Financing Sustainable Cities
Learn more about how large investors, urban civic leaders, and project developers alike are all attempting to channel private sector finance and design skills towards beneficial public infrastructure of big cities in large countries.
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Lecture details
Financing Sustainable Cities
19 September 2017
4.00pm – 5.30pm. Registration from 3.30pm, seated by 4.00pm
MND Auditorium
Lecture video
Synopsis
Large investors, urban civic leaders, and project developers alike are all attempting to channel private sector finance and design skills towards beneficial public infrastructure of big cities in large countries. Some of these are showcases like New York and Singapore; and others are fast growing, densely populated urban areas like Sao Paolo, Lagos, and Jakarta. Is now the time for technology companies and portfolio investors to look more closely at financing and developing sustainable and resilient cities and infrastructure?
Lecture report
Large investors, urban civic leaders, and project developers alike are all attempting to channel private sector finance and design skills towards beneficial public infrastructure of big cities in large countries. Some of these are showcases like New York and Singapore; and others are fast growing, densely populated urban areas like Sao Paolo, Lagos, and Jakarta. Is now the time for technology companies and portfolio investors to look more closely at financing and developing sustainable and resilient cities and infrastructure?
Rather than wait for the government to tackle unsustainable development, John Macomber believes businesses can do it faster.
The senior lecturer in Harvard Business School’s finance unit is not optimistic that states can come to consensus around urban issues such as uneven urbanisation, worsening resource scarcity and lagging infrastructure development, and advocates for a market-based approach instead.
“Everybody’s Plan A…is that ‘All we need is better government that goes ahead and builds up the infrastructure we all need, based on evidence, ([and that is also] well financed and using consensus’,” said Macomber during his CLC lecture on 19 September 2017. “We can sit around and wait for better government to just arrive, or we can think about what the private sector, business people can do to address these issues so that we don’t wind up living on a giant planet of slums.”
Cities are good focal points for the private sector because they generate most of the world’s GDP and greenhouse gases, their needs are more easily understood by investors and they can often act more nimbly than national governments. Macomber would help cities build infrastructure first—roads, bridges, and water and power facilities—as these can support softer development such as schools, hospitals and jobs, but he admits that there are other ways to look at these issues too.
One challenge to private sector investment in sustainable development is the existence of six ‘Cs’: corruption, competence, capital, customers, control and commitment, said Macomber. This is partly why institutional investors such as pension funds, endowments, sovereign wealth funds and insurance companies wielding trillions of dollars of potential investments are not being matched with infrastructure projects. While everyone may know how to construct buildings and cities, mobilising trillions of dollars to finance them is the problem.
“You can look at the Centre for Liveable Cities, the World Economic Forum, the United Nations, the World Bank, hundreds and hundreds of pages on how to build an infrastructure project, a new city, and how to do all these things with transparency. It doesn’t happen—why?” he asked.
“When you see those phenomena, such as a lack of customers or real purpose, or a lack of commitment to building value for the long term, it becomes difficult to build something in a sensible way.”
The financing of emerging technologies has given more people in India access to clean water.
Overcoming these obstacles requires cities managing demographics, finance and technology. While hundreds of millions of people moving into cities today means there is a huge demographic to be harnessed, one has to be careful that development matches the actual demand.
“The world is awash in projects where the government, the bank or the developer forgets what is the purpose here. You have to be careful about thinking that new cities are all about planning and structure, when it’s really about the market to begin with, around the customers and what will make this happen,” says Macomber.
Emerging technologies and platforms such as sensors and data science can help make investments in urban sustainability more viable for private investors. For instance, a water company in India uses sensors to track and maintain their reverse osmosis machines, as well as cashless payments to minimise corruption and ensure fair pricing. This has helped it gain a lendable capital base because its collateral and cashflow are easily understood.
“This opened financing and entrepreneurship for thousands of people, and for hundreds of thousands of families to get water, basically by smart use of sensors and smart use of the data,” explained Macomber. He added that developments in tracking the flow of investment funds in infrastructure projects and delivering financing in tranches will also have a major impact for potential investors.
Technology is not just impacting financing models for infrastructure projects—it is also changing the types of development cities need. For instance, the use of drones for courier services, autonomous vehicles and ride pooling could reduce the need for huge road networks and change the way emerging cities are organised.
“Between the ride pooling concept and the autonomous vehicles concept, it’s a chance to move 10 to 20 times as many people over the same roads, at less cost and without having to build metros everywhere,” he said.
Panel discussion during the lecture.
During the panel discussion, Goh Toh Sim, a veteran of Singapore’s Suzhou Industrial Park development project, echoed Macomber’s attention to market demand by sharing his experience of working on this public–private partnership in China. While it was important to offer stability, security and a beautiful environment, what mattered most were meeting the people’s practical needs.
“The crux of the matter is whether people are happy, and whether you are able to eliminate poverty. When you’re able to create jobs, people are occupied, that solves half of your problems,” Goh said. “The other issue is about community development. The Suzhou government came to study Singapore’s model—for example, in SIP now, they have Meetthe-People sessions where problems can get solved.”
Written by Alvin Chua. This report first appeared in the Oct 2017 Better Cities newsletter.
About the Speakers
SPEAKER
Mr John Macomber
Senior Lecturer of Business Administration,
Harvard Business School
Mr John Macomber focuses on the future potential for the private design, finance, and delivery of public infrastructure in urban areas. His classes and writings at Harvard look at organising large pools of capital to help address problems and opportunities in urbanisation.
PANELLISTS
Professor Deng Yongheng
Provost’s Chair Professor,
Real Estate and Finance;
Head of Real Estate,
Department of Real Estate,
School of Design and Environment, National
University of Singapore
Professor Deng Yongheng was formerly the Director of the Institute of Real Estate Studies at NUS from 2009 to 2017. He previously chaired the World Economic Forum’s Global Agenda Council on Real Estate and co-chaired the UN Sustainable Development Solutions Network, Singapore Chapter, among others. His research interest spans over different areas of real estate finance and urban economics worldwide, particuarly on the China market.
PANELLISTS
Mr Goh Toh Sim
Executive Director and President of Investment and Asset Management,
CEC World Asset Management Pte Ltd
Mr Goh Toh Sim is currently ED and President of EC World Asset Management Pte Ltd. He has over 20 years of experience in the management of industrial parks, real estate development and business management in China. He had served in Keppel Corporation, Ascendas (China) Pte Ltd and the China-Singapore Suzhou Industrial Park. He was awarded the Friend of Jiangsu, Suzhou and Changzhou Honourary Citizenship, and the Jiangsu Labour Award.
MODERATOR
Mr Ho Tong Yen
General Manager,
Group Corporate Communications,
Keppel Corporation
Mr Ho Tong Yen was previously CEO of the Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd from Jan 2011 to Jun 2015. Before that, he held various positions in the Singapore Government, including Press Secretary to then Senior Minister Goh Chok Tong and concurrently a Director in the Ministry of Foreign Affairs and Ministry of Information, Communications and the Arts.