UNCTAD’s World Investment Report 2023 reveals a widening annual investment deficit that developing countries face as they work to achieve the Sustainable Development Goals (SDGs) by 2030.
The gap is now about $4 trillion per year – up from $2.5 trillion in 2015 when the SDGs were adopted.
The report shows that global foreign direct investment (FDI) fell 12% in 2022 and analyses how investment policy and capital market trends impact investment in the SDGs, particularly in clean energy.
It highlights that developing countries need renewable energy investments of about $1.7 trillion each year but attracted only $544 billion in clean energy FDI in 2022.
Although investments in renewables have nearly tripled since 2015, most of the money has gone to developed countries.
The report calls for urgent support to developing countries to enable them to attract significantly more investment for their transition to clean energy.
It proposes a compact setting out priority actions, ranging from financing mechanisms to investment policies, to ensure sustainable energy for all.
After a strong rebound in 2021, global FDI fell by 12% in 2022 to $1.3 trillion, due mainly to overlapping global crises – the war in Ukraine, high food and energy prices, and soaring public debt.
The decline was felt mostly in developed economies, where FDI fell by 37% to $378 billion. But flows to developing countries grew by 4% – albeit unevenly, with a few large emerging countries attracting most of the investment while flows to the least developed countries declined.
On a positive note, greenfield investment project announcements were up 15% in 2022, growing in most regions and sectors.
Industries struggling with supply chain challenges, including electronics, semiconductors, automotive, and machinery, saw a surge in projects, while investment in digital economy sectors slowed.
International investment in renewable energy generation, including solar and wind, also continued to grow – but at a slower 8% than the 50% growth recorded in 2021. Notably, projects announced in battery manufacturing tripled to more than $100 billion in 2022.
The report also notes that major oil companies are gradually selling fossil fuel assets – at a rate of about $15 billion per year – mostly to unlisted private equity firms and smaller operators with lower disclosure requirements.
This calls for new dealmaking models to ensure responsible asset management.
