John D. Macomber

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Problem</h5>
  <p>Over the next 40 years the number of people living in cities will nearly double, to 6 billion. Yet even today many cities lack sufficient clean water, electricity, reliable public transit, and other basic resources needed to support their exploding populations and strengthen their economies.</p>
  <h5>The Argument</h5>
  <p>Governments don’t have the political will, money, or managerial skill to solve this problem on their own. A vast opportunity exists for the private sector to provide products and services that make the most efficient use of resources.</p>
  <h5>The Solution</h5>
  <p>These products and services—such as water desalination and incentive programs to smooth spikes in electricity demand—combine sophisticated technology with financial engineering that attracts capital by aligning the interests of many parties and offering investors a spectrum of risk and reward.</p>
 </div>
</article-ideainbrief><p>By 2050 the number of people living in cities will have nearly doubled, from 3.6 billion in 2011 to more than 6 billion. Yet the world’s urban areas are already overcrowded and, particularly in developing countries, suffer from shortages of clean water, electricity, and other resources essential to the support of their exploding populations and fragile economies.</p>

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<p><span class="reprint">Reprint: R1307B</span></p>
<p>By 2050 the number of people living in cities will have nearly doubled, to 6 billion, and the problems created by this rampant urbanization are among the most important challenges of our time. Of all resource-management issues, the author argues, water, electricity, and transit deserve the greatest focus. Every other service a competitive city provides&#8212;functional housing, schools, hospitals, stores, police and fire departments, heating, cooling, waste management&#8212;depends on a reliable infrastructure for those three resources.</p>
<p>Many corporations and investors assume that fixing cities is the purview of government. But governments around the world are stuck&#8212;financially, politically, or both. Implementing solutions to the problems of urbanization requires large amounts of capital, exceptional managerial skill, and significant alignment of interests. All these abound in the private sector.</p>
<p>Thus major opportunities exist for businesses that can create and claim value by improving resource efficiency. The products and services that new (or legacy) cities will require, and that provide the return investors and entrepreneurs need, optimize both technological sophistication and financial sophistication&#8212;approaches designed to attract capital by offering different levels of risk and return, different cash-flow priorities, and opportunities for both short-term and long-term investment.</p>
<p>The author cites a number of companies that have moved toward or into what he calls &#8220;the efficiency frontier.&#8221; These include Sarvajal, in India, which saves money and eliminates waste by selling direct to customers through its &#8220;water ATMs&#8221;; the Boston-based EnerNOC, which manages electricity production and consumption to reduce spikes in demand; and EMBARQ, based in Washington, DC, which coordinates the interests of business and government to organize city transit services.</p>

Building Sustainable Cities

Reprint: R1307B By 2050 the number of people living in cities will have nearly doubled, to 6 billion, and the problems created by this rampant urbanization are among the most important challenges of our time. Of all resource-management issues, the author argues, water, electricity, and transit deserve the greatest focus. Every other service a competitive city provides—functional housing, schools, hospitals, stores, police and fire departments, heating, cooling, waste management—depends on a reliable infrastructure for those three resources. Many corporations and investors assume that fixing cities is the purview of government. But governments around the world are stuck—financially, politically, or both. Implementing solutions to the problems of urbanization requires large amounts of capital, exceptional managerial skill, and significant alignment of interests. All these abound in the private sector. Thus major opportunities exist for businesses that can create and claim value by improving resource efficiency. The products and services that new (or legacy) cities will require, and that provide the return investors and entrepreneurs need, optimize both technological sophistication and financial sophistication—approaches designed to attract capital by offering different levels of risk and return, different cash-flow priorities, and opportunities for both short-term and long-term investment. The author cites a number of companies that have moved toward or into what he calls “the efficiency frontier.” These include Sarvajal, in India, which saves money and eliminates waste by selling direct to customers through its “water ATMs”; the Boston-based EnerNOC, which manages electricity production and consumption to reduce spikes in demand; and EMBARQ, based in Washington, DC, which coordinates the interests of business and government to organize city transit services.

Building Sustainable Cities

Summary.

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