The UN Conference on Trade and Development (UNCTAD) has released the 2023 edition of its World Investment Report. Themed, ‘Investing in Sustainable Energy for All,’ the report finds that out of a USD 4 trillion annual funding gap for the SDGs – compared to USD 2.5 trillion in 2015, developing countries face an investment gap of USD 2 trillion annually for the energy transition.
Of all sectors of the SDGs, the report finds the largest gaps in energy, water, and transport infrastructure. It explains that the increase is the result of underinvestment as well as additional needs.
On clean energy, the report reveals that much of the growth in international renewable energy investments has concentrated in developed countries, while developing countries experienced a growth rate that exceeded gross domestic product (GDP) growth “only marginally.” It also shows that the growth of investment in renewable energy, which nearly tripled since the adoption of the Paris Agreement on climate change in 2015, slowed down in 2022 because of overlapping crises, including the war in Ukraine, high food and energy prices, and debt pressures.
A significant increase in investment in sustainable energy systems in developing countries is crucial for the world to reach climate goals by 2030.
— UNCTAD Secretary-General Rebeca Grynspan
The report calls for:
- A compact setting out priority actions that include financing mechanisms and investment policies to help developing countries attract investments to build clean energy systems;
- The de-risking of energy transition investment in developing countries through loans, guarantees, insurance instruments, and equity participation of the public sector and multilateral development banks (MDBs), through public-private partnerships (PPPs) and blended finance;
- Partnerships between international investors, the public sector, and multilateral financial institutions (MFIs), to reduce the cost of capital for sustainable energy investment in developing countries; and
- Debt relief to offer developing countries fiscal space to make the necessary investments and to help them “attract international private investment by lowering country risk ratings.”
The report further shows that foreign direct investment (FDI) flows to developed economies declined and that developing countries accounted for two-thirds of global FDI in 2022, with a few large emerging economies responsible for much of the growth. At the same time, FDI flows to least developed countries (LDCs) decreased by 16%.
Among regional investment trends, the report highlights that:
- FDI in Africa dropped to earlier levels of USD 45 billion.
- While FDI in developing countries in Asia accounted for more than half of global FDI, at USD 662 billion, it remained unchanged.
- FDI flows to Latin America and the Caribbean (LAC) increased by 51%, to USD 208 billion, reaching the highest level ever recorded.
- Flows to LDCs, landlocked developing countries (LLDCs), and small island developing States (SIDS) declined.
UNCTAD’s World Investment Report provides analysis and insights into global investment trends and policies. The 2023 report was launched on 5 July, ahead of in-depth review of SDG 7 (affordable and clean energy) by the UN High-level Political Forum on Sustainable Development (HLPF) on 12 July. In addition to SDG 7, the HLPF is reviewing global progress on SDGs 6 (clean water and sanitation), 9 (industry, innovation and infrastructure), 11 (sustainable cities and communities), and SDG 17 (partnerships for the Goals). [Publication: World Investment Report 2023: Investing in Sustainable Energy for All] [Online Report] [UNCTAD Press Release] [UN News Story]