(Editor’s note: This is the fourth article in a series on “Rights and Dignity: Older People in Conflict and Crisis,” produced in cooperation with Amnesty International USA and HelpAge USA.)
Amid the global megatrend of aging, low- and middle-income countries (LMICs) will experience the greatest demographic change. According to the World Health Organization, in less than three decades (by the year 2050), almost 80 percent of individuals 60 and over will reside in LMICs. This demographic trajectory demands sustained engagement of development finance institutions to support aging populations. Inadequate preparation for population aging can present significant economic risks and pose challenges to national competitiveness in both high-income countries and LMICs. For example, economists predict that fiscal and monetary policy may lose effectiveness as the productive labor force shrinks, and the International Monetary Fund estimates that the United States, Japan, and Europe could lose up to 11 percent, 26 percent, and 28 percent of their respective tax bases between 2010 and 2050 due to the impact that demographic shifts will have on public spending.
Officials from the World Bank and the Inter-American Development Bank, speaking at an October conference hosted by AARP, agreed that aging is the agenda of the 21st century. Their statements aligned with recent research from AARP (where two of us, Vijeth and Peter, work), FP Analytics (Foreign Policy magazine’s research and advisory division, where Isabel works), and other organizations such as the World Bank. The observations represented a refreshing expansion of the global priorities of international institutions beyond climate change. The two officials acknowledged the significant challenges — but equally important opportunities — presented by the global megatrend of population aging and highlighted the critical, ongoing role that development finance institutions have in supporting their client countries as they plan to meet the needs of their aging populations.
Investing in Aging Populations Yields Widespread Societal Benefits
Planning for this megatrend can be particularly productive if viewed from the perspective that age-friendly environments and age-ready policy interventions not only serve older adults but also provide demonstrated benefits for society at large. Policies, systems, and interventions that specifically support older adults share significant overlap with those that advance health care, social protection, gender equality, and accessibility overall. As a result, they can also aid marginalized or vulnerable groups such as people with disabilities and chronic health conditions, people in remote and underserved communities, and women and girls.
Making public spaces more accessible to older adults by increasing step-free access or widening pavements, for example, facilitates the movement of the whole community, easing access to work, education, and even shopping. Developing accessible healthcare systems — through telehealth systems, broadband expansion, or the deployment of mobile and community health centers — can similarly benefit the whole of society. Such investments can increase the uptake of maternal, infant, and early childhood health care, while helping older adults receive care at home or in their communities. The end result? Healthier societies. Indeed, a whole-of-society, whole-of-life approach to health, education, and social care can facilitate thriving populations that are healthier, better educated, and more prosperous at all stages of life than previous generations. Widespread health and education can contribute to significant economic development. A 2023 analysis revealed that every £1 ($1.27) invested in the U.K.’s National Health Service yields a £4 ($5.09) return, through increased productivity and fewer workdays missed.
Yet preparing for demographic change remains a low priority for many governments, even though every region of the world will experience population aging in the coming decades, regardless of current life expectancy and stage of economic development. Indeed, age-friendly and age-ready interventions are perennially underfunded in national budgets and overlooked on policy agendas. This is particularly the case in resource-scarce countries, where other development challenges may appear more pressing.
In a growing Database of Action Plans on Aging, FP Analytics and AARP found that, to date, only one-third (36 percent) of national-level plans, policies, strategies, and programs to support older adults included any budgetary allocation for implementation. While the majority of the analyzed countries with planned budgetary allocations for older adults are upper-middle or high-income — including New Zealand, Bulgaria, and Singapore — notable LMICs with such planned allocations include Eritrea, Rwanda, and Vietnam. A planned budgetary allocation does not necessarily reflect actual spending, though; resource-scarce LMICs rarely include older adults in their planning.
Examining Gaps and Filling Them
Multilateral development finance institutions are critical to the development of human capital globally, as idea generators, agenda-setters, and conveners of the global community. These institutions will be key to better preparing societies for accelerated aging, especially in low- and middle-income countries. Development finance institutions help guide — and are guided by — national agendas and strategies and undertake creative and ambitious partnerships with governments or with other multilateral institutions such as United Nations agencies, with NGOs, and with the private sector.
As a consequence, development finance institutions can be powerful influencers of national and international policy and investment decisions. And they will be key to incorporating support for older people into every policy and program – in other words, mainstreaming the issue of aging. A 2022 FP Analytics and AARP report, Harnessing the Potential of Population Aging: Insights and Opportunities for Development Finance, examined ongoing work at five leading development finance institutions: the World Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. The analysis sought to better understand the work already underway at these institutions to prepare for population aging, to identify gaps and opportunities for greater engagement with and investment in these issues. The report drew on meta-analysis of all projects approved by the five institutions between 2015 and 2022 — nearly 15,000 projects — and drew on first-person interviews and roundtables with more than 30 experts, including individuals working at development finance institutions, in civil society, and academia.
Analysis revealed that teams and individuals across each institution are producing research and funding and implementing projects on demographic transition, but the issue has yet to be mainstreamed across strategies, operations, and funding decisions. Consequently, work on aging can sometimes lack a clear direction or plan of action and may be overlooked by senior leaders. The complex structure of development finance institutions, which consist of numerous sectors, teams, and practices, can impede the efficient sharing of knowledge and information. Teams working on relevant issues, such as accessible infrastructure design, may be unaware of ongoing work related to population aging and support for older adults, or unfamiliar with its relevance to their own work.
More critically, aging and older adults are under-recognized in institutional strategy documents — which set the agenda for all work within a certain time period — and in funding decisions. This is the case even for institutions in which demographic transition is an increasingly important topic of research and an immediate concern to their member countries, such as those in Europe and Asia. Indeed, just one institution, the Asian Development Bank, highlights demographic change as an institutional priority in its overarching strategy document, Strategy 2030.
While strategy documents may seem largely symbolic at first glance, highlighting cross-cutting issues such as gender equality and climate change can have a measurable impact on the level of financing dedicated, and on their inclusion in project design. In 2021 alone, the World Bank distributed $26 billion in climate financing and $48 billion on projects related to gender and human development, out of a total $157 billion disbursement. In contrast, our analysis found that only a tiny fraction of all projects funded across the five targeted development finance institutions had a significant focus on aging, representing less than 2 percent of all projects approved between 2015 and 2022 in each bank, and accounting for less than 5 percent of funds committed. It is possible that some projects addressing population aging may have been missed for a range of technical reasons, and certainly development finance institutions and their member countries often have limited resources that must be shared across numerous priorities. However, the shortfall in funding for aging-related projects illustrates the need for greater focus in this area.
Prioritizing Population Aging
While the issue of population aging is not typically high on the policy agenda at development finance institutions, they hold tremendous potential for supporting aging populations everywhere, including across LMICs. As touched upon in the FP Analytics-AARP report, leaders and individuals at these institutions could:
- Identify champions within these institutions and establish internal working groups to ensure accountability of aging-related goals and commitments.
- Apply a longevity lens to both planned and ongoing development projects, by analyzing their impact on aging populations and identifying interventions that will build healthier older adult populations.
- Integrate age-inclusive practices into strategic documents and project-design guidance.
- Identify intersections with other development challenges.
- Partner with interested client States to design effective and adaptable interventions that support population aging.
The next few decades present a critical window to come together as a global community and bring about positive change to meet the new demands created by shifting demographics. With global aging as the agenda for the 21st century, all sectors of society — including development financial institutions — will need to harness the panoply of opportunities that come with this megatrend.