Note: The following is a redacted version of the original report published November 19, 2024 [44 pgs].

EQUITY RESEARCH | November 19, 2024 | 5:14PM GMT

The Demographic Dilemma

Aging populations and the Social Investing opportunities from potential solutions
Latest 2024 UN data show that populations are declining faster than initially expected in mature economies around the world and nearly 1/4 of the world's
population already lives in countries with declining populations. A resulting Demographic Dilemma – a shrinking productive labour pool tasked with
supporting an aging population – has the potential to impact multiple Sustainable Development Goals and drive a wider opportunity set for Social Investing,
particularly in verticals such as education, healthcare, human capital, and automation.

In this report, we cover investment implications of the global aging trend across maturing economies that could elevate Social Investing opportunities via five
potential responses from companies and governments – Womenomics, Education, Immigration, Capital Relocation, Automation & AI.

Evan Tylenda, CFA Madeline Meyer Sharon Bell Brian Singer, CFA Derek R. Bingham Shubham Jain
+44 20 7774-1153 +44 20 7774-4593 +44 20 7552-1341 +1 212 902-8259 +1 415 249-7435 +1 332 245-7652
[email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Goldman Sachs International Goldman Sachs International Goldman Sachs International Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs India SPL

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict
of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not
registered/qualified as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
 Authors
Evan Tylenda, CFA Madeline Meyer Sharon Bell Brian Singer, CFA
+44 20 7774-1153 +44 20 7774-4593 +44 20 7552-1341 +1 212 902-8259
[email protected] [email protected] [email protected] [email protected]
Goldman Sachs International Goldman Sachs International Goldman Sachs International Goldman Sachs & Co. LLC

Derek R. Bingham Yuriko Tanaka Shubham Jain Jacqueline Du

+1 415 249-7435 +81 3 4587-9964 +1 332 245-7652 +86 21 2401-8948
[email protected] [email protected] [email protected] [email protected]
Goldman Sachs & Co. LLC Goldman Sachs Japan Co., Ltd. Goldman Sachs India SPL Goldman Sachs (China)
Securities Company Limited

Yuichiro Isayama Daniela Costa Suhasini Varanasi Mark Delaney, CFA

+81 3 4587-9806 +44 20 7774-8354 +44 20 7774-3722 +1 212 357-0535
[email protected] [email protected] [email protected] [email protected]
Goldman Sachs Japan Co., Ltd. Goldman Sachs International Goldman Sachs International Goldman Sachs & Co. LLC

George K. Tong, CFA Brendan Corbett Emma Jones Grace Chen

+1 415 249-7421 +1 415 249-7440 +61 2 9320-1041 +44 20 7774-5119
[email protected] [email protected] [email protected] [email protected]
Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs Australia Pty Ltd Goldman Sachs International

Rachit Aggarwal Varsha Venugopal

+1 212 934-7689 +1 415 393-7554
[email protected] [email protected]
Goldman Sachs India SPL Goldman Sachs & Co. LLC
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Table of Contents
The Demographic Dilemma: Why This Matters for Sustainable Development Goals and Social Investing 3

The Demographic Dilemma in Charts & Numbers 8

5 Potential Solutions: Womenomics, Education, Immigration, Capital Relocation, and Automation & AI 12

1) Womenomics and Expanding Labour Force Participation 14

2) Education, Reskilling, Retention, and Recruiting 16

3) Immigration 20

4) Capital Relocation of Industrial Activity 23

5) The Need for Automation & AI 26

Disclosure Appendix 35

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Goldman Sachs GS SUSTAIN: The Demographic Dilemma

The Demographic Dilemma: Why This Matters for Sustainable Development Goals and Social
Investing

Over the late 20th and early 21st centuries, the rapid rise in global populations combined with falling fertility rates has
allowed countries to benefit from the so-called ‘demographic dividend,’ where the proportion of working age populations
relative to older populations is high, leading to greater potential for countries to benefit from relatively large productive labour
pools. However, as populations continue to age and fertility rates continue to decline, this is now leading to declines
in working age populations amongst many maturing economies — driving old-age dependency ratios higher and
presenting a Demographic Dilemma.1 According to the latest UN data from the 2024 Population Prospect report, the
global population is expected to rise by ~2 bn through 2061 but is now expected to peak earlier than previously expected,
with one in four people already living in countries where populations have peaked.

Exhibit 1: The number of individuals over age 65 in G7 Exhibit 2: ...combined with rapidly declining working age Exhibit 3: ...setting the stage for old-age dependency ratios
countries is set to increase... population percentages across many regions... to accelerate in the coming years
Actuals until 2023 and forecasts from 2024 to 2050 Working populations as a % of total population, 1990-2100E Old-age-dependency ratios for G7 & China, 1970-2023,
2024-2050E

140 80% Forecast Japan 80 8

Japan Japan
Forecast Italy

# people 65+ per 100 working age people

Italy Forecast
Italy Germany
75% 70 Germany 7
120 Germany France France
Working population as % of total pop.

France EU EU
EU 70% 60 United Kingdom
6
UK

YOY change in OADR

100
Population aged 65+, mn

UK USA United States of America

USA Canada 50 Canada 5
65% China
Canada China
80 India
Wtd. Avg OADR
40 4
60%

60 30 3
55% Acceleration in
YOY change in
20 2
40 50% OADR vs history

10 1
20 45%
0 0
40%
0
1990 2000 2010 2020 2030 2040 2050 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Source: UN population prospects 2024 Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN, Data compiled by Goldman Sachs Global Investment Research

1
Old-Age Dependancy Ratio (OADR): Number of individuals over the age of 65 per 100 individuals of working age. Used as an indicator of potential
social support requirements resulting from changes in population age structure.

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Goldman Sachs GS SUSTAIN: The Demographic Dilemma

We believe corporate and/or government responses to the Demographic Dilemma will drive significant investment
opportunities for Sustainable Investors. In our report, we highlight five potential solutions that governments and
corporates may pursue.

1. Womenomics: Potential tailwinds for childcare, women and child health.

2. Education, Reskilling: Education, staffing recruiting, training and reskilling providers.
3. Immigration: Remittance providers.
4. Capital Relocation: Outsourced / contract manufacturers and solutions providers.
5. Automation & AI: Industrial and service automation, and humanoid robots.

This Demographic Dilemma will introduce both new challenges and opportunities to solving the Sustainable
Development Goals (SDGs), particularly focusing on Good Health and Wellbeing (SDG 3), Quality Education (SDG 4),
Gender Equality (SDG 5), Decent Work and Economic Growth (SDG 8), and Reduced Inequalities (SDG 10).

n Challenges: Health and well-being of an increasing aging population, rising social costs to support aging population (SDG
3), corporate management of human capital and attracting and retaining key talent, and the threat of automation
displacing productive workers (SDG 8).
n Opportunities: Provide greater opportunity for women and older workforce participation (SDG 5), opportunities for
productive labour and legal migration to fill labour gaps (SDG 10), support re-skilling and education for older and younger
populations to meet future jobs in demand (SDG 4 & 8).

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Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 4: Sustainable Development Goals that could be impacted by the implications of Aging Populations to healthcare, labour and broader markets

Source: United Nations, Goldman Sachs Global Investment Research

SDG 3: Good Health and Wellbeing: Older populations have higher levels of non-communicable diseases, which could
impact government spending, healthcare providers and medicines, in addition to drug discovery.

