Smart cities are no longer a topic of the future. Across the world, industries from infrastructure, to resource management to transportation to technology are mobilizing to make them a reality. Omar Moufti, BlackRock’s Thematic Investment Specialist for EMEA, explains the investment opportunities that may arise from this urban transformation.
Urban future
In 1972, world leaders met at the United Nations Conference on the Human Environment in Sweden, where they defined actions that would ultimately lay the foundation for companies and global organizations to join the efforts to combat climate change. In later years, the United Nations Sustainable Development Goals (SDGs) set key targets to guide international efforts.
This year, the United Nations Climate Change Conference (COP26) continued the conversation to meet sustainability goals in the short term. Cities play a central role in the collective effort to meet these goals, as they are directly or indirectly significant contributors of carbon emissions and pollutants. This transformation of cities, aside from changing the urban landscape, will also offer the opportunity to incorporate exposure to the industries involved in this process to investors’ portfolios.
Over the course of this decade there will be one billion new inhabitants in highly urbanized areas. Of these, 90 percent will be absorbed by emerging markets5. This means that more than 900 million people will move to cities in the coming years. For example, Mexico is expected to grow from 384 cities today to over 900 by 2030, according to UN-Habitat.
Smart cities
The UN sees cities with smart infrastructure as a sustainable path to urbanization, and smart cities along with smart urban management models revolutionizing current infrastructure (5G, the internet of things (loT), etc.) have the potential to reduce environmental impact while improving the quality of life of their inhabitants.
And the creation of smart cities is getting a lot of attention from policymakers, such as President Biden as well as the European Commission allocating significant budget to infrastructure to boost GDP. “With the pandemic, many municipalities and federal governments have had to accelerate the modernization of their offerings. Information sharing has greatly improved. Emergency response teams have been modernized,” explains Omar Moufti, BlackRock’s Thematic Investment Specialist for EMEA.
With the weight of global governments and organizations behind it, the development of the infrastructure sector has the potential to generate investments that foster economic growth. Opportunities abound – From equipment manufacturers and service providers improving resource efficiency, to real estate development and renovation.
Future urban growth opportunities also extend to software developers and new technology solutions. “Undoubtedly, 5G and IoT are key to increasing machine-to-machine communication and real-time data updates, which are already part of today’s reality and will consolidate as a core element of smart cities,” adds Moufti.
Investment strategy
Investing in the transformation of urban spaces and infrastructure offers investment possibilities to generate results with a good balance of risk and return. In this sense, the macro theme of infrastructure could be incorporated as a countercyclical strategy to help recovery after the social and economic impact of the current market environment.
“The integration of intelligent infrastructure will generate urban complexes that allow a positive coexistence between the environment, society, and modes of connectivity. All with a goal of long-term improvement in people’s quality of life and recycling resources to preserve the planet,” says Moufti.
Infrastructure is a multi-decade driver of development, and it is vital to choose the right strategy for investing in it. “We put a lot of research effort into developing our benchmarks, along with our index partners, to help ensure we capture all the long-term opportunities,” says Moufti. “Some sub-themes may outperform in some cycles, but the most important thing when creating thematic indexes is to capture the entire opportunity set so that the growth in that theme accumulates in the portfolio.”
Smart City Infrastructure is an ETF developed with not only megatrends in mind, but also the UN SDGs.. This and other types of instruments with exposure to smart infrastructure themes are a solution aligning an investment portfolio with major global trends and investing in cities that are already leapfrogging into the future.
Additional related products:
- iShares EM Infrastructure UCITS ETF (IEMI)
- iShares Global Infrastructure UCITS ETF (INFR)
- iShares Smart City Infrastructure UCITS ETF (CITY)
- iShares NASDAQ 100 UCITS ETF (CSNDX)
- iShares MSCI Global Semiconductors UCITS ETF
- iShares Electric Vehicles and Driving Technology UCITS ETF (ECAR)
- iShares Global Clean Energy UCITS ETF (INRG)
Sources:
1 ONU. “Objetivo 11: Lograr que las ciudades sean más inclusivas, seguras, resilientes y sostenibles”. https://www.un.org/sustainabledevelopment/es/cities/ As of November 2021
2 ONU-Habitat. (20 junio 2017). “Tendencias del desarrollo urbano en México”. https://onuhabitat.org.mx/index.php/tendencias-del-desarrollo-urbano-en-mexico As of November 2021
3 UNAM (2018). “Mientras la población crezca más que el PIB, los problemas económicos en México serán mayores”. https://www.dgcs.unam.mx/boletin/bdboletin/2018_299.html As of November 2021
4 ONU-Habitat Op. Cit
5 ONU. “Objetivo 11: Ciudades y comunidades sostenibles”. https://www1.undp.org/content/undp/es/home/sustainable-development-goals/goal-11-sustainable-cities-and-communities.html
Disclaimer
The information contained herein is for informational purposes only and is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. An assessment should be made as to whether the information is appropriate for you having regard to your objectives, financial situation and needs. Reliance upon information in this material is at the sole discretion of the reader. Investment implies risk, including the possible loss of principal.
