Maya Chorengel on Impact Investing, Global Foreign Direct Investment Decline - UN Report 2024

The World Investment Report 2024, released by the UN Trade and Development (UNCTAD) body, highlights a significant decline in global foreign investment for the second consecutive year, driven by escalating geopolitical tensions.

This report underscores the urgent need for innovative financial strategies to counteract these economic downturns.

In this context, Maya Chorengel offers her expert perspective on building the impact investing industry. Chorengel emphasizes the critical role of impact investing in addressing global economic challenges and promoting sustainable development. Her insights provide a compelling case for how impact investing can serve as a resilient and transformative approach in an increasingly uncertain global landscape.

Disclaimer: the Newsletter Investors Board is not an investment advice. The sole purpose of its publication is informative.

Maya Chorengel on Building the Impact Investing Industry

Maya Chorengel , co-managing partner at The Rise Fund , discusses the evolution and current state of impact investing in an interview with Alexandra Nee at McKinsey’s Women in Private Equity Global Forum .

Key takeaways from their conversation:

1. Early Journey into Impact Investing: Maya Chorengel began her journey into impact investing about 13 years ago, leaving a career in private equity to explore using investment strategies to create positive social and environmental impact. Her early funds were relatively small, focused on emerging markets and venture-stage investments.
2. Formation of The Rise Fund: In 2017, Maya joined TPG to launch The The Rise Fund , now one of the largest impact investing platforms globally with $19 billion in assets under management (AUM). This marked a significant shift as one of the first private equity firms to enter the impact investing space at scale.
3. Sector Growth and Diversification: Since its inception, The Rise Fund has expanded beyond venture investments into growth equity, buyout equity, infrastructure, and public equity, with a strong emphasis on climate investing. This diversification reflects the maturation of the impact investing sector and its ability to attract institutional investors.
4. Financial Returns and Impact: Contrary to the misconception that impact investing sacrifices financial returns, Maya emphasizes that with rigorous investment underwriting and a clear impact methodology, it's possible to achieve full risk-adjusted financial returns while generating significant social and environmental benefits.
5. Sector Challenges and Opportunities: While climate investing has seen substantial growth due to clear regulatory and market drivers, social impact sectors such as education and healthcare face challenges in scaling due to their complexity and varying regional needs. There's a need for continued innovation and simplification of investment narratives in these areas.
6. ESG and DEI Considerations: Maya acknowledges the politicization of terms like ESG and impact investing but focuses on data-driven impact reporting and letting the work speak for itself. She underscores the importance of staying objective and grounded in evidence amid these challenges.
7. Advice for Women in Private Equity: Maya encourages women aiming for leadership roles in private equity and impact investing to cultivate strong peer networks, be authentic in their leadership styles, and challenge traditional norms that may not cater to diverse perspectives.

Maya Chorengel’s insights highlight the rapid evolution and growing opportunities within impact investing, while also addressing the complexities and misconceptions that continue to shape the sector's narrative. Her leadership at The Rise Fund exemplifies how private equity can drive both financial returns and positive societal impact on a global scale.

https://www.mckinsey.com/industries/private-capital/our-insights/maya-chorengel-on-building-the-impact-investing-industry

WORLD INVESTMENT REPORT 2024 - UN Trade and Development

Detailed Report on Global Foreign Direct Investment Trends from 2023

Introduction

The World Investment Report 2024 by UN Trade and Development (UNCTAD) reveals a nuanced perspective on global Foreign Direct Investment (FDI) trends in 2023, highlighting a decline to $1.3 trillion, down by 2% from the previous year. This report examines the underlying factors, regional disparities, sectoral impacts, and policy recommendations amidst economic slowdowns and geopolitical tensions.

Global FDI Overview

Global FDI flows totaled $1.3 trillion in 2023, marking a 2% decrease from 2022. However, excluding volatile investment flows from certain European conduit economies reveals a more significant decline exceeding 10%. This decline underscores the fragility of global investment dynamics amidst ongoing economic uncertainties.

Regional Breakdown

• Developed Economies

FDI inflows to developed economies increased by 9%, reaching $464 billion. This growth was driven by investments in technology and advanced manufacturing sectors, despite broader economic challenges.

• Developing Economies

In contrast, FDI flows to developing economies decreased by 7%, totaling $867 billion. This decline was uneven across regions, reflecting varying economic conditions and investment climates.

Impact on Sustainable Development Goals (SDGs)

The downturn in global FDI flows had a severe impact on sectors crucial for achieving the SDGs:

• Agrifood and Water: Investment in these sectors dropped by over 10%, significantly affecting efforts towards food security and sustainable water management.
• Renewable Energy: International project finance for renewable energy saw a sharp decline, hindering progress towards clean energy transitions.

Regional Insights

• Africa

FDI inflows to Africa declined by 3% to $53 billion, with notable decreases in North and Central Africa. Greenfield project announcements, including a notable green hydrogen project in Mauritania, provided some positive momentum amidst broader challenges.

