The United States: a sub-par sustainability profile
- Since 2008, Degroof Petercam has been publishing its six-monthly sustainability ranking for the 35 OECD countries. Here, it is no surprise to see that the United States remains at the bottom of the ranking.
- The outcome of the elections, which was a surprise, does not suggest the situation will improve in the coming months.
The United States: its flaws are well-known...
The country sustainability analysis proved very useful during the eurozone debt crisis, and has demonstrated that it is important to look at sustainability challenges at the country level so as to make it possible to assess a State’s capacity to pay off its debts, instead of its ability to take on even more debt. The model is based on the five major sustainability pillars, namely (1) transparency and democratic values, (2) population, healthcare and wealth distribution, (3) environment, (4) education and innovation and (5) the economy.
Since this proprietary model was created, the United States has always been in the bottom third of the ranking and has kept a fairly stable score, i.e. just above 50/100.
The United States’ lag of five points compared to the average score of the 35 current OECD member countries - Latvia joined the organisation in July - is mostly attributable to environmental and social criteria.
On the one hand, the United States remains a big consumer of coal, a cheap energy source that emits huge amounts of greenhouse gases. On the other hand, renewable energy remains below average in the country’s energy mix.
On the social front it is well known that there is a lot of social inequality in the United States, as evidenced by the GINI coefficient, which partly measures this variable. Only Mexico, which occupies the last place in the ranking, does worse than the United States. Moreover, the incarceration rate in the country is also a major criterion. The high prevalence of obesity is a long- and medium-term problem for the US population as it entails significant health issues and major financial consequences.
Although the United States exhibits a satisfactory score overall with regard to democracy and civil liberties, we regret that the country has failed to recognise the International Court of Justice and ratify the Ottawa Treaty on anti-personnel mines. In addition, the death penalty has not been abolished in all US States.
... and it has too few strengths
One domain in which the United States clearly stands out is innovation. The country remains a leader in this respect, be it in terms of R&D expenditure or the number of patents registered.
Innovation is a key challenge for developed countries, and the United States fully realises this state of affairs. The employment rate for immigrants is higher than that of several OECD member countries, in particular Belgium, and to a certain extent this can be explained by the US policy of attracting qualified immigrants. Moreover, the educational level of immigrants going to the US and Canada is substantially higher than that of immigrants in Europe. Specifically, two thirds of immigrants moving to the United States and Canada have post-secondary degrees, almost double the figure for Europe.
Not a lot of improvement to be expected
Donald Trump’s statements do not suggest the situation will improve any time soon, on the contrary. Indeed, although Trump will most likely not pull the US out of the Paris climate change agreement, which was signed by his predecessor, he will not go to great lengths to reach the objectives of reducing greenhouse gas emissions set out in the agreement. The statements he made during the campaign support the use of fossil fuels, and in particular they endorse increased coal production, reviewing plans to operate the Keystone XL pipeline, as well as exploiting gas and oil deposits in Alaska and the Gulf of Mexico.
Although Trump’s ‘America First Energy Plan’ rejects the importance of climate change, various studies have shown that the US is quite vulnerable in the face of this phenomenon. For example, according to the ND-GAIN index the US is more vulnerable than the average for OECD countries.
The commitment to lower corporation tax from 35 to 20% is mostly positive for the tax transparency of US companies, which will no longer benefit from having their revenues taxed in other countries with lower rates. It is currently not easy to say whether the repatriation of profits to the United States will compensate for the lower tax revenues. The same goes for increasing job growth, the main objective of the Trump programme. Will this be able to compensate? To be more precise, although such a measure is positive in the short term, it does entail longer-term risks for public financing. If the measure does not go hand in hand with real economic growth, the education and healthcare sectors will be the first ones to be hit by budgetary restrictions affecting the US economy, which already carries a heavy debt burden. It is therefore difficult to claim that the US score on these two sustainability pillars will improve going forward.
For more information about this ranking, don't hesitate to contact Ophélie Mortier, Responsible Investment Strategist.