Every month we look at stunning statistics from the world of sustainability. What do they mean? What is the impact for investors? Today: ‘Death spiral demographics’.
Unsustainable growth in the world’s population is normally a major cause for concern, along with uncontrolled immigration swelling national numbers. But what about countries facing a population decline? That’s just as bad for sustainability, and it’s occurring right at the heart of Europe, Robeco’s experts warn.
A study by Forbes magazine entitled ‘Death Spiral Demographics’ showed that Bulgaria’s population is expected to decline by an astonishing 27% by 2050, while Romania’s is seen falling by 22% and Poland’s by 14%. In the Eurozone, Italy faces the worst scenario with a population drop expected to be 5.5%, followed by Spain with 2.8%.
At the heart of the problem is a falling birth rate which has long been below 2 in most European countries, meaning the state loses the ability to replace those who die with new blood, combined with net migration as citizens flee poor economic conditions.
Population issues are a factor in the Country Sustainability Ranking (CSR) produced by RobecoSAM to ascertain a nation’s scores on environmental, social and governance (ESG) factors. It can affect the ‘S’, since an ageing population presents pensions problems for governments, while a birth rate below 2 means the working population cannot be replaced (without immigration) as people retire. Meanwhile, increasing populations through immigration can raise social and political issues.
Germany’s population was set to drop by 7.7% due to a birth rate of only 1.4 before an influx of more than one million Syrian refugees in 2016 addressed some of the imbalance. Spain’s decline has been more attributable to net migration, particularly among young people fleeing youth unemployment rates of 24% to seek work elsewhere.
And after centuries of being the world’s most populous country, China is now facing a population decline of 2.5% by 2050, a loss of 28 million people. Japan’s decline is better known and steeper, with a loss of 15%, and more people aged over 80 than under 15. The biggest exception to the rule is the US, whose population is seen rising by 21% by 2050, due mainly to immigration.
Germany is a good example of how population decline can affect a country’s ESG score, which then feeds through into decisions over whether to buy the country’s government bonds. The country is ranked 13th place overall – behind peers such as the UK, whose population is rising – partly due to demographic challenges.
“As with other mature economies, demographic aging poses an important challenge, as projected employment and population will shrink over time, pointing to a rising dependency ratio and increasing age-related costs,” says Max Schieler, Senior Country Risk Specialist at RobecoSAM, in the October 2016 update to the Country Sustainability Ranking.
“This could (partly) be offset by improving employment opportunities for women and the elderly, but a large gender pay gap remains a hindrance. Immigration (including refugees) is also increasing the labor pool, but poses considerable integration challenges. It is currently one of the major political problems facing the nation as it is giving rise to anti-immigration sentiments and further fueling the populist right-wing AfD party which could result in undesired consequences in the 2017 election.”
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.