SDG 4: Quality Education: To offset aging populations and a reduction in working-age populations, demand could rise for
childcare for working parents, access to reskilling/vocational training, and more quickly connecting younger populations to
relevant skills training and jobs in sectors with labour shortages. Access to education and finance is explored more in our
series on Investing in the SDGs and our Media team’s prior work on the Future of Learning.

SDG 5: Gender Equality: Access to reproductive health and family planning services can help ensure women have the
opportunity to access education and the workforce, where increased participation from women can help offset reductions in
overall numbers of working-age individuals. For more, see our Strategy team’s work on Womenomics.

SDG 8: Decent Work and Economic Growth: Innovation will be needed to support aging populations and address labour
shortages, and achieving full productive employment can help to offset overall declines in working-age populations. Achieving
strong economic growth in developing countries can help ensure global sustainable development and growth.

SDG 10: Reduced Inequalities: Legal migration/mobility of people is one potential solution we discuss which could help to
address location-specific labour shortages that arise partially due to declining working-age populations.

19 November 2024 5
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 5: SDGs and sub-targets which will become increasingly important as developed market populations age and working-age populations decline

3. Good Health 8. Decent Work and Economic

4. Quality Education 5. Gender Equality 10. Reduced Inequalities
and Well-Being Growth

Quality early childhood care and Recognize and value unpaid care and
Sustain per capita economic growth, and Income growth of bottom 40% of
Prevention and treatment of non- education, and free, equitable and domestic work through public services,
especially 7% per year in least developed the population at a rate higher
communicable diseases (3.4) quality primary and secondary infrastructure and social protection
countries (8.1) than national average (10.1)
education (4.1, 4.2) (5.4)

Universal health coverage, access to Ensure women's full and effective Increase economic productivity through Fiscal, wage and social
Access to quality, technical, vocational
quality essential healthcare services, participation and equal opportunities diversification, tech upgrades and protection policies to achieve
and tertiary education (4.3)
medicines and vaccines (3.8) for leadership (5.5) innovation (8.2) greater equality (10.4)

Increase the number of youth and Support decent job creation, Safe, regular and responsible
Reduction in hazardous chemicals Universal access to reproductive
adults with relevant skills for emploment entrepreneurship, creativity and migration and mobility of people
and air, water and soil pollution (3.9) health and reproductive rights (5.6)
and decent jobs (4.4) innovation (8.3) (10.7)

Full and productive employment and

decent growth; reduce proportion of
youth not in employment, education or
training (8.5, 8.6)

Source: United Nations, Goldman Sachs Global Investment Research

19 November 2024 6
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

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Goldman Sachs GS SUSTAIN: The Demographic Dilemma

The Demographic Dilemma in Charts & Numbers

A potential inflection of global aging populations in developed markets combined with declining percentages of
population in working ages will drive increasing attention to the ramifications and potential solutions to the
Demographic Dilemma, in our view. We profile the key stats and trends driving this theme, including:

n Accelerating old-age dependency ratios (OADRs) across many regions... Across the G7 + China, OADRs are set to
inflect higher (Exhibit 6), while G20 countries are also set to experience an acceleration in old-age dependency ratios,
estimated to rise to 21.7 by 2030, up from 17.5 in 2020, 14.71 in 2010, and 13.8 in 2000 (Exhibit 15).
Old-Age Dependancy Ratio n ... with senior populations expected to double by 2050 as populations age... Globally, the population over 65 is set
(OADR): Number of individuals
to nearly double from 808mn in 2024 to 1.6bn by 2050 with Europe and the US seeing the fastest growth amongst the
65 or older per 100 individuals
of working-age population
G7 (Exhibit 10, Exhibit 11).
(15-64). n ... and fertility rates rapidly falling below replacement levels... More than half of all countries are below the
replacement level of 2.1 births per woman, the rate required to keep population size constant without migration (Exhibit
8).
n ... driving significant declines in productive working age populations. Mature economies are expected to be the
hardest hit, with Europe in a particularly difficult position, expected by 2030 to lose 13 mn (-5% from 2023 levels)
working age individuals by 2030, followed by an additional 50 mn decline (-24% from 2023 levels) by 2050 (Exhibit 13).
n Over time, this adds risk to both exacerbating labour shortages, which have been on the rise... Labour markets
have become increasingly tighter across the G7 for many industries (Exhibit 16), while corporate mentions of labour
shortages remain elevated since the pandemic (Exhibit 19).
n ...and straining government budgets as social spending has continued to increase. Social spending (financial
assistance, unemployment, healthcare) as a % of GDP has continued to rise across the G7, corresponding with aging
populations (Exhibit 17).

As society ages and fertility rates continue to decline, the UN now expects world population to peak sooner than
initially estimated. According to the latest 2024 UN World Population Prospects report, global populations are expected to
grow ~2 billion through 2060 but now peak in ~2084, earlier than previous estimates (in both 2019 and 2010) which expected
peaks beyond 2100 (Exhibit 7). This has been driven by dramatically falling fertility rates around the world, with current
global fertility 2.25 births per woman, down from 3.31 in 1990 (Exhibit 8). Nearly half of all countries currently have fertility
rates below the replacement level of 2.1 live births per woman, the rate required to keep population size constant without
migration.

19 November 2024 8
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 6: Old-age-dependency ratios are accelerating Exhibit 7: The UN has moved forward its expectation for Exhibit 8: Global fertility rates are declining rapidly and
globally peak global population by 16+ years expected to be below the replacement rate by 2047
Old-age-dependency ratios for G7 & China, 1970-2023, World population 1950-2023 and estimates 2023-2100 from 2024, Total fertility rate of live births per woman 1950-2100E
2024-2050E 2019, 2010 reports
80 8 11.00 5.5
Japan Population Peak in Forecast
# people 65+ per 100 working age people

Italy Forecast 5
10.00 2084, as per 2024
70 Germany 7
estimate
France 4.5
EU 9.00

World Population (in billion)

60 6

Total Fertility Rate

United Kingdom 4

YOY change in OADR

United States of America 8.00
50 Canada 5 3.5
China 7.00
Wtd. Avg OADR 3
40 4 Population
6.00
peak after 2.5
2100 as per
30 3 5.00 2010 & 2019
Acceleration in 2
est.
YOY change in 4.00
20 2 1.5
OADR vs history
3.00 1
10 1
1950 1975 2000 2025 2050 2075 2100
2.00
0 0 1950 1975 2000 2025 2050 2075 2100 Japan Italy Germany
France United Kingdom USA
2010 2019 2024
World Replacement Rate

Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN, Data compiled by Goldman Sachs Global Investment Research

Declining population growth rates are leading to a global aging population as young population (<19 yrs) have
already peaked and populations over age 65 are set to nearly double from 808 mn in 2024 to 1.6bn by 2050. According
to the UN, nearly 1/4 of global populations live in countries where populations have already peaked by 2024 within many
countries including China, Japan, Germany and Italy (Exhibit 9). As young populations <19 yrs have already peaked, the
population over age 65 is set to be the fastest growing group, nearly doubling out to 2050 (Exhibit 10).