In Latin America, for institutional investors and financial intermediaries only (not for public distribution). This material is for educational purposes only and does not constitute investment advice or an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund or security and it is your responsibility to inform yourself of, and to observe, all applicable laws and regulations of your relevant jurisdiction. If any funds are mentioned or inferred in this material, such funds may not been registered with the securities regulators of Argentina, Brazil, Chile, Colombia, Mexico, Panama, Peru, Uruguay or any other securities regulator in any Latin American country and thus, may not be publicly offered in any such countries. The securities regulators of any country within Latin America have not confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America. The contents of this material are strictly confidential and must not be passed to any third party
In Argentina, only for use with Qualified Investors under the definition as set by the Comisión Nacional de Valores (CNV).
In Brazil, this private offer does not constitute a public offer, and is not registered with the Brazilian Securities and Exchange Commission, for use only with professional investors as such term is defined by the Comissão de Valores Mobiliários
In Chile, the sale of each fund not registered with the CMF is subject to General Rule No. 336 issued by the SVS (now the CMF). The subject matter of this sale may include securities not registered with the CMF; therefore, such securities are not subject to the supervision of the CMF. Since the securities are not registered in Chile, there is no obligation of the issuer to make publicly available information about the securities in Chile. The securities shall not be subject to public offering in Chile unless registered with the relevant registry of the CMF.
In Colombia, the sale of each fund discussed herein, if any, is addressed to less than one hundred specifically identified investors, and such fund may not be promoted or marketed in Colombia or to Colombian residents unless such promotion and marketing is made in compliance with Decree 2555 of 2010 and other applicable rules and regulations related to the promotion of foreign financial and/or securities related products or services in Colombia
IN MEXICO, FOR INSTITUTIONAL AND QUALIFIED INVESTORS USE ONLY. INVESTING INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THIS MATERIAL IS PROVIDED FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SHARES OF ANY FUND OR SECURITY. This information does not consider the investment objectives, risk tolerance or the financial circumstances of any specific investor. This information does not replace the obligation of financial advisor to apply his/her best judgment in making investment decisions or investment recommendations. It is your responsibility to inform yourself of, and to observe, all applicable laws and regulations of Mexico. If any funds, securities or investment strategies are mentioned or inferred in this material, such funds, securities or strategies have not been registered with the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, the “CNBV”) and thus, may not be publicly offered in Mexico. The CNBV has not confirmed the accuracy of any information contained herein. The provision of investment management and investment advisory services (“Investment Services”) is a regulated activity in Mexico, subject to strict rules, and performed under the supervision of the CNBV. These materials are shared for information purposes only, do not constitute investment advice, and are being shared in the understanding that the addressee is an Institutional or Qualified investor as defined under Mexican Securities (Ley del Mercado de Valores). Each potential investor shall make its own investment decision based on their own analysis of the available information. Please note that by receiving these materials, it shall be construed as a representation by the receiver that it is an Institutional or Qualified investor as defined under Mexican law. BlackRock México Operadora, S.A. de C.V., Sociedad Operadora de Fondos de Inversión (“BlackRock México Operadora”) is a Mexican subsidiary of BlackRock, Inc., authorized by the CNBV as a Mutual Fund Manager (Operadora de Fondos), and as such, authorized to manage Mexican mutual funds, ETFs and provide Investment Advisory Services. For more information on the Investment Services offered by BlackRock Mexico, please review our Investment Services Guide available in www.blackrock.com/mx. This material represents an assessment at a specific time and its information should not be relied upon by the you as research or investment advice regarding the funds, any security or investment strategy in particular. Reliance upon information in this material is at your sole discretion. BlackRock México is not authorized to receive deposits, carry out intermediation activities, or act as a broker dealer, or bank in Mexico. For more information on BlackRock México, please visit: www.blackRock.com/mx. BlackRock receives revenue in the form of advisory fees for our advisory services and management fees for our mutual funds, exchange traded funds and collective investment trusts. Any modification, change, distribution or inadequate use of information of this document is not responsibility of BlackRock or any of its affiliates. Pursuant to the Mexican Data Privacy Law (Ley Federal de Protección de Datos Personales en Posesión de Particulares), to register your personal data you must confirm that you have read and understood the Privacy Notice of BlackRock México Operadora. For the full disclosure, please visit www.blackRock.com/mx and accept that your personal information will be managed according with the terms and conditions set forth therein.
