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Economy

The World’s Most Innovative Economies

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Ranked: The World's Most Innovative Economies

The World’s 10 Most Innovative Economies

In the 21st century, innovation has become the heart and soul of economic policy. Developed and developing nations alike are in the race to leave industrialization behind, adapting instead to technology-focused, entrepreneurial societies.

Customized cancer treatment, faux meat products, and the smart home technologies are frequently positioned as ‘the next big thing’. But which countries are consistently innovating the most?

Today’s graphic comes from the seventh annual Bloomberg Innovation Index and highlights the 10 most innovative economies, and the seven metrics used to rank 2019’s top contenders.

Measuring Innovation

Bloomberg calculated each country’s innovation score using seven equally-weighted metrics.

  1. R&D Spending
    All research and development funding invested in an economy each year.
  2. Patent Activity
    Number of domestic patents filed, total patent grants, patents per population, filings per GDP, and total grants awarded measured against the global total.
  3. Tertiary Efficiency
    Total enrollment at post-secondary institutions, graduation levels, and number of science and engineering graduates.
  4. Manufacturing Value-added
    Manufacturing output levels that contribute to exports and domestic economic growth.
  5. Productivity
    Overall productivity levels of the working-age population.
  6. High-tech Density
    Number of domestic high-tech public companies, measured against the number of domestic public companies and the global total of public high-tech companies.
  7. Researcher Concentration
    Number of professionals currently engaged in research and development roles.

More than 200 countries were initially considered for Bloomberg’s Innovation Index. Any country reporting in less than six categories was automatically eliminated, leaving 95 countries remaining. Bloomberg publishes the results for the top 60 most innovative economies each year.

Notable Countries in the Top 60

The U.S. rejoined the top 10 after dropping to 11th in 2018 for low scores in education. Israel moved up five spots to 5th place, while Romania made the largest overall gain, jumping six spots to rank in the top 30.

2019 RankEconomyTotal ScoreChange in Ranking
#1🇰🇷 South Korea87.380
#2🇩🇪 Germany87.32
#3🇫🇮 Finland85.574
#4🇨🇭 Switzerland85.491
#5🇮🇱 Israel84.785
#6🇸🇬 Singapore84.49-3
#7🇸🇪 Sweden84.15-5
#8🇺🇸 United States83.213
#9🇯🇵 Japan81.96-3
#10🇫🇷 France81.67-1
#11Denmark81.66-3
#12Austria80.980
#13Belgium80.431
#14Ireland80.08-1
#15Netherlands79.541
#16China78.353
#17Norway77.79-2
#18United Kingdom75.87-1
#19Australia75.38-1
#20Canada73.652
#21Italy72.85-1
#22Poland69.1-1
#23Iceland68.411
#24New Zealand68.12-1
#25Czech Republic68.093
#26Malaysia67.610
#27Russia66.81-2
#28Luxembourg66.374
#29Romania64.786
#30Spain64.52-1
#31Slovenia64.11-
#32Hungary63.05-5
#33Turkey62.890
#34Portugal62.79-4
#35Greece62.05-4
#36Estonia61.790
#37Lithuania59.73-3
#38Hong Kong58.9-1
#39Slovakia58.03-1
#40Thailand57.775
#41Bulgaria56.360
#42Latvia55.46-2
#43Malta55.43-4
#44Croatia54.98-2
#45Brazil53.62-
#46U.A.E.52.93-
#47Iran52.812
#48Cyprus52.05-1
#49Serbia51.35-5
#50Argentina51.31-
#51South Africa51.03-3
#52Tunisia48.92-9
#53Ukraine48.05-7
#54India47.93-
#55Kuwait47.27-
#56Saudi Arabia47.18-
#57Qatar46.58-
#58Chile46.4-
#59Mexico46-
#60Vietnam45.92-

Brazil rejoined the list at number 45, after not being included on the 2018 list. The United Arab Emirates made the list for the first time, marking the highest debut ever at number 46.

Tunisia and Ukraine were the two countries with the largest losses, which both fell out of the top 50 this year. To date, South Africa is the only Sub-Saharan nation to be ranked in the index.

Newcomers to the Innovation Index in 2019 are some of the largest emerging economies, such as India, Mexico, Vietnam, and Saudi Arabia.

Impact of Global Innovation

Innovation is complex─many factors play a role in the ideation, development, and commercialization of any new technology. And while innovation success can fuel economic growth, it is generally more accessible in high-income economies, where R&D funding is readily available.

“The battle for control of the global economy in the 21st century will be won and lost over control of innovative technologies.”

—Tom Orlik, Bloomberg Economics

The focus of an economy that prioritizes innovation, however, is not simply allocating resources for a group of people─it’s discovering new methods, models, and products that create a better quality of life for society.