Exhibit 9: Population growth rates are declining for much of Exhibit 10: By the late 2080s, there will be more people Exhibit 11: Number of individuals over 65 in G7 countries
the G7 aged 65 and over than under-19s Actuals until 2023 and forecasts from 2024 to 2100
Population growth rates from 1950-2023, forecasts after 2023 Current population (bn) by age group, forecasts after ‘23
2.5% 140
Forecast 4.5 Forecast Forecast
2.0% 4.0 120
France
Germany

Population aged 65+, mn

1.5% 3.5
United States of America 100
World Population, bn

Japan 3.0
1.0%
Population Growth

United Kingdom 80
2.5
Italy
0.5% 2.0 60

0.0% 1.5
40
1.0
-0.5%
0.5 20
-1.0%
0.0 0
1950 1975 2000 2025 2050 2075 2100 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
-1.5%
Age 15 to 64 - DM Age 15 to 64 - EM Under-19s
Japan Italy Germany France
-2.0% Aged 65 & over Aged 80 & over Under-1s EU UK USA Canada
1950 1965 1980 1995 2010 2025 2040 2055 2070 2085 2100

Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN Population Prospects 2024 Source: UN population prospects 2024

19 November 2024 9
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Working-age populations (15-65 yrs) are expected to decline amongst all G7 countries, while immigration is
expected to help only some regions maintain or grow working-age populations under UN scenarios. Europe is
perhaps the hardest hit as working-age populations without immigration are expected to decline 5% by 2030, 14% by 2040,
and 23% by 2050 (from a 2023 baseline), followed by Japan, the US, Korea, Germany, and Italy (Exhibit 13). Immigration is
expected to only help some countries, namely the US, UK, and Canada, grow working-age populations under the UN
immigration scenario (Exhibit 14).

Exhibit 12: Working-age populations as a % of total Exhibit 13: Excluding migration, working-age populations Exhibit 14: ...while immigration can only help some
population declining across many countries are expected to decline in all G7+ countries, with Europe countries manage working-age population declines based
Working populations as a % of total population, 1990-2100E the hardest hit... on UN scenarios
Estimated cumulative decline in working age population (mn) Estimated cumulative change in working-age population (mn)
with no migration from 2023 baseline including migration scenario from 2023 baseline

80% Forecast Japan

Italy
75% Germany

Change in working age population (in millions)

Change in working age population (in millions)
France
Working population as % of total pop.

10
EU 0 -7%
70% -5% -2% -8% -8% -4% -6% -1% 4% 2%
UK -16% -14% -7%
-5% -3% -8% 0 1%
USA -10 -14% -7% -11%
-14% -13%
65% Canada -5% -4% -15% -6%
China -1% -3% -12%
-20 -11% -7% -2% -10
India 1%
-4%

from 2023
-5% -9%

from 2023
60% -9% -4% -5% -13% 1%
-30 -6% -20 -7% 0%
-5% -8% -9% -3% 2% 2%
55% -2%
-40 4%
-30

50% -50 -9% -40

-7%
45% -60 -50

40% -70
-60
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
2030 2040 2050 2030 2040 2050

Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UN, Data compiled by Goldman Sachs Global Investment Research

19 November 2024 <0

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Aging populations are expected to place further constraints on companies and countries as old age dependency
ratios rise alongside labour shortages and increased government spending on social services. Dependency ratios (the
% of population over 65 yrs per 100 people of working age 15-65 yrs) have increased significantly amongst the G7 and are
projected by the UN to more than double for China by 2030 (Exhibit 15). This increase in the dependency ratio has generally
coincided with a rise in government social spending as a % of GDP (Exhibit 17), which has put a strain on federal budgets.

This has led some governments to propose and implement reforms like China’s plan to gradually increase retirement age for
the first time since the 1950s, or French pension reform to increase retirement age from 62 to 64. These policies come with
potential societal pushback and may result in delaying the gaps forming for productive labour.

Exhibit 15: Old-age-dependency ratios for the G7 are Exhibit 16: Labour markets have become tighter as job Exhibit 17: ...and government budgets could become further
increasing significantly vacancies increase... constrained as social spending has continued to increase
Dependency ratios from historical periods and 2030 estimates Job vacancy rate by sector, US, Germany, France, Australia, Government spending on social expenditures as % of GDP for
forecasts after 2023 Italy, Canada, UK average 2010, 2023 G7 countries
5 5.0
60
45

Job Vacancy rate by sector %

# of individuals aged 65 or older per 100

2010 2023
4 4.0 40
50
people of working age

35
2030 avg. 39.8 3 3.0
40 30

% of GDP
2020 avg. 32.6
2 2.0 25
30 2010 avg. 26.5
20
1 1.0
20 15

0 0.0 10
10
5
1980 1985 1990 1995 2000 2005 2010 2015
0
Japan Italy Germany France EU UK USA China G20 Japan Italy Germany France

2000 2010 2020 2023 2030 United Kingdom United States Canada

Source: UN Population prospects Source: McKinsey Source: OECD

19 November 2024 <1

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

5 Potential Solutions: Womenomics, Education, Immigration, Capital Relocation, and Automation & AI

We evaluate 5 key potential solutions that we see helping to alleviate the Demographic Dilemma, that may be
deployed by governments or corporations looking to mitigate challenges of aging developed market populations or
take advantage of increased opportunities. While not all of these solutions may be pursued consistently, we believe the
likelihood of none of them being pursued is small which is why we see increased opportunities for Social Investing and
potential tailwinds from the aging population theme.

1. Womenomics and Expanding Labour Force Participation. If pursued, this could lead to tailwinds for companies that
provide child care services. The key risk to being impactful is that labour force penetration can only go so far.
2. Education, Reskilling, Retention, and Recruiting. If pursued, this could lead to tailwinds for companies that provide
education, training & reskilling, and staffing and recruiting services. The key risk to being impactful is that education and
reskilling may take significant time to efficiently retrain new workforces during periods of constant disruption.
3. Immigration. If pursued, this could lead to tailwinds to close labour gaps for many industrial and services industries and
benefit companies focused on remittance and financial inclusion. The key risk to being impactful is rising political and
societal pushback.
4. Capital Relocation of Industrial Activity. If globalization and relocation of manufacturing to regions with available labour
are pursued, this could lead to tailwinds for companies that provide outsourcing services helping companies navigate
non-domestic manufacturing. The key risks to being impactful are trade tariffs, rising supply chain costs, and
social/environmental supply chain concerns.
5. Industrial and Services Automation & AI. If pursued towards the goal of boosting labour productivity and helping to
close labour gaps, this could lead to tailwinds for companies that produce industrial and service automation solutions to
help boost labour productivity. The key risk to being impactful is displacing workers too quickly without reskilling/training.

In the sections below, we address these five potential solutions.

19 November 2024 <2

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 18: Corporate references to ‘aging populations’ have been on the rise Exhibit 19: Corporate mentions of labour shortages remain elevated in company documents
Number of ‘aging populations’ mentions in global company documents (reports, transcripts) and transcripts
Number of ‘labour shortages’ mentions in global company documents (reports, transcripts)
4,500 12,000

# of docs mentioning 'labour shortages'

# of docs mentioning 'aging populations'

4,000
10,000
3,500

3,000 8,000

2,500
6,000
2,000

1,500 4,000

1,000
2,000
500

0 0

Source: AlphaSense Source: AlphaSense

19 November 2024 <3

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

1) Womenomics and Expanding Labour Force Participation

Driven by aging demographics, an increase in family-friendly benefits, and an increase in highly qualified women, our
European Portfolio Strategy team has highlighted a clear trend of higher female labour force participation in many countries
in recent years. The US was once clearly in the lead for women’s workforce participation, but while the US has seen no
change in recent decades, other countries have caught up and overtaken it (Exhibit 20).

