Three investment themes for 2023
It’s that time of year when everyone reaches for their crystal balls to predict what sectors could...
Last month, the world’s population hit 8 billion*. The number of people on the planet has more than doubled since I became one of the numbers back in 1974 and, although the pace of growth is slowing, it is still expected to reach a peak of 10.4 billion by 2080.
*Source United Nations
Of course, more people mean more challenges. Our natural resources are already stretched, infrastructure is buckling under the demand and, while the population is growing, it is also ageing as birth rates are falling and improvements in healthcare mean we are all living longer.
In fact, the United Nations estimates that the number of over 65-year-olds will rise from 10% of the population today, to 16 per cent in 2050*.
But with challenges also come opportunities. And for investors there are plenty of ways to invest in this long-term trend. Here, we look at four ways to invest in the world’s growing population.
The obvious beneficiary is healthcare. As populations grow, so too does the burden on this sector. Specific industries that will benefit from this include nursing, care homes, pharmaceutical, dental and funeral services.
In fact, any company that help make processes or procedures more time and cost-efficient will be popular with governments trying to make their money go further.
According to the OECD, health spending as a share of GDP, jumped to 9.7% across OECD countries in 2020, up from 8.8% in 2019. Preliminary estimates suggest that it increased by a further 6% on average in 2021**. Polar Capital Global Healthcare Trust and Polar Capital Biotechnology are two funds to consider in this area.
Financial services is another area that could benefit from a growing population. Investment and banking services will see demand increase as we will all need to take care of our own financial futures and make our retirement savings last longer.
When it comes to insurance, life and health sectors are most impacted by demographic developments and will need to think about their propositions. Funding of long-term care will also be critical, and insurers will need to play a role in a more sustainable solution.
As populations grow, infrastructure needs to grow with them, especially as increased urbanisation comes hand-in-hand with this trend. If it doesn’t, the ‘congestion’ will result in a fall in economic activity, and the erosion of living standards. This infrastructure can be anything from hospitals and schools, to roads and communications towers.
In order to keep up with the population growth, it is estimated that some $47 trillion will need to be invested in new infrastructure by 2050. First Sentier Global Listed Infrastructure and M&G Global Listed Infrastructure are options in this space.
More people also means that we’ll consume more, especially as the middle-class population also continues to grow. This is a particular theme in emerging markets where consumption is increasing dramatically.
While this could be looked upon as a positive theme for investors, it can also be a negative. This is because some believe that overconsumption rather than overpopulation is the problem when it comes to climate change.
Why? Because a small number of people are causing far more than their fair share of emissions. Kenya, for example, has 55 million people – about 95 times more than the population of Wyoming in the United States***. But Wyoming emits 3.7 times the amount of carbon dioxide as Kenya!
If you are concerned about the social and environmental impact of a growing population, you could invest in a fund which has the UN’s Sustainable Development Goals (SDGs) at the heart of its process.
These 17 goals recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
*Source:United Nations, Department of Economic and Social Affairs
**Source: OECD Health Statistics 2022.
***Source: Euronews, 16 November 2022
Photo by Ishan @seefromthesky on Unsplash