Multi-year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity-building and Sustainable Development, ninth session
13 October 2022
This meeting comes at very important time for the world, in the context of major cost-of-living crisis that is again reminding us of the great difficulty developing countries are facing to deal even with their short-term pressures, let alone to invest in their long-term, sustainable development aspirations. And even while these investments are desperately needed, global investment flows are going the wrong way.
Last year, it is true, foreign direct investment recovered to pre-pandemic levels, reaching $1.6 trillion. However, these flows were highly skewed towards developing countries, and even then, towards Mergers and Acquisitions activities, not towards the sorts of greenfield investments that are key to building productive capacities.
Lastly, UNCTAD already forecasts a decline in FDI following the war in Ukraine, given rising investor uncertainty, and squeezed budgets in both the private and the public sector.
The war in Ukraine has also provoked reflection on the energy transition and its consequences for investors. Worryingly, some emerging indicators suggest that the war may reverse trends toward clean energy, with increased fossil fuel production in countries previously committed to reducing emissions.
In the first quarter of 2022, most of the 5000 largest multinational enterprises revised downward their earnings forecasts for the year. Alarmingly, extractive industries revised upwards their expected earnings, with oil and gas at plus 22 per cent and coal at plus 32 per cent of expected earnings. This sends all the wrong signals and provides all the wrong incentives for investment going forward.
Current conditions risk reversing years of progress towards investing in sustainable energy. This is especially worrying as global emissions from energy combustion and industrial processes rebounded last year to reach their highest ever annual level.
Climate change investment is therefore even more urgent and necessary in the current context, despite – or indeed, because – the headwinds I just mentioned.
UNCTAD is seeking to reflect this urgency. In this year’s editions of our World Investment Report, we are including a new dedicated section on climate change investment, and sustainable finance trends in capital markets.
Our results are very revealing.
The need for investment in productive capacity, in the Sustainable Development Goals and in climate change mitigation and adaptation is enormous. Current investment trends in these areas are not generally positive.
Industrial investment remains weak and well below pre-pandemic levels, especially in the poorest countries.
SDG investment meaning: project finance in infrastructure, food security, water and sanitation, and health, is growing but not enough to reach the goals by 2030.
Investment in climate change mitigation, especially renewables, is booming but most of it remains in developed countries and adaptation investment continues to lag well behind. But there is room for hope, especially in the trends that we are seeing in capital markets.
Sustainable finance in capital markets is growing very rapidly.
UNCTAD estimates that the value of sustainability-linked investment products in global financial markets grew to $5.2 trillion in 2021, up 63 per cent from 2020.
These products include sustainable funds, green bonds, and other sustainability-linked bonds. At the same time, the regulatory environment is proving to be very supportive of this trend – however, attention should be given to developing countries’ capacity, especially in terms of their SME sector, to deal with the added legal costs that new and welcome sustainability standards will require of them.
So, debating about these topics could not come at a more pertinent time. In less than a month, we will be in Egypt for COP27, a hugely important COP.
The issues you will discuss in the next two days will be reflected in our contribution to the publication “From Glasgow to Sharm El-Sheikh: A Guidebook for Just Financing” – which is being developed by the Government of Egypt and will be launched at the COP.
Excellencies, distinguished speakers:
This meeting brings together delegates, policymakers, international organizations, experts, and private sector representatives; let’s use this platform to discuss and learn from each other.
Let us use this platform to renew our commitment and call for immediate action.
We need you; we need your collective and individual voice.
The stakes could not be higher. I wish you all a very engaging, purposeful and – above all – impactful week ahead.
Thank you.