Evidence from Italy shows a significant increase in women labour force participation helping to grow the overall
labour force. As per our European Portfolio Strategy team’s report, the change in women’s contribution to the workforce
over recent decades is difficult to overstate. For example, the rise in the Italian labour force since the 1970s has largely been
due to women joining and participating more; had this not occurred with all else equal, the labour force would have been flat
or shrunk (a function of a declining working-age population) (Exhibit 21).

In Japan, employment has grown despite aging demographics driven by women and older populations continuing
to work. Absent these groups entering or continuing in the workforce, demographic shifts would have pointed to a sharp
decline in numbers of workers. The combination of women joining and staying in the workforce with a higher propensity —
encouraged by reforms to working practices and family-friendly polices — and older cohorts, both men and women, working
for longer (Exhibit 22). At some point these solutions will reach peak penetration as labour force participation can
only go so far, requiring additional solutions across education, immigration, relocation, and automation.

Exhibit 20: Female labour force participation has grown Exhibit 21: The growth in the Italian labour force is largely Exhibit 22: Japan’s labour force growth is mostly supported
across developed economies due to the increase in working age women by older ages (re)joining the labour force
Female labour force participation rate (age 15-64, %). Latest Cumulative change in labour force (millions people). Latest data Cumulative change in labour force (millions people). Latest data
data as of 2022 as of 2022. as of 2023.
80 3.5 8
Female 15-64yr Italy Japan
Germany Female 15-64yr
75 3.0 Female over 64yr
6 Female over 65yr
Male over 64yr
UK
2.5 Male 15-64yr Male over 65yr
70 Total labour force
Japan 4 Male 15-64yr
2.0
65 France Total labour force
1.5 2
60 US
1.0 0
Italy
55
0.5
-2
50
0.0

45 -4
-0.5

40 -1.0 -6
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23

Source: Haver Analytics, OECD, Goldman Sachs Global Investment Research Source: Haver Analytics, OECD, Goldman Sachs Global Investment Research Source: Haver Analytics, OECD, Goldman Sachs Global Investment Research

19 November 2024 <4

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Companies exposed to the Womenomics theme

We highlight companies that improve health and wellness outcomes for women and children through women’s
health, fertility and family building services, reproductive health, and maternal and infant nutrition. We also include
companies that allow women and mothers to have increased flexibility to both raise children and participate in the labour
force, through services such as early education and childcare.

19 November 2024 <5

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

2) Education, Reskilling, Retention, and Recruiting

Declining populations have the potential to drive labour shortages and the need for re-skilling in the age of AI,
which could unlock $6.5 trillion in economic productivity by 2030. In our view, with the rise of automation and AI, non-
labour inputs in economic activity will continue to increase, requiring technical expertise for jobs to evolve. According to
BCG, 68% of workers are willing to retrain to maintain and learn new skills to remain competitively employed. As people are
more likely to shift from one trade, skillset, or industry several times throughout their careers, the ability to make these
shifts requires upskilling and reskilling to ensure employees have technical expertise for future work requirements. This will
likely result in increased focus by corporates on how to best prioritize, incentivize, and spend on employee reskilling.

Traditional education may not adequately prepare students to enter a workforce increasingly defined by
automation, and digitization. Previously, our Education analysts focused on the future of education in The Future of
Learning: Transforming Education in the digital era. They found that the format of education has remained largely
unchanged over the past 100 years and more closely reflects the former job paradigm, where young people specialize in a
single trade or skillset and find lifetime employment in a single industry. While in 1900 only 17% of jobs required
‘knowledge workers,’ today that figure exceeds 60% (Horn & Staker). According to a report published by Dell and authored
by the Institute for the Future (IFTF) in 2017, 85% of all jobs that would exist in 2030 were not yet invented. Education
companies, such as Pearson are highlighting the large demographic shift forming with 10% of US jobs to be vacated by
retiring Boomers by 2030, and declining birthrates will drive the need for AI and create new education opportunities for
different jobs and skillsets.

Exhibit 23: The majority of jobs with greatest estimated Exhibit 24: Labour markets have become tighter as job Exhibit 25: Total training expenditures have increased
growth in the US require niche technical or soft skills vacancies increase for US companies
Occupations with most job growth, 2023-2033E Job vacancy rate by sector, US, Germany, France, Australia, Total training expenditures 2018-2023
Italy, Canada, UK average 2010, 2023
5 5.0
900,000 120
# of new jobs projected (2023-2033)

Job Vacancy rate by sector %

800,000 2010 2023

Total training expenditures in the US ($bn)

700,000 4 4.0
600,000 100
500,000
3 3.0
400,000
80
300,000
200,000 2 2.0
100,000 60
0
1 1.0

40
0 0.0

20

0
2018 2019 2020 2021 2022 2023

Source: BLS Source: McKinsey Source: Training Magazine

19 November 2024 16
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Attracting and Retaining Talent in the Age of Declining Populations and Tighter Labour Markets
We maintain that training, re-skilling, and retaining talent is key to human capital strategy, particularly as the decline in working age
populations is likely to tighten the labour market. Panelists at our Global Sustainability Forum last month highlighted these themes as an
opportunity to address social inequities through technological solutions and automation. Multiple companies noted the growing skills gap across
industries hinders growth and advancement in their sectors, such as construction, healthcare, and cybersecurity. Talent retention through
competitive compensation, development and internal mobility programs, and investments in automation were also emphasized as key drivers of
human capital and business value.

Investing in quality education and re-skilling. We have previously highlighted the importance of education and training as key to advancing
progress across the SDGs, from achieving equal opportunity for decent work, to creating the next generation of innovators and problem-solvers.
However, there are several barriers to access, including cost, physical proximity to quality services, and access to technology (Exhibit 26).
Traditional education systems may fail to equip students with the necessary skills to enter an increasingly digital economy and lack the flexibility to
facilitate access to education for a wider range of users, such as life long learners. In addition to being a top category of rising cost in recent
decades, disruptions associated with COVID-19 compounded educational challenges. The EdTech market is well positioned to take advantage of a
growing learner base and increasing interest in personalized education. We believe that skill shortages, growth in emerging markets, and the shift
to hybrid learning will drive growth in the higher education market, as global education and training expenditure is forecast to exceed $10 trillion by
2030, per HolonIQ. Companies that offer widely accessible and in-demand courses, such as Coursera, are positioned to address skill shortages
and demand in emerging markets, in our view. Duolingo has focused on using AI tools to increase interactivity with students and aid educators in
creating coursework, making personalized education more accessible to disadvantaged communities. Companies like Pearson and PowerSchool
further facilitate the shift toward hybrid learning and encourage interactivity in-school, such as through Pearson’s development of AI-powered
chatbots in online textbooks and Powerschool’s personalized learning pathways.

Emphasizing talent retention in human capital strategy. Although finding and retaining high-quality employees and managers is a heightened
challenge today, we believe companies better able to do it will be at an advantage vs. peers, with implications for costs, productivity and
innovation. We organize the spectrum of potential employee considerations into five key categories — Pay, Path, People, Purpose, and Process
(Exhibit 28). The importance of each driver will differ by both industry and individual employee, but the key for companies to maximize talent
attraction and retention is to be good at as many as possible.