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Economy

Top Countries by GDP and Economic Components (1970-2017)

This animation looks at the top countries in the world by GDP, while also showing the components that comprised economic activity at the time.

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Countries by GDP and Economic Components (1970-2017)

While looking at the top countries by GDP is a useful big picture measure, it can also be informative to look at the components that make up an economy as well.

Examining a country’s economic building blocks can tell us a lot about what stage of development the country is in, and where competitive advantages may exist.

Analyzing GDP by Sector

Today’s “horse race” bar chart, by Number Story, is an entertaining historical look at the ranking of top countries by GDP, including the parts that make up the whole.

Here is the latest data as of 2018, as well as the largest sector according to data from the United Nations’ industry classification database:

RankCountryGDP (2018)Top Sector (% of total)2nd Largest Sector (% of total)
1🇺🇸 United States$20.6TOther (55%)Mining/Manufacturing/Utilities (15%)
2🇨🇳 China$13.6TOther (36%)Mining/Manufacturing/Utilities (33%)
3🇯🇵 Japan$4.9TOther (43%)Mining/Manufacturing/Utilities (23%)
4🇩🇪 Germany$3.6TOther (48%)Mining/Manufacturing/Utilities (25%)
5🇬🇧 UK$2.5TOther (55%)Retail/Restaurant/Hotels (14%)
6🇮🇳 India$2.5TOther (36%)Mining/Manufacturing/Utilities (22%)
7🇫🇷 France$2.5TOther (56%)Mining/Manufacturing/Utilities (13%)
8🇮🇹 Italy$1.9TOther (49%)Mining/Manufacturing/Utilities (20%)
9🇧🇷 Brazil$1.6TOther (50%)Mining/Manufacturing/Utilities (16%)
10🇨🇦 Canada$1.6TOther (52%)Mining/Manufacturing/Utilities (18%)
11🇰🇷 South Korea$1.6TOther (42%)Mining/Manufacturing/Utilities (31%)
12🇷🇺 Russia$1.5TOther (36%)Mining/Manufacturing/Utilities (28%)
13🇦🇺 Australia$1.4TOther (53%)Mining/Manufacturing/Utilities (17%)
14🇪🇸 Spain$1.3TOther (47%)Retail/Restaurant/Hotels (19%)
15🇲🇽 Mexico$1.2TOther (34%)Mining/Manufacturing/Utilities (24%)

Why are “Other Activities” so dominant in this breakdown?

It’s because of the way GDP that components are classified as data in the UN industry classification system, which is laid out below:

  1. Agriculture, hunting, forestry, fishing (ISIC A-B)
  2. Mining, manufacturing, utilities (ISIC C-E)
  3. Construction (ISIC F)
  4. Wholesale, retail trade, restaurants and hotels (ISIC G-H)
  5. Transport, storage and communication (ISIC I)
  6. Other activities, such as finance, healthcare, real estate, and tech (ISIC J-P)

Although agriculture, construction, or manufacturing have been a bedrock for economies in the past, developed countries skew towards adding economic value in different ways today.

Given that finance, government spending (healthcare, education, defense, etc.) and technology — all important modern industries — are included in “Other”, this makes the possibly outdated classification the biggest (and least useful) category to examine here.

Nevertheless, there is still information we can glean from this animated breakdown of GDP, spanning a period of almost 50 years.

A More Granular Look at GDP

In the past, we’ve shown you high level visualizations that break down the world’s $86 trillion GDP by country, or even projections on the largest countries by GDP in 2030 in PPP terms.

However, the animated bar chart shows something more granular that is compelling in its own right. By observing the evolution of countries’ economic components over time, some interesting observations emerge that would normally be lost in the big picture.

Japan’s Manufacturing Boom

At points during Japan’s heyday of growth during the 1980’s, manufacturing comprised nearly 30% of economic activity. By the mid-90s, this single segment of Japan’s economy was so valuable that, on its own, it would’ve placed fifth in the global ranking.

America Leading the Pack

While other countries switch positions, reordering as economies boom and bust, the U.S. has handily remained in top position.

Japan was the country that narrowed the gap between the first and second spot the most, though the country’s Lost Decade in the 1990s cut that ascension short.

During the years between 1970 and 2017, the United States was at its most dominant in 2006 when its GDP was triple the size of Japan’s. Of course, in recent years China has narrowed the gap considerably.

A Star Rising in the East

As one would expect, the building blocks of China’s economy looked very different in the 1970s than today.

The communist systems of the USSR and China are both easy to spot in the visualization. Agriculture played an outsized role, and industries like finance, real estate, and retail were understated compared to the profiles of countries that operated under a capitalist system.

