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Thematic Investing
21st Century Cities: Global Smart Cities
Primer
Primer Equity |02 March 2017
A Transforming World: Smart Cities
As part of our work on A Transforming World, we introduce a new Innovation- and
People-focused theme – Smart Cities. This Primer sets out the challenges and
opportunities posed by cities. We also publish a Primer Picks report.
Urbanisation:55% of people &$62tn of economic activity
For the first time in history, there are more people living in urban than rural areas. Some
55% of the world’s population lives in cities, a number that will grow to 70% by 2050E,
including 86% in DMs. Cities have become the engines of global economic growth, with
economic activity of about US$62tn pa (c.85% of global GDP), rising to US$115tn by
2030E. Urbanisation has been a major push in development and poverty reduction, and
global urban consumption has become a greater driver than population growth, set to
grow by US$23tn from 2015-30E.
Tipping points: success or failure will be decided in cities
More than 80% of the world’s cities show signs of fragility yet the success or failure in
meeting the world’s most pressing challenges will be decided in them. Our cities are
reaching a tipping point on many issues: poor governance and weak institutions (1
perceived impediment to prosperity); inadequate infrastructure (US$78tn of investment
needed over 10Y); rising inequality (75% of cities are worse off than 20Y ago); housing
(1bn new homes needed); crime (a top concern for citizens); environmental challenges
(c.75% of natural resource use and emissions); and new and pervasive risks
(cybersecurity, terrorism, securitisation, disease and pandemics etc.).
Smart Cities: a ‘perfect storm’ of disruptive technologies
Smart Cities use 21st century disruptive technologies to meet demographic, economic,
environmental, infrastructure and social challenges. These include: ubiquitous broadband
coverage (84% globally); nextgen infrastructure (5G up to 100x faster than 4G); the
Internet of Things (IoT)(10bn connected devices in cities by 2020E); Big Data (200mn
GB of data/day for a city of 1mn by 2020E); the Cloud (secure, open platform); and
artificial intelligence (AI)(predictive insights, anticipatory actions). Smart Cities can
achieve cuts of 30% in energy use and crime, and 20% in traffic delays and water loss.
We see Singapore, London, NYC, Paris and Tokyo as some of today’s Smartest Cities.
US$1.3-1.6tn Smart City mkt by 2020E: six entry points
We see the Smart City market growing to US$1.3-1.6tn by 2020E (vs US$1tn today) and
highlight six entry points for investors wishing to access the theme:(1) Smart
Infrastructure;(2) Smart Buildings;(3) Smart Homes;(4) Smart Safety & Security;
(5) Smart Energy; and (6) Smart Mobility. We anticipate fast growth for:5G, AI, building
automation, Big Data, bricks and steel infrastructure, Cloud, cleantech, cybersecurity,
electric and autonomous vehicles (AVs and EVs), IoT, sensors, surveillance, telco
infrastructure and services, and voice assistants, among other areas.
BofAML Smart City stock exposure and Primer Picks
We present a list of 250+ global stocks covered by BofAML that have exposure to Smart
City-related solutions. Our Buy-rated stocks with material exposure to the theme are
detailed in an accompanying Primer Picks report, as is our full list of stocks.
Europe
Thematic Investing
Sarbjit Nahal
Equity Strategist
MLI (UK)
+442079968031
sarbjit.nahal@baml
Beijia Ma, CFA
Equity Strategist
MLI (UK)
+442079969070
beijia.ma@baml
Felix Tran
Equity Strategist MLI (UK)
+442079967010 felix.tran@baml
A Transforming World
Timestamp:02 March 201705:15AM EST
2 Thematic Investing |02 March 2017
Contents
Smart Cities in a nutshell 3
BofAML Global Smart Cities Stock Universe 5
The century of cities: urbanisation as a transformative and disruptive force 11
Smart Cities 101: US$1.3-1.6tn market by 2020E 54
Smart Infrastructure: greater resilience & connected cities 86
Smart Safety & Security: fear fuels growth 123
Smart Homes: home is where the smart is 150
Smart Buildings: the building blocks of cities 180
Smart Energy: cities driving the cleantech revolution 208
Smart Mobility: electric, autonomous, connected, public, and shared 240
Thematic Investing |02 March 20173
Smart Cities in a nutshell
55% of the world’s population lives in cities, a number that will grow to 70% by
2050E, including 86% in DMs. Cities have become the engines of global economic
growth, with economic activity of about US$62tn pa (c.85% of global GDP), rising to
US$115tn by 2030E.
Exhibit 1: Our urban world in a nutshell
Source: UN
More than 80% of the world’s cities show signs of fragility yet the success or failure
in meeting the world’s most pressing challenges will be decided in them (e.g. poor
governance and weak institutions, inadequate infrastructure, rising inequality, housing,
environmental challenges et. al.).
Smart Cities use 21st century disruptive technologies to meet demographic,
economic, environmental, infrastructure and social challenges (e.g. ubiquitous
broadband, the Internet of Things (IoT), Big Data, the Cloud, and AI.
Exhibit 2: Disruptive technology at work in a Smart City
Source: National League of Cities 2016
4 Thematic Investing |02 March 2017
We have created a BofAML Smart City Indicator of the world’s smartest cities and
view Singapore, London, New York, Paris, Tokyo, Stockholm, Amsterdam, Seoul and
Vienna as some of today’s smartest.
Exhibit 3: BofAML’s Smart City Indicator of the world’s smartest cities
Source: BofAML Global Research based on various sources. Maps reflect greater urban area. Full table indicator in Smart Cities 101 section.
We see the Smart City market growing to US$1.3-1.6tn by 2020E (vs US$1tn today)
and highlight six entry points for investors wishing to access the theme.
Exhibit 4: US$1.3-1.6tn global Smart Cities market (2020E)
Source: BofAML Global Research based on various sources
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