19 November 2024 17
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 26: Healthcare, education, food and housing are among areas for which costs Exhibit 27: Education and workforce development ranks second by share of
have been rising the most in the US organizations likely to adopt this technology by 2027
Indexed change in price levels of select categories since 2000 Technologies ranked by the share of organizations surveyed who are likely or highly likely to
adopt this technology over the next 5 years (2023-2027)

250% Hospital Services Digital platforms and apps

Education and workforce development tech

200% Big-data analytics

More Expensive College Tuition IoT and connected devices
Cloud computing
150%
Childcare & Nursery Encryption and cybersecurity
Medical Care E-commerce and digital trade
100% Prescription Drugs
Artificial intelligence
Housing
F&B Environmental management
50% Overall Inflation Climate-change mitigation
New Vehicles Text, image, and voice processing
0% Apparel Augmented and virtual reality
2000 02 04 06 08 10 12 14 16 18 20 22 24*
Power storage and generation
-50% Electric and autonomous vehicles
Computer Software
More Affordable IT, Hardware & Services Robots, non-humanoid

-100% TVs 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: US Bureau of labour Statistics, Goldman Sachs Global Investment Research Source: World Economic Forum, Future of Jobs Survey 2023

Exhibit 28: 5 P’s of human capital

Our view of key indicators of human capital leadership, and how each can be measured using ESG metrics
Pay Path People Purpose Process

Compensation, benefits, Growth opprtunities through Employees and corporate Community and business Employee safety and supply
and perks training and promotion culture goals/mission chain considerations

Measures Measures Measures Measures Measures

Compensation quantum & Training and upskilling Employee safety
Employee diversity Product alignment
structure Employee mobility Manuf. & supply chain

Employee turnover
Employee satisfaction surveys

Source: Goldman Sachs Global Investment Research

19 November 2024 <8

Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Companies exposed to the Education, Reskilling, Retention, and Recruiting theme

We highlight companies exposed to education, reskilling, retention and recruiting which are important for
educating and training the labour force in addition to ensuring skills gaps in the labour market get closed. Staffing and
recruiting companies may benefit from helping companies navigate human capital gaps, while also helping to provide
reskilling services for laid off workers.

19 November 2024 19
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

3) Immigration
Immigration has been one key solution that has helped maintain balance in the labour market, particularly in the US
where foreign-born workers significantly contributed to reducing the jobs-workers gap according to our US Economists.
However, under the latest UN scenario, immigration of working age populations will only help some countries grow
their productive working age population (Exhibit 14), while others are likely to witness further declines in working age
populations. Immigration has faced more vocal political debates, and many countries have begun to implement immigration
reform aimed at limiting immigration or focusing on attracting experienced and skilled / unskilled workers to fill critical
labour gaps (Exhibit 32). For example, Canada recently announced a plan to reduce immigration by 20%, and our US
economics team expects the new US administration to tighten immigration to levels modestly below the pre-pandemic
trend.

Exhibit 29: In the US, increased foreign-born labour Exhibit 30: …with immigrants typically seeing increased Exhibit 31: ...and helping to rebalance labour markets gaps
participation has offset declines from native born workers... participation going into industries with large labour gaps, faster for many industries
particularly in many industrial and services industries...
7 Bubble Size Represents Size of 1
69 Employment 2024
Education

Change in Jobs-Workers Gap as Share of Labor

Food & Accommodations 0
68 6 Finance Construction
Labor force participation rate %

Construction Arts & Entertainment

Force From Peak to 2024 March %

Total Employment in an Industry %
67 -1
Recent Immigrants as Share of 5 Health & Social
66 Other Services Professional & Rsq = 40% Real Estate
Transportation & -2 Assistance
Manufacturing Business
65 Utilities Wholesale Trade Other Services
4 Nondurables Manufacturing
-3 Durables
64 Mining Manufacturing Transportation &
3 -4 Nondurables Utilities
63 Retail Trade Manufacturing Rsq = 50%
Durables Professional & Business
62 Native born Education -5
2 Mining Food & Accommodations
Information
61 Native-baseline Retail Trade
Arts & Entertainment -6
Health & Social
60 Foreign born 1 Finance Assistance Wholesale TradeBubble Size Represents Size of
Foreign-baseline Real Estate -7
59 Information
0 Employment 2024
-8
0 1 2 3 4 5 6 7
Change in Jobs-Workers Gap as Share of Labor Force 0 1 2 3 4 5 6 7
From 2019 to Peak % Recent Immigrants as Share of Total Employment in an Industry %

Source: US Bureau of Labor Statistics, Goldman Sachs Global Investment Research Source: US Department of Labor, Goldman Sachs Global Investment Research Source: US Department of Labor, Goldman Sachs Global Investment Research

19 November 2024 20
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 32: G7 Immigration policies target skilled workers in sectors with labour shortages in many cases
Germany passed the Act on the Further Development of Skilled Immigration that entered into force in November 2023 and March 2024, which allows student visa
Germany holders easier access to German labour markets, allow for foreign highly skilled workers to bring their parents to Germany, create new immigration options for skilled
workers and reduce the period of required residence in Germany required to qualify for permanent residence.
The EU Commission released Communication on Attracting skills and talent to be implemented by the end of 2022, in which support is provided to target countries to
EU address labour and skills needs and gaps between EU and non-EU partner countries. The Partnerships allow foreign nationals to study, work or train in the EU to help
address labour shortages and skills gaps while preventing exploitation and reducing cost and administrative burden for employers.
Japan passed an amendment in June 2024 to the country's Immigration Law, which established a new labour recruitment initiative, the Training Work Program, for
foreign workers. This program allows immigration for unskilled foreign workers and creates a path for permanent residency after passing an exam within the three-year
Japan Training Work Program, passing a second exam as Specified Skilled Workers 1, with the option to apply for permanent residency after five years of work as a Specified
Skilled Worker 2. At the same time, it enables the government to revoke permanent resident status to those who commit crimes or fail to pay taxes, and it introduced
new deportation procedures for individuals that have applied for refugee status three or more times.
Italy has increased work permits to migrant works from around 30,000 in 2019 to over 100,000 in 2023 and is targeting 165,000 permits granted by 2025 in order to
address labour shortages in areas such as manufacturing, healthcare, computer technicians, software developers, fishing, plumbing, nursing, construction and
Italy
mechanics. This has progressed simultaneously with crackdowns on illegal migration through deals with North African countries, increased penalties for people
smugglers, etc.
France formalized new immigration reform at the beginning of 2024, which creates a residence permit for undocumented foreign nationals to work in areas facing labour
shortages and creates a new residence permit for non-EU healthcare professionals to address health sector labour shortages. In other areas it expedites the deportation
France
process for foreigners who commit crimes, introduces proficiency rules requiring foreign nationals to learn the French language, limits the number of renewals for
temporary residence permits, and expands power of surveillance for police in deportation cases.
The USA's H-1B visa program targets employees of specialty occupations for skilled worker immigration. The annual H-1B cap is set at 65,000 per year, initially created
through the Immigration Act of 1990 to protect US workers, with 20,000 additional visas set aside for workers who have earned a US master's degree or higher. These
USA caps have been consistent since 2006. The Emergency National Security Supplemental Appropriations Act proposed increasing legal immigration (13% increased in
employment-based visas, and 7% increase in family-based visas over next five years), while simultaneously proposing a new Border Emergency Authority that would
have authority to deport migrants without allowing them to apply for asylum. This bill was not passed.
The UK has a points-based immigration system for skilled workers based on if the job offer is in a shortage occupation, required skill level for job, education, salary and
UK language skills. The Labour Government's immigration plan looks to reduce net migration and reliance on migrant workers, focusing instead on reskilling domestic
labour, and improving wages and conditions, though no changes have been passed to Conservative Government's policies.
Canada has a points-based immigration system for skilled workers, based on language skills, education, work experience, age, arranged employment, and adaptability.
The country announced, in September 2024, changes to immigration policies and processes designed to reduce the number of temporary residents. These changes
include implementing a 10% employer cap on foreign workers under the Low-Wage Stream, reducing open work permit eligibility for spouses of foreign workers in
Canada
management, professional occupations, or sectors with labour shortages, and for spouses of master's degree students. In addition, graduates of public colleges will only
be eligible for a PGWP if degree is for an occupation with a labour shortage, international student visas are to be reduced by around 10%, and PGWP applicants must
demonstrate language proficiency.

