Last week I attended the “Smart Finance for Smarter Lighthouse Cities” seminar which brought together cities, investors and others working on the Sharing Cities Lighthouse project. This project brings together six cities across Europe with the ambitious aim of triggering €500 million of investment into smart city solutions and engaging with 100 cities. The interactive day was very productive.
The first question asked was “what does smart finance for smart cities mean?”. My answer was that it is finance that comes with the other pieces of the jigsaw that are essential to ensure a continuous flow of financeable deals, i.e. assistance to develop pipelines of bankable projects (“project development assistance”), capacity building for customers, project developers and the finance community, and standardisation that enables aggregation. The experience in energy efficiency is that finance alone (i.e. project finance) is not enough, there is no point just having finance for projects – that is what I call “dumb finance”. There is a wall of money seeking bankable projects, particularly projects with green credentials. I think the smart cities domain is in the same place.
Bankable projects have to be developed and that requires both skills and resources, technical, financial and managerial. Such skills are always in short supply, technical skills of all sorts are particularly in short supply at the moment, even in basic energy systems and particularly in emerging areas like smart cities. Furthermore cities everywhere lack resources, smaller cities have enough problems managing existing infrastructure let alone developing new projects, a problem made much worse by a decade or so of austerity. Somehow we need to build development skills, capacity and resources. Investors and financial institutions looking to deploy capital into smart infrastructure really need to address this problem which ultimately, in the absence of grants will mean accessing some high risk equity type capital. Perhaps cities, financial institutions and governments can come together to share and build resources through projects like Sharing Cities. We look forward to working with the project.