Visualizing Social Risk in the World’s Top Investment Hubs
Visualizing the Social Risk of the World’s Top Investment Hubs
As social responsibility becomes an important aspect of doing business, it’s more crucial than ever for decision-makers to understand the risks associated with various global markets.
This graphic, using data from a report by Verisk Maplecroft, looks at the world’s top cities for foreign direct investment (FDI) and assesses their relative levels of social risk.
In the article below, we’ll take a look at the research methodology to explain how risk was assessed in the report and touch on some key markets that placed high on the ranking.
The Relationship Between FDI and Social Risk
To look at the relationship between FDI and social risk, the report identified the top 100 cities for FDI in 2020, using data from fDi Markets (the Financial Times’ foreign investment monitor).
From there, social risk in the top 100 FDI cities was measured using data from Verisk Maplecroft’s Cities@Risk Social Index. The index measures the social risk landscape of 575 different cities across the globe, using three key pillars:
- Civil and political rights: the right to protest, security force abuses
- Labor rights: child labor, modern slavery
- Poverty: portion of population in extreme poverty
After calculating scores based on these three metrics, cities were then grouped into four categories to measure their level of social risk:
- Low risk
- Medium risk
- High risk
- Extreme risk
Based on this analysis, citizens in 33 of the top 100 cities for FDI (representing $71 billion of inward investment) are at ‘high’ or ‘extreme’ levels of social risk, meaning they face significant threats to their civil, political, and labor rights.
Of the top 100 places, Istanbul and Izmir rank the highest when it comes to overall human rights risks, largely because of labor rights violations and the exploitation of migrant and refugee workers. This is something manufacturers should take note of, especially those who outsource production to these Turkish cities.
In contrast, Beijing, which places third on the list, scores high due to China’s various civil rights issues. Other major manufacturing and commercial hubs in China, like Guangzhou and Shanghai, place high on the list as well.
Overall Social Risk Index
While a third of the top FDI cities are at high or extreme social risk, this figure is even higher when looking at all 575 cities included in the Cities@Risk Social Index.
Of the 575 cities, 75% are classified as ‘high’ or ‘extreme’ risk. Mogadishu, Somalia is the highest risk city, followed by Damascus, Aleppo, and Homs in Syria, Pyongyang in North Korea, and Sanaa in Yemen.
While the high-risk cities are spread across the globe, it’s worth noting that 240 of the high and extreme risk cities are located in Asia.
Civil and Political Risk Index
In addition to the overall ranking, the report provides insight into specific human rights violations, highlighting which cities are most at risk.
Perhaps unsurprisingly, Pyongyang, North Korea places first on the list when it comes to civil and political rights violations. Under the current North Korean regime, some significant civil rights violations include arbitrary arrests and detentions, the holding of political prisoners and detainees, and a lack of judicial independence.
In addition to North Korea, Syria places high on the civil rights risk index as well, with three of the top five cities located in the war-torn country.
Labor Rights Index
When focusing specifically on labor rights, almost half of the ‘high’ or ‘extreme’ risk cities are in Europe and Central Asia.
The biggest problems across a majority of ‘high’ risk cities include child labor, the exploitation of migrant workers, and modern slavery. Pakistan in particular struggles with child labor issues, with an estimated 3.3 million children in situations of forced labor.
What This Means for Foreign Investors
Understanding a country’s social landscape can help organizations make decisions on where to conduct business, especially those that prioritize ESG efforts.
And, while organizations who invest in ‘high’ risk locations aren’t directly involved in any human rights violations, being associated with a ‘high’ risk city could impact a corporation’s reputation, or cause financial damage down the line.
Charted: The Number of Democracies Globally
How many democracies does the world have? This visual shows the change since 1945 and the top nations becoming more (and less) democratic.
Charted: The Number of Democracies Globally
The end of World War II in 1945 was a turning point for democracies around the world.
Before this critical turning point in geopolitics, democracies made up only a small number of the world’s countries, both legally and in practice. However, over the course of the next six decades, the number of democratic nations would more than quadruple.
Interestingly, studies have found that this trend has recently reversed as of the 2010s, with democracies and non-democracies now in a deadlock.
In this visualization, Staffan Landin uses data from V-DEM’s Electoral Democratic Index (EDI) to highlight the changing face of global politics over the past two decades and the nations that contributed the most to this change.
V-DEM’s EDI attempts to measure democratic development in a comprehensive way, through the contributions of 3,700 experts from countries around the world.
Instead of relying on each nation’s legally recognized system of government, the EDI analyzes the level of electoral democracy in countries on a range of indicators, including:
- Free and fair elections
- Rule of law
- Alternative sources of information and association
- Freedom of expression
Countries are assigned a score on a scale from 0 to 1, with higher scores indicating a higher level of democracy. Each is also categorized into four types of functional government, from liberal and electoral democracies to electoral and closed autocracies.
Which Countries Have Declined the Most?
The EDI found that numerous countries around the world saw declines in democracy over the past two decades. Here are the 10 countries that saw the steepest decline in EDI score since 2010:
|Country||Democracy Index (2010)||Democracy Index (2022)||Points Lost|
Central and Eastern Europe was home to three of the countries seeing the largest declines in democracy. Hungary, Poland, and Serbia lead the table, with Hungary and Serbia in particular dropping below scores of 0.5.
Some of the world’s largest countries by population also decreased significantly, including India and Brazil. Across most of the top 10, the “freedom of expression” indicator was hit particularly hard, with notable increases in media censorship to be found in Afghanistan and Brazil.
Countries Becoming More Democratic
Here are the 10 countries that saw the largest increase in EDI score since 2010:
|Country||Democracy Index (2010)||Democracy Index (2022)||Points Gained|
|🇬🇲 The Gambia||0.25||0.50||+25|
|🇱🇰 Sri Lanka||0.42||0.57||+15|
Armenia, Fiji, and Seychelles saw significant improvement in the autonomy of their electoral management bodies in the last 10 years. Partially as a result, both Armenia and Seychelles have seen their scores rise above 0.5.
The Gambia also saw great improvement across many election indicators, including the quality of voter registries, vote buying, and election violence. It was one of five African countries to make the top 10 most improved democracies.
With the total number of democracies and non-democracies almost tied over the past four years, it is hard to predict the political atmosphere in the future.
Commodities4 weeks ago
Charted: Commodities vs Equity Valuations (1970–2023)
Energy2 weeks ago
How EV Adoption Will Impact Oil Consumption (2015-2025P)
Money4 weeks ago
Visualizing the Assets and Liabilities of U.S. Banks
Wealth2 weeks ago
Ranked: The World’s Top 50 Endowment Funds
Markets3 weeks ago
Visualized: Real Interest Rates by Country
Markets2 weeks ago
Charting the Rise of America’s Debt Ceiling
Money3 weeks ago
Comparing the Speed of Interest Rate Hikes (1988-2023)
China2 weeks ago
Ranked: The Cities with the Most Skyscrapers in 2023