Source: LSEG, Bloomberg, Data compiled by Goldman Sachs Global Investment Research

19 November 2024 21
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Companies exposed to the Immigration theme

Remittance a key driver of economic and human development for developing countries. Companies most directly
exposed to benefit from the immigration theme include remittance providers helping migrants send money back to country
of origin. According to the World Bank, remittance flows to low- and middle-income countries reached $656 bn in 2023,
growing modestly 0.7% from 2022. The World Bank highlights how remittances are essential drivers for economic and
human development in low- and middle-income countries, and for the first time surpassed foreign direct investment
and official development assistance in 2023. In 2023, the average fee cost of remittance was 6.4%, up from 6.2% (both
above the SDG target of 3%). Companies with products exposed to immigration include remittance providers.

19 November 2024 22
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

4) Capital Relocation of Industrial Activity

Newly Industralized Growing product labour pools helped drive a significant share of global manufacturing exposure for developing
Countries (NICs) include:
countries from the 1990s to 2020s. Outsourcing and relocating to regions with growing labour pools and attractive labour
Brazil, China, India, Indonesia,
Thailand, Malaysia, Philippines,
costs has been a major trend for the last few decades as Newly Industrializing Countries (NICs) have benefited from a
Mexico, South Africa, Turkey large growing productive labour force since 1990 (Exhibit 33) and helped contribute to a growing share of overall global
manufacturing demand vs. maturing economies (Exhibit 34).

Exhibit 33: Since the 1990s, NICs have seen a large rise in working-age populations, while Exhibit 34: This has driven manufacturing share gains for developing economies (NICs) over
maturing economies have stagnated the past few decades
Working-age population for NICs, and G7+EU from 1990 to 2023 Manufacturing value added, as a % of global GDP, in current USD

3.0 Total World NICs G7 Rest of World

Manufacturing Value Added as % of global

20%
2.5
Working age population (bn)

GDP, current USD

2.0 15%

1.5

10%
1.0

0.5
5%

0%

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
NICs G7 + EU

Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: UNIDO, Goldman Sachs Global Investment Research

19 November 2024 23
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

However, working-age populations are peaking even in many industrializing countries, and rising costs have
coincided with stagnant trade globalization. New concerns emerging over trade barriers, rising labour (Exhibit 36) and
shipping costs, supply chain bottlenecks, and human rights violations (e.g., CSRD, CSDDD requiring supply chain due
diligence disclosures and legal liability for human rights violations in the supply chain) are driving debates around
de-globalization with the potential for greater reshoring with more localized supply chains. Since the global financial crisis,
trade globalization has stagnated as relocating supply chains and attracting workers has become more expensive (Exhibit
37). An inability to relocate supply chains towards other regions may further exacerbate the demand for labour in regions
with declining working-age populations, which could drive greater considerations for automation.

Exhibit 35: Working-age populations are declining Exhibit 36: ...while labour costs have been on the rise Exhibit 37: Trade globalization has stalled since the
across many regions... across all regions, limiting labour arbitrage advantages global financial crisis
Working populations as a % of total population, 1990-2100E Unit labour costs index to 2010 in select regions, 2022 and 2030E World merchandise exports (% of GDP)

80% Forecast Japan 350 30%

Italy
75% Germany
France 300 25%
Working population as % of total pop.

EU +195%
70% UK 250
USA 20%
65% Canada
China 200
15%
India +38% +65% +50%
60% 150
10%
55% 100
5%
50% 50
0%

1500

1600

1700

1820
1873
1878
1883
1888
1893
1898
1903
1908
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
2018
2023
45% 0
Germany, France, Italy USA China India
40% + Spain Merchandise exports (% of GDP)
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2010 2022 2030

Source: UN, Data compiled by Goldman Sachs Global Investment Research Source: ABB Source: World Bank, Fouquin and Hugot (CEPII 2016) – processed by Our World in
Data

19 November 2024 24
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Companies exposed to the Capital Relocation theme

If capital relocation is pursued, we see increased opportunities for outsourced manufacturers with a global presence,
helping customers navigate shifting global supply chain issues. Primary potential beneficiaries include Contract
Manufacturers, Electronics Manufacturing Services (EMS), Original Design Manufacturers (ODM), companies helping
customers optimizing manufacturing supply base globally and locally. The companies have expertise in navigating global
supply chains and procurement, helping customers more efficiently manufacture goods.

19 November 2024 25
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

5) The Need for Automation & AI

Despite recent weakness, investment in industrial automation has grown significantly, particularly amongst
countries with declining populations. Over the last 10 years annual installments of industrial robots have increased over
200% from 2013 to 2023, driven by significant growth in Asia (Exhibit 38). The majority of deployments have gone into the
automotive and electronics industry, which have seen recent weakness driven by China (Exhibit 39). While investment in
automation has largely followed the capex cycle and may be near cyclical peaks, our European Capital Goods team expects
the current cycle to last until 2027. The aging demographic and declining labour force is likely to continue to drive the
medium- and long-term need for automation to improve productivity, in our view.

Various studies show a direct connection between aging populations and faster adoption of automation. One study
by MIT and Boston University finds that aging populations, especially in rapidly aging countries such as Germany, Japan, and
South Korea, experience greater industrial automation as a direct result of declining working age populations. Additionally,
the paper finds that the implied scarcity of working-age populations directly drives higher value for automation technologies
as a direct substitute for manual production tasks. Another study shows that a 1% decline in population growth is associated
with a 2% rise in growth of robot density.

Aging populations and associated declining labour force may also be impacted by AI, with our Economics team seeing
significant economic value and cost savings from the automation of AI-exposed tasks and economic upside from generative
AI (Exhibit 49). The team’s baseline estimate implies a 15% increase in US labour productivity and GDP.

Labour shortages in manufacturing amidst aging populations — a self-correcting problem? As mature economics (with
high standards of living) age, demand for durable goods generally declines which ultimately should drive lower demand for
labour in manufacturing, in theory. However, service industries will generally see rising demand for labour with aging
populations as consumption shifts away from durable goods towards services (healthcare) and staples. Our
Economists also believe AI could raise output by creating new jobs that were previously technologically or
economically infeasible.

