Wikipedia defines carrying capacity of an ecosystem as the maximum population size of a biological species that can be sustained by that specific environment, given the food, habitat, water, and other resources available.
Between 1900 and 2020, Earth’s human population increased from 1.6 billion to 7.8 billion (a 390% increase). This greatly increased human resource demands and generated significant environmental degradation. Needless to say, this has given rise to a number of academic studies that have universally concluded that this is not sustainable.
The United Nations publishes historical population data and makes projections for what the future might look like. In its most recent publication, the UN projects peak population at 10.6 billion in 2084 and a gradual decline after that. To be clear, these are projections, not predictions.
The UN projections assume that the current global average fertility rate will decline from 2.5 births per woman to 1.8 by 2100. This data is a global average and there are significant differences by regions. For instance, the latest data shows that the US fertility rate dropped to 1.57, well below the replacement level of 2.1 births per woman.
This discussion has significant implications for portfolio strategy. With fewer children, purchasing patterns are almost certain to change, (less diapers, more vacations?).
It may also be worth noting that valuations tend to depend on growth and growth depends on economic activity which is driven by population.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
