The UN Conference on Trade and Development (UNCTAD) has issued its annual assessment of trends in foreign direct investment (FDI), measures to improve its contribution to development, and global value chains and their development implications. The report finds that in 2023, global FDI dropped 2% to USD 1.3 trillion, and investments in sectors linked to the SDGs were down 10%.
The 2024 World Investment Report themed, ‘Investment Facilitation and Digital Government,’ argues that amidst challenging FDI prospects for 2024, “modest growth for the full year appears possible,” with the easing of financial conditions and investment facilitation.
The report calls for countries “to promote investment by creating a transparent and streamlined environment through business facilitation and digital government tools” and for institutional investors “to boost FDI flows to infrastructure projects, especially in developing countries, to support long-term economic growth and stability.”
According to the report, “tight financing conditions in 2023 led to a 26% downturn in international project finance,” which plays a major role in infrastructure investment in power and renewable energy, among other areas. This led to a decrease in investment in SDGs-linked sectors of more than 10%. Agrifood systems and water and sanitation attracted fewer internationally financed projects in 2023 than in 2015, the report highlights.
In a foreword, UN Secretary-General António Guterres underscores that insufficient SDG funding is hindering implementation of the 2030 Agenda for Sustainable Development, particularly in least developed countries (LDCs). “We need urgent action to remove obstacles and provide a transparent, streamlined investment climate for sustainable development,” he writes.
The report further finds that the pace of growth in SDG investment through sustainable finance products in global capital markets is slowing down. For example, in 2023, sustainable bonds grew only marginally, while inflows in sustainable investment funds were down 60%.
The report describes the role of digitalization in developing countries as a stepping stone for wider digital government implementation, which can bolster weak governance and institutions and improve investment flows. It recommends a “bottom-up” approach to digital government tools, starting from basic services for business and gradually expanding coverage to more institutions “to capture economies of scale and scope and extend benefits to all businesses.”
Other recommendations include that:
- Countries and institutions encourage investment regimes aligned with the SDGs;
- Governments promote investment in sustainable development projects, including through outward investment promotion measures and provisions in international agreements;
- Institutional investors set more ambitious targets for fossil fuel divestment and increased investment in renewables; and
- Systematic efforts be pursued to address greenwashing, including well-defined product standards, robust sustainability disclosures, external auditing and third-party ratings.
The report was released on 20 June 2024, ahead of the July session of the UN High-level Political Forum on Sustainable Development (HLPF) where ‘partnerships for the Goals’ is one of the five SDGs to undergo in-depth review. [Publication: 2024 World Investment Report: Investment Facilitation and Digital Government] [Executive Summary] [Online Report] [UNCTAD Press Release] [UN News Story]