19 November 2024 26
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 38: Industrial robots have grown significantly over Exhibit 39: The majority of robot installation has been Exhibit 40: Robot density per worker has doubled from 2016
the last decade deployed across automotive and electronics in recent years to 2022
Annual installations of industrial robots (‘000 of units) 2013-2023 Units (1000s) of robot installations by industry 2021-2023 Robot density per 10,000 employees in 2016 and 2022
156.9
450 160 135.5 1200 1012
2023 2022 2021 2022
Annual installations of industrial robots ('000 of

404 136.1 142.6

Robot density per 10,000 employees

400 385 382 140 125.8 2016
117.3 1000

Units ( in thousands)
120 102.5 2022 World avg.
350 91.3 730
94.2
100 68.4 800 2016 World avg.
300 280 284 274 76.8 74.8 61.0 631
255 80 55.0
66.1
415
250 600 488 397
60 343
units)

200 25.0
200 40 22.4 14.7 15.4 296 285 274
161 23.5 400 309 303 284 248 219 219
216 198 189
15.1 223 180 169
150 134 20 189 211 185 184
99 82 85 92 128 137 153 144 145 132 160
67 76 74 66 0 200 101
100 50 56 151
43 46 69
46 55 47 52 56 55 74
50 33 38 41 0
30

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Asia/Australia Europe Americas

Source: International Federation of Robotics Source: International Federation of Robotics Source: International Federation of Robotics

Services Automation — the next frontier, with rising service demand and limited workers
While demand for services is expected to rise with aging populations, labour shortages remain a key concern. As
populations age they generally consume more services, namely healthcare vs. younger populations, which will drive greater
demand for labour. According to the Association of American Medical Colleges (AAMC), the US is expected to have a
shortage of up to 124,000 physicians by 2034, with an additional 820,500 home health and personal care aides (#1 largest
source of new jobs) and 197,200 nurses (#6) needed by 2033 according to the BLS. Despite services jobs growth, they
also have some of the highest and rising job openings rates in the US (Exhibit 41).

Service automation and humanoid robots are expected to grow rapidly to help fill in the gaps. The service robots
market is expected to grow to $297 bn, or a 22.1% CAGR by 2033, with household robots and maintenance & inspection
robots seeing the largest TAM, according to Statzon (Exhibit 42).

Driven by labour shortages, our Chinese Machinery team sees significant growth in humanoid robotics going
forward with a global TAM forecast of US$38 bn by 2035. The team estimates humanoids will cover 10-15% of
hazardous, dangerous and auto manufacturing roles, which will be needed to address manufacturing labour shortages and
household/elderly care demand, in their view (Exhibit 47, Exhibit 48). Humanoid robots look particularly appealing, in our
Machinery team’s view, for special operations such as “dangerous, dirty and dull” (3D) tasks, considering the associated
fatality rates and people’s low willingness to do such jobs. Possible applications include: disaster rescue, nuclear reactor
maintenance, chemicals manufacturing, mining and auto manufacturing. This has already been seen in national policy, with
China developing emergency robots to perform tasks such as monitoring and providing early warnings, search and rescue,

19 November 2024 27
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

communication command, logistics support, safety production operations, and disaster relief.

Companies are launching new service automation business lines and experimenting with Humanoid robots.
Legrand’s Care offering (6% of 2023 revenue) focuses on the smart home and connected care, with the company
highlighting aging populations and labour shortages as a growth driver for automation. Amazon has been experimenting
with humanoid robot Digit, helping to work in warehouses.

Exhibit 41: Many services jobs have the highest and rising Exhibit 42: Services robots are expected to grow rapidly... Exhibit 43: ...as are Humanoid robots
rates of job openings Global service robotics market value, by application, 2023-2033 Global Humanoid Robot market value (mn USD) 2023-2035E
Job opening rates ranked highest to lowest
7% Application 2023 2024 2025 2033 CAGR %
2010 2015 2019 2024 40,000
Household 6.1 7.4 9.1 47 22.8% 37,899
6%
Job openings rate

Medical 3.2 4 4.9 26.6 23.5%

Global Humanoid Robot TAM ($US mn)

5% 35,000
Field 2.5 3 3.6 16.2 20.6% 30,153
4% 30,000
Defense, Rescue & Security 3.9 4.7 5.9 32.4 23.8%
3%
Entertainment, Edu. & Personal 4.6 5.5 6.6 28.5 20.1% 24,034
25,000
2% Public Relation 5.3 6.4 7.8 37.4 21.6%
19,193
1% Inspection & Maintenance 5.9 7.2 8.7 41.2 21.5% 20,000
15,354
0% Logistics 0.8 1 1.2 6.7 23.9% 15,000 12,306
Construction & Demolition 2 2.5 3.1 16.5 23.3% 9,222
10,000 7,032
Marine 5.9 7.1 8.6 40.7 21.4%
5,377
Research and Space Expl. 0.5 0.6 0.7 3.7 22.5% 5,000 3,775
1,538
Total 40.7 49.4 60.2 297 22.1% 64 329
-

Source: BLS Source: Statzon, Apollo Research Reports Source: Goldman Sachs Global Investment Research

19 November 2024 28
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 44: Our China Machinery team finds that if general purpose AI robots are technologically/economically viable, it could help solve social issues such as manufacturing labour
shortages and elderly care

US manufacturing labor surplus/(shortage) (mn ppl) Global elderly caregiver demand (mn ppl)
2.0
Caregiver demand for the elderly, to carry out personal care or household activities (mn ppl)
1.5
surplus
1.0 Caregiver demand for the elderly with severe disabilities (mn ppl)

0.5 120
0.0 100
-0.5 80 51mn
shortage gap
35mn
-1.0 60 25 mn

-1.5 40
20
-2.0
0
-2.5

% gap filled by 2030E if humanoid % gap filled by 2030E if humanoid

robots can work an equivalent of 20 robots can work an equivalent of 8 % gap filled by 2035E
hours a day hours a day 100%
100%
200% 80%
80%
150% 60%
60%
100% 40%
40%
50% 20%
20%
0% 0% 0%
Bluesky Bull Base Bear Bluesky Bull Base Bear Bluesky Bull Base Bear
scenario case case case scenario case case case scenario case case case

Source: OECD, Deloitte, FRED, Goldman Sachs Global Investment Research

19 November 2024 29
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Aging Populations and Declining Workforces: A Problem for AI to Solve?

While the debate around the economic and societal impact of AI has been hotly debated, our US Economics team sees significant economic
upside from generative AI, with their baseline estimate implying a 15% increase in US labour productivity and GDP (assuming the capital stock
evolves to match increased labour potential).

That said, fully automating AI exposed tasks has the potential to generate significant cost savings— (Exhibit 45) shows that full automation of the
types of work tasks that we consider most substitutable by generative AI would result in several thousands of dollars of costs savings per worker
per year—and the cost of new technologies tends to fall rapidly over time (Exhibit 46). Given that cost-saving applications of generative AI will
likely follow a similar pattern and that the marginal cost of deployment will likely be very small once applications are developed, we continue to
expect that adoption and automation rates will ultimately far exceed Daron Acemoglu’s 4.6% estimate.

