UNCTAD’S World Investment Report: Overview and Highlights

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.

Business Strategies to Address Climate Change

Guest post by C2ES
Climate Solutions & Business Leadership
Originally published on C2ES website, (n.d.)

Leading companies are taking action both inside and outside their fence lines to reduce their own emissions and become more resilient to inevitable climate impacts. C2ES has found that, internally, companies are seeking a deeper understanding of the risks and opportunities of a changing climate, and are taking steps to reduce their carbon footprints (the emissions from producing their products) and their handprints (emissions from the sales and use of their products). Externally, they are engaging suppliers, customers, key stakeholders and policymakers, and are publicly reporting emissions and energy-usage data, climate-related risks and management strategies. Companies are also demonstrating their commitment to climate action by partnering with other companies and stakeholders on solutions and by publicly supporting policies like the Paris Agreement.

Climate Action Plans

 The first step for many companies is to develop climate action plans across the company and for individual business units. The components of a climate action plan depend on the type of company and the goals it wants to achieve, but every company faces a few general decisions, such as:

• whether the plan is designed through a “top-down” or “bottom-up” process

• whether to establish one or more targets – and if so, of what type and how

• how targets fit in with other environmental management activities

• to what extent the plan features market mechanisms such as internal carbon price and/or and external carbon offsets

• how to use research and development resources and other means to drive innovation.

Once targets are established, they can drive innovation within the company, spurring internal programs and products that can help the company meet its goals. Sometimes the mere existence of emissions or energy use data generates interest and ideas for improvements that turn out to be profitable on their own.

Goals and Targets

A growing number of companies have voluntarily adopted climate-related targets. The type of target an individual company chooses depends on its products and production methods, policy environment, and business models. Some targets focus on reducing greenhouse gases, and others on energy use. Some serve as absolute limits, and others are relative to production levels and revenues. Goals and targets can also apply to supply chain purchases or use of company products.

Nearly 300 companies have set a greenhouse gas emission reduction target “in line with climate science.” More than 100 have set goals to be powered by 100 percent renewable energy. Other companies, such as Microsoft, are adopting operational carbon neutrality goals.  Some companies purchase carbon offsets from projects such as reduced deforestation to help achieve their emission goals more cost-effectively.

Companies have found that addressing climate also makes good business sense. Greenhouse gas targets have helped them save money, generally through improvements in energy and operational efficiency. They have also seen reduced production costs and enhanced product sales, making them more competitive.

Companies have also found these internal policies help prepare them for future regulation by investing in emissions reductions now. They’ve also protected and enhanced their reputation with customers and shareholders.

Internal Carbon Pricing

One business strategy gaining traction among leading businesses is internal carbon pricing, which assigns a price to carbon emissions attributable to the business. More than 1,200 companies worldwide are either pursuing internal carbon pricing or preparing to do so in the coming two years—up 23 percent from 2015.

Companies that establish a corporate carbon price assign a monetary value to CO2 emissions associated with a business activity. This price signal is factored into investment decisions, providing an incentive for the company to move from emissions-intensive programs and products to low-carbon, climate-resilient alternatives.

Nearly 300 companies have set a greenhouse gas emission reduction target in line with climate science. More than 100 have set goals to be powered by 100 percent renewable energy.

Energy Efficiency

Improved energy efficiency has emerged as a key component of corporate climate change strategies. Companies participating in the global EP 100 initiative pledge to double their energy productivity (dollar of output per unit of energy), which has the potential to save more than $2 trillion globally by 2030.

Leading firms that give greater attention to energy efficiency report billions of dollars in savings and millions of tons of avoided greenhouse gas emissions. Efficiency strategies can encompass internal operations, supply chains, products and services, and cross-cutting issues.

Companies that take on carbon footprinting and reduction strategies quickly come to see their energy use in a whole new light. When companies calculate their carbon footprint, they typically find that their energy consumption accounts for the great majority of their directly measurable emissions impact. Suddenly, energy shifts from perhaps a small cost item to the biggest piece of their carbon footprint. Viewed from this perspective, energy efficiency becomes a sustainability imperative.

Corporate energy efficiency strategies are most effective when:

• Efficiency is an integral part of corporate strategic planning and risk assessment;

• leadership and organizational support are real and sustained;

• the company has SMART (specific, measurable, accountable, realistic, and time-bound) energy efficiency goals;

• the strategy relies on a robust tracking and measurement system;

• the organization puts substantial resources into efficiency;

• the energy efficiency strategy shows results; and

• the company effectively communicates efficiency results internally and externally.

Innovative Finance

Companies are also employing a wide range of innovative financial tools to achieve their climate and energy goals:

• Energy producers and utilities often offer their customers on-bill financing, which allows a homeowner or commercial building owner to invest in energy efficiency improvements, with payments added on to their utility bills. This removes the high upfront costs of efficiency improvements, and encourages building owners to work directly with utilities on efficiency projects.

• Large energy buyers also participate in green pricing programs (also known as green tariffs). U.S. utilities that offer these programs allow eligible customers to buy energy at a premium from a renewable project directly operated by the utility, or by issuing a renewable energy certificate (REC) from a renewable project. This allows businesses to use sources like wind, solar, low-impact hydro, biomass, landfill gas, and geothermal.

• Some companies and banks are tapping into the rise in investor demand to finance environmentally sound projects by issuing green bonds or sustainability bonds. Green bonds act as a vehicle for institutional investors seeking to put their capital in projects that address climate change, and help drive innovation and development of low-carbon products. Like conventional bonds, green bonds can be issued by a corporate, bank, or government entity. The debt insurance by investors means that the companies do not need to tap into their limited credit lines or cash reserves to fund renewable or energy efficiency projects. While green bonds help support projects with a positive environmental impact, sustainability bonds work like green bonds, but also focus on the social impact.

Originally published on C2ES (n.d.). You can read more here.