On May 30, 2023, The Economist online ran an attention-grabbing headline, “It’s not just a fiscal fiasco: greying economies also innovate less.” This is shocking to those of us who believed that populations would be ever-expanding. What do fewer people in the world mean for ESG practitioners who focus on social and environmental issues?

As we understand it, death rates have remained relatively static worldwide while birth rates in many countries, particularly rich ones, have leveled or dropped. Declining birth rates are attributed to positive factors like economic and social development, and increased educational and professional opportunities for women. On the downside, social security programs may be at risk as the number of active workers who are contributing to schemes declines, and the needs of aging populations increase.

In a New York Times article titled “U.S. Population Growth Has Nearly Flatlined. Is That So Bad?” from September 14, 2022, Spencer Boket-Lindell wrote that population stagnation or even decline need not spell disaster. Japan is a case in point. Though overall GDP growth there has been small in recent years, GDP per capita has been maintained.

Governments can provide solutions to the problems posed by declining populations, such as adjusting retirement ages, encouraging immigration, increasing labor force participation, and enhancing savings and private pensions. If countries around the world are able to implement these programs and continue developing innovative solutions to supplement the workforce, the impact of declining populations can be buffered successfully. 

There is also good news for the environment in shrinking populations. As populations in rich countries, which drive fossil consumption, shrink, greenhouse gasses should decrease. 

ESG frameworks provide valuable tools for analyzing the environmental and social risks that arise from population shifts. At Clear Strategy we welcome the opportunity to explore issues like what the potential impacts of population stagnation are to your company, and how your sources of labor will be affected. Contact us today at info@clearstrategyco.com. 

© 2023 Clear Strategy Co.

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