Paving the way for smart sustainable cities in the UAE

Abu Dhabi and Dubai are charting a new way forward that recognises the role of private capital in supporting smart sustainable city development.

April 17, 2025

6 mins

The United Arab Emirates is making strides in the development of smart cities that feature advanced public transport networks and healthcare systems as well as a digitalised bureaucracy.

By using advanced technologies that improve how crucial sectors like healthcare and infrastructure function, smart cities enhance residents’ quality of life. They also enable the efficient delivery of government services and underpin a supportive business environment that fosters innovation.

Creating these urban environments, though, requires a collaborative ecosystem: one in which the private sector brings innovation, governments and policymakers provide political stability and regulatory support, and investors and financial institutions supply the capital. In that way, the vision can become reality.

The UAE is working towards creating this ideal mix of driving forces. As Rajesh Singhi, Global Head, Diversified Industries M&A, Standard Chartered, says: “A smart city is all about using technology and innovation to make people’s lives better. The UAE has always had the vision to achieve that and it’s why we have two of the leading smart cities of the world coming up here.”

Enabling smart city development

When it comes to creating sustainable, smart cities it is crucial to have a supportive infrastructure – particularly as regards technology and finance. The UAE has a significant advantage: it offers near-universal digital access as well as access to advanced capital markets.

Together, these attributes have positioned the country as the Middle East’s financial hub and, coupled with ample government support, have eased access to funding for projects of all sizes and forms – from micromobility ventures to sustainable mixed-use communities to large-scale infrastructure projects. All contribute to making a city smart and sustainable. Broadly, there are two ways to create smart, sustainable cities: build them from the ground up or equip an existing city with the necessary features. The UAE has adopted both approaches. In Abu Dhabi, Masdar City, which marks the Middle East’s first effort to build a sustainable city from scratch, features tech-enabled smart mobility options and is planned as a model of urban sustainability that combines economic, social and environmental values to aid the UAE’s transition to a net-zero future.

Dubai is an example of the second approach. Focusing on enhancing key physical and digital infrastructure, such as transport, communications and economic services, along with initiatives aimed at conserving energy and recycling building material, as part of its plans to become a smart and sustainable city.

Embracing the public-private partnership (PPP) route

In the UAE, as in the rest of the world, most investments for building resilient, future-proof urban ecosystems continue to be driven by government. This is understandable given the capital-intensive nature of infrastructure projects – a major component of smart cities – and the primary goal of providing services to the population. Increasingly, though, the private sector is playing a crucial role especially in areas like transport, healthcare and the energy transition.

Supported by innovation-friendly policies, the private sector can bring in technical know-how and best practices from other markets. It can also provide additional capital and offer the efficiencies and project optimisation capabilities that a purely public undertaking may not be able to provide.

As Singhi points out, banks like us can support financial innovation and offer novel instruments like sustainable bonds with key performance indicators that help prioritise and scale up funding and lower the cost of capital.

An ideal risk-reward equation

This confluence of factors is drawing investors, local and global, confident that the region will continue to offer near- and long-term investment opportunities for projects related to the development of smart, sustainable cities. Over the past decade, the UAE has attracted several global institutions and investment teams that are looking to deploy more capital across the region, Singhi says.

Along with projects like Masdar City, which illustrates the success of the PPP model, the country also boasts other initiatives. For example, Hub71 in Abu Dhabi offers a well-rounded tech ecosystem that incubates startups and acts as a platform connecting investors to entrepreneurs. Dubai’s Silicon Oasis is another model of a successful PPP that is described as a “15-minute city for business and sustainable living”. It offers commercial and industrial spaces, digital infrastructure for businesses, a range of residential real estate options, as well as entertainment, shopping, education and healthcare facilities. Meanwhile, Sharjah’s Sustainable City is positioned as a fully integrated, net-zero energy community.

A sharper focus for a tighter economic environment

That said, today’s challenging operating environment – where interest rates are far higher than just two years ago – means the viability of projects, their risk-reward equation, and the opportunity cost of picking one project over another have come under greater stakeholder scrutiny. There is far more focus today on aspects like scalability, the impact of regulatory changes and the speed of technological advancement, which could rapidly leave solutions obsolete.

As a result, companies are becoming more disciplined in approaching banks for funds. At the same time, says Singhi, international financial institutions like ourselves are relying on their global networks, expertise, and regional know-how to fulfil their fiduciary responsibilities to clients and shareholders by ensuring that capital flows to projects that optimise returns and impact.

Additionally, the global footprint and cross-border expertise of financial institutions like ourselves help channel funds brought in by global private credit players keen to support projects in the UAE and across the Gulf Cooperation Council (GCC). These institutions can also act as conduits for the transfer of knowledge and best practices as regions look to learn from each other in their quest to build smart, sustainable cities.

As Singhi puts it: “Success breeds success and there are many examples of successful ventures in the UAE aiding the creation of smart, sustainable cities. And they are supported by the growing availability of private capital and financial innovation to catalyse change that is equitable and ensures inclusivity.”