In 1980, as the first Special Economic Zones were being created, three-quarters of China’s economy was based on agriculture, resource extraction, and manufacturing. Even as recently as the early ’90s, China wasn’t in the top 10 despite being the world’s most populous country.

Of course, that situation changed drastically over the next two decades. By the dawn of the 21st century, China ranked fifth in the world, and a decade later, China surpassed Japan to become the second largest economy globally.

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Economy

Visualizing the Global Rise of Sustainable Investing

Total assets in sustainable investing reached nearly $31 trillion in 2018. What are the driving forces behind the global rise of sustainable investing?

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No matter where you look, climate change is at the centre of every conversation.

With a wide range of global sustainability challenges and complex risks on the rise, investors are starting to re-evaluate traditional portfolio approaches.

The ESG Boom

Today, many investors want their money to align with a higher purpose beyond profit. This infographic from iShares unpacks the prolific rise of sustainable investing, and how its trillion-dollar potential is sweeping across the world.

ESG Sustainability

What is Sustainable Investing?

Sustainable investing considers environmental, social, and governance (ESG) factors that create a lasting, positive impact on the world. As the term ‘ESG’ suggests, its scope goes well beyond environmental concerns alone. Examples include:

  • Environmental: Climate risks, resource scarcity, and clean energy
  • Social: Diversity, human rights, and cybersecurity
  • Governance: Business ethics, transparency, and anti-corruption

Simply put, it’s a force for good.

Although sustainable investing emerged in the 1970s, the movement has gained impressive traction in the last few years.

How Global Assets are Growing

Since 2012, total assets in sustainable investing have more than doubled:

Region2012 Assets2018 Assets
Total$13.3 trillion$30.7 trillion
Europe$8.8 trillion$14.1 trillion
U.S.$3.7 trillion$12.0 trillion
Japan$0.01 trillion$2.2 trillion
Canada$0.59 trillion$1.7 trillion
Australia and New Zealand$0.18 trillion$0.7 trillion

The U.S. and Europe are major players in this shift. In particular, specific legislation across European countries will continue driving ESG investment for years to come.

The European ESG Landscape

Across major economies in Europe, cultural shifts and new regulations are shaping the landscape of sustainable investing.

  • The UK has an ambitious net-zero greenhouse gas emissions target by 2050.
    Result: Most sectors will significantly ramp up their decarbonisation efforts to meet this goal.
  • As per France’s Article 173 (Energy Transition Law), investors must explain how they incorporate ESG factors into their investment strategies.
    Result: A majority of French institutional investors now manage their assets with ESG criteria in mind.
  • Nordic countries consider sustainability and social responsibility a cornerstone of their cultural mindset.
    Result: Nordic investors are increasingly integrating all three ESG aspects into their investments.

If Europe’s trajectory is any indication, sustainable investing will soon become second nature in other parts of the world too.

No Industry is Untouched

The rise of sustainable investing is a global phenomenon, and reaches a myriad of industries.

Here is a summary of just a few ESG efforts of some of the world’s most sustainable corporations:

CompanyIndustryCountryESG Efforts
Chr. Hansen A/SBioscience🇩🇰 Denmark• 100% green operations commitment by Apr 2020
• 82% of revenue directly supports UN Global Goals
AutodeskSoftware🇺🇸 U.S.• 100% renewable energy-run cloud services and offices
• 44% women on the Board
Banco do BrazilFinance🇧🇷 Brazil• $51 billion earmarked for green economy spending
• 99% adherence to Code of Ethics and Conduct Standards
City Developments LtdReal Estate🇸🇬 Singapore• S$100 million fully-allocated Green Bond
• 59% carbon emissions reduction target by 2030

The business world agrees: sustainable investing is smart investing.

How Can Investors Think Sustainably?

Many investment products allow investors to easily access sustainable investing, such as exchange-traded funds (ETFs) and index funds. These provide complete transparency—allowing investors to align their approach with the objectives that matter most to them.

Investors are able to:

  1. Screen out companies involved in controversial businesses
  2. Invest in companies with high ESG standards
  3. Advocate for specific issues like climate change

Not only this, but sustainable investing also has the potential to improve portfolio returns. In a 2015 paper covering ESG investing since the 1970s, 90% of ESG investing matched or overperformed traditional approaches.

The Bottom Line

Investors see a triple bottom line from sustainable investing: strong financial returns, and a lasting impact on both people and the planet.

As sustainable investing goes mainstream, it won’t simply act as a niche in a broader strategy—instead, it’ll be naturally integrated throughout a portfolio.

“With the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.

—Larry Fink, BlackRock Chairman and CEO

Sustainability is a global force that will continue to factor into everyday decisions.

Soon, sustainable investing will simply be considered “investing”.

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