Artificial Intelligence on Economic Growth (Briggs/Kodnani)

Exhibit 45: Automation of Work Tasks Should Generate Significant Economic Value…

% of Value of Automating Work Task Categories, Dollars

Time per Worker
4 2500
2000
3
1500
2
1000
1 500
0 0

Performing Administrative

Characteristics of Products,
Analyzing Data or
Documenting/Recording

Interpreting the Meaning of

Materials, or Surroundings

Determine Compliance with

Processing Information
Getting Information

Identifying Objects, Actions,

Scheduling Work and

Relevant Knowledge
Organizing, Planning, and

Estimating the Quantifiable

Updating and Using

Evaluating Information to
Monitoring Processes,

Information for Others

Events, or Information
Information
Prioritizing Work

Activities
Information
and Events

Activities
Standards

Source: Goldman Sachs Global Investment Research

19 November 2024 30
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 46: …Especially if Costs Fall in a Manner Similar to Prior Technological Breakthroughs
Index Price of Electricity and Dollar (2013)/ log(FLOPS) log(FLOPS)
(2017=100) KW Hour 10 Floating Point Operations Per Second, 10
Personal Computing
Technological Frontier by Year
1900 1905 1910 1915 1920 1925 1930 1935 9 9
25000 6
Personal Computer Cost (left, bottom) 8 8
5 7 7
20000 Electricity Cost (right, top)
6 6
4
15000 5 5
3
4 4
10000
2 3 3

2 2
5000
1
1 1

0 0 0 0
1990 1995 2000 2005 2010 2015 2020 2025 1990 1995 2000 2005 2010 2015 2020 2025

Source: Bureau of Economic Analysis, Department of Commerce, Goldman Sachs Global Investment Research

Risks of AI to jobs and potential mitigants

Technological revolutions have long raised ethical, environmental and social questions, and the rise of AI will be no different. As advances
have accelerated, so have concerns, to the extent that some AI experts and executives called for temporary moratoriums on further development
of leading-edge AI models.

In our 2023 report on AI risks and opportunities, we outline four principal tiers of risks, including potential impact on jobs. Our
Economists estimate that roughly two-thirds of current jobs are exposed to some degree of AI automation, and that generative AI could substitute
up to one-fourth of current work. Headlines have shown that workers and labour unions are concerned about job replacement risks of AI and
automation, as reflected in the Hollywood writers’ strike in 2023 and the East Coast port strike by the International Longshoremen’s Association in
2024.

There is evidence for employment challenges related to technological disruption in the modern IT era. A study by economists Daron
Acemoglu and Pascual Restrepo found that technological change displaced workers and created new employment opportunities at roughly the
same rate for the first half of the post-war period, but has displaced workers at a faster pace than it has created new opportunities since the
1980s. These results suggest that the direct effects of generative AI on labour demand could be negative in the near or intermediate term if AI
affects the

19 November 2024 31
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

labour market in a manner similar to earlier advances in information technology.

Exhibit 47: Historically, worker displacement from automation was roughly offset by Exhibit 48: One-fourth of current work tasks could be automated by AI in the US
the creation of new roles/tasks prior to 1980, but displacement has created a net drag AI exposed employment share (%)
on labour demand more recently

Percentage points Contributions to Total Wage Bill Growth* Percentage points 50 46 44

1.5 1.5 45
Displacement of Workers From Old Roles 40 37 36
35
33 32
Remployment of Workers in New Roles 35 31
29 28 28 28
1 1 30 27 26 26 25
25
19
20
0.5 0.5 15 12 11
9
10 6
4
5 1
0 0
0

-0.5 -0.5

-1 *Lines indicate 10-year moving averages of -1

Green shading =
reinstatement (green) and displacement (red) IT automation boom
effects
-1.5 -1.5
1950 1960 1970 1980 1990 2000 2010

Source: Acemoglu and Restrepo (2019), Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

However, the potential for worker displacement in the short term can also come with an expectation of significant increases in
productivity and economic and employment growth over the long term, including the creation of new jobs and stimulation of demand for
hard-to-automate services. Using Census data, a study by economist David Autor and coauthors found that 60% of workers today are employed in
occupations that did not exist in 1940, implying that over 85% of employment growth over the last 80 years is explained by the technology-driven
creation of new positions. There will also be a growing need for education, training and reskilling to help employees adopt the new technologies,
adapt their skills for use in their current roles, and prepare to transition to different functions, as highlighted earlier in this report.

19 November 2024 32
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Exhibit 49: We frame four principal tiers of risks for AI, ordered by time horizon and potential impact, and mitigants for
each AI-related risks and mitigants

Source: Goldman Sachs Global Investment Research

19 November 2024 33
Goldman Sachs GS SUSTAIN: The Demographic Dilemma

Companies exposed to Automation Solutions

Declining populations may be a source for automation growth. Various academic studies (1, 2) have shown a link
between declining populations and growth in automation capital, with one study showing that a 1% decline in population
growth is associated with a 2% rise in growth of robot density.

19 November 2024 34
Goldman Sachs

Disclosure Appendix
Reg AC
We, Evan Tylenda, CFA, Madeline Meyer, Brian Singer, CFA, Derek R. Bingham, Shubham Jain, Jacqueline Du, Yuichiro Isayama, Daniela Costa, Suhasini Varanasi, Mark Delaney, CFA, George K. Tong, CFA,
Brendan Corbett, Emma Jones, Rachit Aggarwal, Grace Chen and Varsha Venugopal, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject
company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in
this report.
We, Sharon Bell and Yuriko Tanaka, hereby certify that all of the views expressed in this report accurately reflect our personal views, which have not been influenced by considerations of the firm’s business
or client relationships.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its sector peers. The four key attributes depicted are:
Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks
for specific metrics for each stock. The normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may vary
depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a higher percentile indicating a higher growth company.
Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is
based on a stock’s forward-looking P/E, P/B, price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile indicating
a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs for the fiscal year at least seven quarters in the future
compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary across sectors and regions) to incorporate the
potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of
the company becoming an acquisition target, 2 representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not factor into our price target, and may or may not be
discussed in research.

Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make
comparisons between companies in different sectors and markets.

Disclosures

19 November 2024 35
Goldman Sachs

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 49% 34% 17% 63% 57% 40%

As of October 1, 2024, Goldman Sachs Global Investment Research had investment ratings on 2,988 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment
Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe
and related definitions’ below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided investment
banking services within the previous twelve months.

Regulatory disclosures
Disclosures required by United States laws and regulations
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Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.
The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their
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19 November 2024 36
Goldman Sachs

financial circumstances, investment profiles or risk profiles of clients. Goldman Sachs assumes no responsibility for any investment decisions that may be taken by a client or any other person based on
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Ratings, coverage universe and related definitions

Buy (B), Neutral (N), Sell (S) Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a stock’s
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Total return potential represents the upside or downside differential between the current share price and the price target, including all paid or anticipated dividends, expected during the time horizon
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Investment List membership.
Coverage Universe: A list of all stocks in each coverage universe is available by primary analyst, stock and coverage universe at https://www.gs.com/research/hedge.html.
Not Rated (NR). The investment rating, target price and earnings estimates (where relevant) are not provided or have been suspended pursuant to Goldman Sachs policy when Goldman Sachs is acting in
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19 November 2024 37
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19 November 2024 39
 The Future of
MINDCRAFT: OUR THEMATIC DEEP DIVES The Circular
Batteries Carbonomics Europe’s Energy Crisis China Agriculture Precision Farming Green Capex Economy

Byte-ology Gene Editing The Metaverse Cloud Computing 5G Blockchain Cars: The Road Ahead

China’s Credit Age of China

Music in the Air China Property Conundrum Automation China Post-95s Silicon Carbide Decarbonization

The Survivor’s Guide Sustainable ESG What Matters

to Disruption Investing Black Womenomics Inclusive Growth Market Cycles Top of Mind for IPOs

Tracking the The Future

Top Projects EU Taxonomy Balanced Bear Clean Hydrogen Green Metals
Consumer of Work

What the Market Pays For The Great Reset The Competitive Value of Data