The pandemic has exposed and aggravated existing inequalities in various segments of society, as well as across sectors and regions. While official data on income inequality is published with a lag, observations from the labor market suggest that the impact of Covid-19 has been highly unequal across different groups of workers. Lower-skilled employees, youth and women have been hit much harder than the highly educated. This asymmetric impact on employment and earnings leads one to expect that inequality is set to rise further.
This development had already been evident for quite some time before Covid-19 in most advanced and larger emerging market economies. Indeed, in the majority of OECD countries, the gap between rich and poor is now at its highest level in 30 years. The richest 10% of the population earns 8.6 times more than the poorest 10%, compared with a ratio of 7:1 in the 1980s.1 The adverse impact of the pandemic will also reverse – at least temporarily – a positive trend observed in many emerging market and low-income developing countries over the past three decades, where within-country income inequality had been steadily declining, albeit from high levels.2
Some data indicate that the repercussions of Covid-19 have led to a widespread rise in wealth inequality in 2020 both within and between countries. What’s more, inequality in wealth is even more extreme than in income. According to Credit Suisse’s Global Wealth Report 2021, the wealth share of the top 10% increased by 0.9 percentage points in the past year and the share of the top 1% by 1.1 percentage points.3 With one single exception – the share of the top 1% in 2014 – last year’s rise in inequality was considerably greater than in any year in this century. The number of ultra-high-net-worth-individuals increased by 24%, while the number of dollar millionaires expanded by 5.2 million to 56.1 million, equivalent to roughly 1% of the world’s adults. The same report estimates that the top 10% of adults owned 82% of global wealth, with the top 1% alone owning almost half (45%).
A further widening of the wealth gap in 2020 could also be observed on a regional basis. Europe and North America accounted for the bulk of the wealth gains last year, whereas India and Latin America were among the losers.
The impact of inequality on growth, politics and society has become the subject of increasingly heated debate in recent years. Sure, inequality is an inherent part of a market-based economic system, resulting from differences in effort, individual preferences, luck, opportunities or talent. And an increase in inequality can be a catalyst for growth by fostering incentives to invest in one’s own human capital, to promote savings and investments, and to take risks. On the other hand, there is a growing consensus that excessive inequality, left unmitigated, poses the threat of disruption to the economy, to our social fabric and to political stability.
There is a growing consensus that excessive inequality, left unmitigated, poses the threat of disruption to the economy, to our social fabric and to political stability
The Gini coefficient is often used as a measure of economic inequality: a low coefficient means low income inequality. According to an OECD analysis, a 1 Gini point reduction in inequality would translate into an increase in cumulative growth of 0.8 percentage points in the following 5 years.4 A more recent World Bank study also shows that a 1% annual decline in each country’s Gini index would have a bigger impact on global poverty than if each country were to experience annual growth that is 1 percentage point higher than expected.5
Next to this, economic inequality also has an adverse impact on political stability. It can lead to social unrest, undermines democratic institutions, breeds populism, and contributes to protectionism, all of which is observable in many countries in recent years.
The above discussion implies that extreme and rising inequality will ultimately also impair financial markets and investments. A PRI study hints at a potentially negative impact on long-term investment performance, changes in the risk and opportunity patterns of the investment universe and instability in the financial system.6
In the sovereign bond space, for example, there tends to be a correlation between countries with greater inequality, lower political stability and higher country risk premiums. In view of these potentially adverse implications for the financial performance of their assets, investors are thus well advised to integrate income inequality considerations into their decision making.
Income inequality has always been an important ESG element in our proprietary Country Sustainability Ranking model. This model integrates the ESG features that are most likely to have a material impact on the long-term performance of government bonds. And, in our emerging market equities strategies, the country ranking is also used as one of the elements to determine the country risk premium.
Furthermore, reducing inequality is key to achieving the Sustainable Development Goals (SDGs), with SDG 10 aimed at reducing inequalities within and among countries. Hence, also in this regard, sustainable investing should seek to promote both sustainability and financial performance, to align the interests of investors with societal preferences in the long run.
Robeco has for many years engaged on labor rights and living wage programs. Our engagement program on this critical topic was expanded during the pandemic. We have begun talks with eight companies in the retail and hospitality sectors and the wider ‘gig economy’ in Europe, North America and Asia.7 The gig economy refers to that portion of the labor market where workers do not have fixed-term contracts guaranteeing certain rights, such as paid holidays or healthcare; it has grown dramatically during the pandemic. Our priorities will be to promote decent work and fundamental workers’ rights, such as social dialogue, wages and benefits, and occupational health and safety. We will also target strong human capital management strategies, including diversity and inclusion, human capital development and employee engagement, all of which are aimed at reducing inequality in multiple facets of society and the economy.1 OECD, Income Distribution Database, July 2021 & “Focus on Inequality & Growth”, December 2014
This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.
Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.
By clicking on "I agree", I declare that:
1 - This website may only be accessed directly or indirectly by the following persons in Singapore:
1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.
2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).
3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.
4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.
2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms. If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore. The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction. It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights. You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos. You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video. Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website. You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason. The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice. The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accessing to the Website, you agree to the foregoing.
The funds referred to in the Website are for information only. It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors. The contents of the website is not reviewed by the MAS. Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions. You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.
Any decisions made based on the information contained in the Website are the sole responsibility of yours. Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives. The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.
Investment involves risks and may lose value. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance. The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future. The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons. The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes. Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.
Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence. An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.