While an improving economic outlook is always good news for financial markets, it is associated with a worsening environmental footprint in many developed countries, as modern consumption patterns deplete planetary resources at rapid speed. This detrimental impact is positively correlated with high GDP per capita level, even for those countries that are recognized as sustainability leaders globally.
Relationship between GDP and sustainable development
The GDP level and overall sustainable development of a country are positively related, as can be seen in many typical ESG assessments. While this relationship holds well for the average scores and sub-indicators related to government institutions and social progress, the relationship is actually negative for many climate-related factors. This is primarily driven by the high level of consumption in developed countries, which requires more goods to be produced, leading to high energy consumption as well as water and land use.
The assessment of country performance on the UN Sustainable Development Goals (SDGs) shows that high-income countries consistently have very low scores on SDG 12, Responsible Consumption and Production. This goal is about promoting sustainable practices in consumption and production to prevent environmental degradation that is associated with current economic progress and lifestyle choices. The quantitative score in the SDG Index1 is based on indicators related to the amount of waste per capita and waste management practices like recycling, as well as imported and production-based harmful emissions of nitrogen and sulfur dioxide (SO₂). With high-income countries having 10 times the footprint of low-income countries, there is a clear discrepancy in scores of countries in different income groups based on GDP levels (as defined by the World Bank). The high-income countries have an average SDG 12 score of just around 60 which is much lower than the average for other countries. At the same time, the overall SDG score which represents the average based on all 17 SDGs is the highest for high-income countries, at 77.
