Smart city financing

© Photo Maksymka

Why do we support smart city financing?


Over the past years, much progress has been made with regards to enabling the Smart City agenda to become one of the most-intensively discussed topics in Europe. Moreover, the European Commission, through numerous EIP-SCC calls, has invested over € 400 million to develop Smart City Lighthouse projects. Subsequently, this strategy has generated over 120 technological Smart City innovations throughout 50 cities within the EU.

Fraunhofer IAO and Partners of the Morgenstadt Initiative are extensively involved in many of the currently-ongoing SCC1 EU projects (Triangulum, SMARTER TOGETHER, Grow Smarter, "Sharing Cities" etc.). As such, the Morgenstadt team possesses a unique insight into the key challenges that lie ahead for Smart Cities projects. Several of these challenges relate to the complex nature of connected solutions, which require new ways of managing, financing and procuring. Along with the technological innovations based on data and connectivity, financing, planning and governing the Smart City requires innovations in the area of business models, urban governance and financial instruments.


Lighthouse cities und follower cities

Lighthouse cities and follower cities of the big smart city projects of the last three years


In order to overcome these Smart City barriers, Fraunhofer IAO is settingup a joint R&D consortium, whose purpose is to research, identify, design and test new models for sustainable financing, governing and management of Smart Cities. The research project is split into four main work packages and links together cities and the private sector. The project will build on the existing knowledge, ongoing projects and market insights, which will be provided by Fraunhofer and LSE research as well as by the partners.


Purpose of this innovation field


The main purpose of the project is to:


•    Classify and categorize existing business models and innovative urban solutions

•    Identify relevant financial instruments and make them applicable.

•    Analyze the governance of new financing tools

•    Develop, test and deploy new smart city financing tool


Smart City Financing Vehicle – Concept


The proposed collaborative research project "Financing the Smart City" is based on four interlinked work packages, which are coordinated and handled by Fraunhofer IAO and LSE Cities. Participating partners will use the results for their own services and offers in the future.

The project will consist of around ten cities and 5-10 financing institutions.


•    Cities will receive individual assessments and expert support

•    Exchange and learning will be facilitated by three transnational meetings per year. Direct exchange with SCC1 projects will be facilitated.

•    An online exchange platform will provided to collaborate electronically and interact on project documents.


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A center of excellence for smart cities in Budapest helps East-European cities to develop special skills, financial strength and business models for smart city development.