In Peru, this private offer does not constitute a public offer, and is not registered with the Securities Market Public Registry of the Peruvian Securities Market Commission, for use only with institutional investors as such term is defined by the Superintendencia de Banca, Seguros y AFP.
In Uruguay, the Securities are not and will not be registered with the Central Bank of Uruguay. The Securities are not and will not be offered publicly in or from Uruguay and are not and will not be traded on any Uruguayan stock exchange. This offer has not been and will not be announced to the public and offering materials will not be made available to the general public except in circumstances which do not constitute a public offering of securities in Uruguay, in compliance with the requirements of the Uruguayan Securities Market Law (Law Nº 18.627 and Decree 322/011).
For investors in Central America, these securities have not been registered before the Securities Superintendence of the Republic of Panama, nor did the offer, sale or their trading procedures. The registration exemption has made according to numeral 3 of Article 129 of the Consolidated Text containing of the Decree-Law No. 1 of July 8, 1999 (institutional investors). Consequently, the tax treatment set forth in Articles 334 to 336 of the Unified Text containing Decree-Law No. 1 of July 8, 1999, does not apply to them. These securities are not under the supervision of the Securities Superintendence of the Republic of Panama. The information contained herein does not describe any product that is supervised or regulated by the National Banking and Insurance Commission (CNBS) in Honduras. Therefore any investment described herein is done at the investor’s own risk. This is an individual and private offer which is made in Costa Rica upon reliance on an exemption from registration before the General Superintendence of Securities (“SUGEVAL”), pursuant to articles 7 and 8 of the Regulations on the Public Offering of Securities (“Reglamento sobre Oferta Pública de Valores”). This information is confidential, and is not to be reproduced or distributed to third parties as this is NOT a public offering of securities in Costa Rica. The product being offered is not intended for the Costa Rican public or market and neither is registered or will be registered before the SUGEVAL, nor can be traded in the secondary market. If any recipient of this documentation receives this document in El Salvador, such recipient acknowledges that the same has been delivered upon his request and instructions, and on a private placement basis.
For investors in the Caribbean, any funds mentioned or inferred in this material have not been registered under the provisions of the Investment Funds Act of 2003 of the Bahamas, nor have they been registered with the securities regulators of Bermuda, Dominica, the Cayman Islands, the British Virgin Islands, Grenada, Trinidad & Tobago or any jurisdiction in the Organisation of Eastern Caribbean States, and thus, may not be publicly offered in any such jurisdiction. The shares of any fund mentioned herein may only be marketed in Bermuda by or on behalf of the fund or fund manager only in compliance with the provision of the Investment Business Act 2003 of Bermuda and the Companies Act of 1981. Engaging in marketing, offering or selling any fund from within the Cayman Islands to persons or entities in the Cayman Islands may be deemed carrying on business in the Cayman Islands. As a non-Cayman Islands person, BlackRock may not carry on or engage in any trade or business unless it properly registers and obtains a license for such activities in accordance with the applicable Cayman Islands law.
This material is restricted to distribution to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act Of 1933, as amended (the “Securities Act”). Any securities described herein may not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. In particular, any UCITS funds mentioned herein are not available to investors in the U.S. and this material cannot be construed as an offer of any UCITS fund to any investor in the U.S.
©2021 BlackRock, Inc. All Rights Reserved. BLACKROCK and iSHARES are registered trademarks of BlackRock, Inc. All other trademarks are those of their respective owners.