In new statements on the extent of greenwashing in the fund management industry, Desiree Fixler highlights some uncomfortable truths about sustainable investing.
Wednesday, July 11, the United NationsÆ annual World Population Day, is a time to reflect on the past, present, and future state of the worldÆs population. Much attention will no doubt be given to the dangers associated with runaway population growth, from environmental degradation to unrelenting cycles of poverty. Amidst these worries, it is important to take note that the high tide of global population growth has peaked and begun to ebb. The real cause for concern is the sometimes gaping divergence in demographic trends between developed and developing nations, as well as between the United States and its traditional allies.
The stunning collapse in fertility rates across the world is the biggest û and perhaps least reported û demographic story of the past few decades. The developed world, of course, is no stranger to falling fertility. With the exception of the postwar Baby Boom, birthrates have been in almost uninterrupted decline for more than a century. More recently, however, fertility has also declined throughout the developing world û and at an extremely rapid pace. Iran, a country that evokes images of religious conservatism and traditional family values, has undergone one of the fastest fertility declines on record. According to UN estimates, the average number of children born to each Iranian woman has fallen from 6.6 to 2.1 over the past 25 years. The decline is global in scale, spanning Latin America, parts of the Islamic Belt, and East and South Asia. Since 1970, fertility in Mexico has fallen from 6.5 to an estimated 2.4, in China from 4.9 to 1.7, and in India from 5.3 to 3.1.
This decline in global fertility has led directly to slower global population growth. After peaking four decades ago in the late 1960s, the rate of growth in the worldÆs population has been steadily decelerating. Because of what demographers call ôdemographic momentum,ö the worldÆs population will still grow by about 2.7 billion between now and 2050. But according to UN projections, it will plateau soon thereafter û and may even enter a gradual decline. If global population growth is a dangerous trend, the moment of maximum risk appears to have passed.
Falling fertility is also bringing about a dramatic middle-aging of the worldÆs population. Back in 1950, the global median age was 24. Today it is 28 and by 2050, according to the UN, it will reach 38. Overall, this is surely a positive trend. Waning ôyouth bulgesö could reduce the risks of civil instability while falling dependency ratios could speed up economic development.
The problem is that the aggregate indicators hide critical differences in regional trends. Though fertility is dropping everywhere, it remains extraordinarily high in Sub-Saharan Africa and much of the Islamic world û 7.5 in Afghanistan, 6.0 in Yemen, and 4.9 in Iraq. Nearly all of the global population growth in the coming decades will occur in the poorest regions of the world. Of the 2.7 billion extra people living in 2050, roughly 40 percent will live in Sub-Saharan Africa. Another 30 percent will live in Muslim-majority countries. Only 1 percent will live in the worldÆs most developed regions. By and large, the countries that will remain the youngest and fastest growing are also the countries with the weakest state institutions, least-adequate infrastructure, and worst-performing economies.
Meanwhile, Europe and Japan face a future of hyper-aging and gathering population decline. Between 2005 and 2050, the proportion of the population that is aged 65 and over will jump from 16 to 28 percent in Europe and from 20 to 38 percent in Japan. Middle age is one thing, but old age is quite another. Graying populations will translate into falling savings rates and rising fiscal burdens, possibly crowding out other public spending, including investment in the young and in national defense. At the same time, large absolute declines in the working-age population û there will be 24 percent fewer working-age adults in Germany in 2050 than there are today and 39 percent fewer in Japan û will mean slower GDP growth and quite possibly slower living standard growth as well.
The outlook for the United States is more favorable. With its relatively high fertility and substantial net immigration, it will face neither absolute population decline nor extreme population aging. While Europe is on track to lose roughly 65 million people by 2050, the United States is on track to gain 100 million. Accompanying this growth gap will be a widening generation gap. By mid-century, the median age of Japan and most European countries could be well over 50, while the median age in the United States will, according to the UN, still be a comparatively spry 41 û not much more than the world average.
Demography may not be geopolitical destiny, but increasingly it is leaning against the developed world. Back in 1950, all the major developed countries û Russia, Japan, Germany, the UK, Italy, and France û were among the worldÆs 10 most populous nations. In 2050, only the United States will remain on the list û and in the same position it occupies today, as the third most populous nation in the world.
Demography is reshaping the world of the 21st century in ways that are little appreciated. The global population bomb may have been defused, but new demographic challenges are emerging û particularly differential population growth and aging. From the perspective of the United States, these demographic changes bring both good news and bad news. On the one hand, the United StatesÆ relative demographic strength will tend to cement its geopolitical power, especially vis a vis other faster aging developed nations. On the other hand, the mounting demographic weakness of its traditional allies could undermine their ability to shoulder part of the global security burden.
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