UNCTAD’S World Investment Report: Overview and Highlights
UNCTAD has released a new UN World Investment Report which monitors global and regional foreign direct investment (FDI) trends and documents recent national and international investment policy developments. This year’s report considers the COVID-19 crisis which has negatively impacted global flows of FDIs. It also includes a new chapter, added at the request of the UN General Assembly, on investment in the Sustainable Development Goals (SDGs).
Chapter V of the report reviews the investment in SDGs, with an assessment of progress made on mobilizing and channeling investment during the first 5 years after the adoption of the SDGs. Progress on investment in the SDGs can be found across 6 of the 10 SDG investment sectors which are infrastructure; climate change; mitigation; food and agriculture; health; telecommunication; and ecosystems and biodiversity. While progress on investment grows, sustainability funds have grown rapidly in number, variety and size. According to the report, “UNCTAD estimates that funds dedicated to investment in sustainable development have reached $1.2 - $1.3 trillion today.” Most of these funds, however, are invested in developed countries (e.g. in renewable energy).
UNCTAD groups the variety of sustainable investments into two groups according to their contributions to sustainable development: sustainability-dedicated investment and responsible investment. Sustainability-dedicated investment refers to investment funds targeting SDG-related themes. UNCTAD estimates that sustainability-dedicated investment today could be in the range of $1.2-1.3 trillion, as mentioned earlier. Responsible investment refers to general investment funds that behave responsibly in their investing strategies and operations. This type of investment is expected to be conducted in a sustainable-development-responsible manner, but it does not directly target environmental, social, and governance (ESG) and SDG-related areas. The total amount of such funds is estimated to be around $29 trillion.
The report also mentions that more than 150 countries have adopted national strategies on sustainable development or corrected their existing development plans to reflect the SDGs. An analysis by UNCTAD shows that although many of these strategies highlight the need for additional financial resources, very few have solid road maps for the promotion of investment in the SDGs. The report states that a more systematic approach is needed for mainstreaming SDGs into national investment policy frameworks and the IIA (International Investment Agreement) regime.
Lastly, UNCTAD believes a new set of transformative global actions to a facilitate a “Big Push” in private sector investment in the SDGs is urgently needed. As a result, their new Action Plan combines several policy instruments to provide an implementation framework for investing in the 2030 Agenda for Sustainable Development. The plan presents a range of policy options to respond to investment mobilization, which can be found in the report.
Aside from information related to SDGs, the report discusses how the COVID-19 crisis will cause a dramatic downfall in FDI in 2020 and 2021. Some interesting findings include a forecast that shows Global FDI flows are expected to decrease by up to 40% in 2020. The report also reviews findings on the immediate effects of the pandemic on FDI. A short-term impact includes tightening margins for reinvestment and new investment restrictions, while more medium-term and long-term effects of the pandemic include navigating a global economic recession and fostering supply chain resilience, respectively. Despite the decline in global FDI flows during the crisis, the international production system will continue to play a vital role in economic growth and development as the global FDI stock stands at $36 trillion today. The report states that the system, however, is entering a decade of transformation that will provide both opportunities and challenges for investment and development policymakers.
To read the full report in detail, please click here.