The 2024 World Investment Report highlighted that a financing gap is hindering efforts towards achieving the 2030 Agenda for Sustainable Development and stressed the urgent need for policies to strengthen financing.
“Investment is not just about the flow of capital. It is about human potential, environmental stewardship and the enduring pursuit of a more equitable and sustainable world,” said Rebecca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD).
The report notes that excluding large fluctuations in investment flows in some European pipeline economies, the decline in FDI was more than 10 percent, with developing countries being the most affected.
Slowing outward direct investment
UNCTAD said the decline was mainly due to rising geopolitical tensions and concerns about “greenwashing”, a marketing technique that makes things seem greener than they actually are.
Foreign direct investment is essential to finance infrastructure and public services such as power and renewable energy, but tough financing conditions in 2023 led to a 26% decline in FDI deal volume.
this The drop led to a 10 percent decrease in investment in areas linked to the Sustainable Development Goals (SDGs), particularly agri-food systems, water and sanitation.
In these areas, there were fewer internationally funded projects in 2023 compared to 2015, when all countries signed up to the targets to be achieved by 2030.
Developing countries will be hit hardest
The report also found that developing countries were the hardest hit.
These countries saw only modest growth in sustainable bonds last year, with fundraising to support sustainable bonds falling by 60 percent.
FDI inflows to developing countries fell 7 percent to $867 billion last year, although the decline varied by region.
Greenfield investment on the rise in Asia
Developing Asia, where 60 percent of the world’s megaprojects are located, has seen a significant increase in greenfield FDI – investments in which companies set up new operations or expand existing facilities abroad.
These investments saw a 44 percent increase in overall value and a 22 percent increase in the number of announcements.
However, overall foreign investment inflows to Asia are set to decline, falling from around $678 billion in 2022 to $621 billion in 2023. Still, the continent, led by East Asia and Southeast Asia, remains the world’s largest recipient of FDI, accounting for nearly half of global inflows.
China and the Hong Kong Special Administrative Region (SAR) remain the region’s largest investors in terms of total FDI, followed by the United States, Japan and Singapore.
