2009 World Development Report, and numerous others, show that the rise in living standards in lower income countries is correlated with urbanisation: cities reduce poverty, they don’t cause it.i
- Recent OECD studies have shown the economic advantages of urban proximity and business exchange: cities help make businesses more productive.ii
- The IPCC observes that cities are the key sites for climate change action: smarter cities are environmentally efficient.iii
- Reports from the UN highlight the importance of well-run cities to secure development goals. In almost all fields of daily life, the city is an important context, or shaper, of life chances and human outcomes.iv UN Sustainable Development Goal 11 pledges to make cities and human settlements inclusive, safe, resilient and sustainable.v
- UNCTAD reports that cities promote trade and can lead to the greening of trade.vi
The promise of global urbanisation is a better life and a better planet. Growth in cities is now a certainty; but whether that is ‘bad’ or ‘good’ depends on other crucial variables. ‘Bad urbanisation’ will produce excessive costs and side effects such as increased carbon emissions, congestion and loss of productivity, infrastructure stress, affordability challenges, poor public health, concentrated poverty and social segregation.
The key ingredients of ‘good urbanisation’ include the quality of urban vision, leadership, and planning, infrastructure investment, metropolitan governance, and the optimisation of new technologies, and better data, towards cleaner and better managed cities. How far we adopt new technologies into city-systems will determine whether we decarbonise urbanisation, and achieve the promise of better cities for a better planet.
What is often called the ‘Smart Cities’ Agenda, but sometimes also called Sustainable Cities, Resilient Cities, Agile Cities or Eco-Cities is all about this. As cities have embraced their new found growth they have sought to adopt new technologies, data, and operating models that achieve better urbanisation. We might observe that they are doing this is in 5 cycles, although some may jump more than one cycle in a single leap.
Future cities in 5 cycles
Each cycle involves adopting increasingly sophisticated tools, and with them greater innovation, in governance, partnership, and co-investment. As cities evolve towards integrated systems or the fully automated scenario, their financing needs will reflect that complexity. It will require the creation of new value capture and platform capital models that utilise fresh forms of joint venture, consortium finance, data/finance sharing, enterprise venturing and continuous reinvestment.
So banks have a decisive role to play in the decarbonisation of cities. By building the business models of the zero carbon city and aligning financial services to support them, banks can lead innovation in the capital, technology, data and talent nexus that will be basis for the future city.
We are only one third of the way into this metropolitan century, but we can already see that the reforms that are at play in transport & mobility, energy, real estate, and retail, will soon fan out into all utilities, and all forms of consumption, production, and distribution. Building the financial tools to support ‘good urbanisation’ are already in train and will be more disruptive than any of us imagined.
iWorld Bank, World Development Report, 2009.
iiWhat Makes Cities More Productive? Agglomeration economies and the role of urban governance: Evidence from 5 OECD Countries, OECD 2018.
iiiThe global research and action agenda on cities and climate change science, IPCC, 2018.
ivUN Habitat, World Cities Report 2016.
vSustainable Development Goals, UN, 2016.
viUNCTAD, China’s Cities, Trade, and Circularisation.