• East Asia: Experienced a 9% decrease in FDI flows, influenced by reduced investments in major economies such as China.
• South-East Asia: Maintained stable FDI flows, supported by ongoing investments in manufacturing and infrastructure.
• South Asia: Saw a significant 37% decline in FDI, reflecting economic uncertainties in key markets like India.

Latin America and the Caribbean

Overall, the region experienced a marginal 1% decrease in FDI flows to $193 billion. While the number of greenfield investment announcements fell, increased investments in commodity sectors and renewable energy projects provided some resilience.

Sectoral Analysis

• Manufacturing: Investments in global value chain-intensive sectors such as automotive and electronics expanded in regions with strategic market access, although developing countries faced challenges in attracting similar investments.
• Infrastructure: International project finance, crucial for infrastructure development, declined by 26%, indicating substantial funding gaps in critical sectors.

Policy Recommendations

• Enhanced Investment Facilitation: Governments should prioritize creating transparent, streamlined business environments to attract FDI, particularly in sectors aligned with sustainable development goals.
• Digital Government Solutions: Scaling up digital government tools, including online single windows and information portals, can enhance administrative efficiency and transparency, thereby improving the investment climate.
• Sustainable Development Finance: Urgent policy actions are needed to bolster sustainable finance mechanisms, bridging investment gaps in sectors crucial for achieving the SDGs, such as renewable energy, agrifood systems, and water management.

Conclusion

Despite the challenges of 2023, modest growth in global FDI is anticipated for 2024, supported by improved financial conditions and ongoing investment facilitation efforts. Moving forward, concerted efforts are required from policymakers to align investment strategies with sustainable development objectives, fostering inclusive economic growth amidst evolving global economic dynamics.

This comprehensive report underscores the critical role of resilient and inclusive investment policies in navigating the complexities of the global economic landscape towards sustainable development and economic resilience

https://unctad.org/publication/world-investment-report-2024

https://youtu.be/OwrpyKlK1vw

https://youtu.be/KArJUAIu_1U

Decline in Global Foreign Direct Investment for Second Year as Geopolitical Tensions Rise, UN Trade Body Reports

Zooming in further on the report discussed in the above article - decline in global foreign investment

The article from UNCTAD's 2024 World Investment Report highlights several key points about global foreign direct investment (FDI) trends in 2023:

1. Overall Decline in FDI: Global FDI fell by 2% to $1.3 trillion in 2023. This decline is attributed to a combination of global economic slowdown and increasing geopolitical tensions.
2. Impact on Sustainable Development Goals (SDGs): The decrease in FDI also affected sectors crucial for achieving SDGs, such as agrifood systems, water, and sanitation. Investment in these sectors dropped significantly, impacting efforts to meet SDG targets by 2030.
3. Developing Countries Most Affected: Developing countries experienced the most significant impact from the decline in FDI. FDI flows to these nations decreased by 7% to $867 billion in 2023. This decline varied across regions, with some areas facing more severe drops than others.
4. Asian Economies and Greenfield Investments: Despite the overall decrease in FDI, developing economies in Asia saw a notable increase in greenfield investments. Greenfield investments, which involve establishing new operations or expanding existing facilities in foreign countries, rose by 44% in value and 22% in number of announcements. East and Southeast Asia remained the largest recipients of FDI globally, with China and its Hong Kong SAR leading in FDI stock.
5. Challenges in Financing and Sustainable Bonds: Financing conditions tightened in 2023, leading to a 26% drop in the number of FDI deals. Developing countries particularly struggled with financing for sustainable bonds, with marginal growth seen in these instruments.
6. Geopolitical Tensions and "Greenwashing" Concerns: The report noted that rising geopolitical tensions and concerns over "greenwashing" practices also contributed to the decline in FDI. "Greenwashing" refers to exaggerated or false claims about environmental responsibility in business practices.

Overall, while there were bright spots like increased greenfield investments in Asia, the general trend of declining FDI underscores broader economic challenges and the need for targeted policy measures to support sustainable development financing worldwide.

https://news.un.org/en/story/2024/06/1151276

Conclusion

The World Investment Report 2024 and insights from Maya Chorengel underscore the evolving landscape of global investment amidst challenging economic conditions and geopolitical tensions. The report reveals a 2% decline in global Foreign Direct Investment (FDI) to $1.3 trillion in 2023, reflecting broader uncertainties and regional disparities. Despite these challenges, there is cautious optimism for modest growth in 2024, bolstered by improved financial conditions and ongoing efforts in investment facilitation.

Maya Chorengel's perspective on impact investing highlights its pivotal role in driving positive social and environmental outcomes alongside financial returns. Her leadership at The Rise Fund exemplifies how impact investing can scale across sectors—from venture capital to infrastructure—contributing to sustainable development goals and resilience in the face of global uncertainties.

Moving forward, addressing barriers to sustainable finance, enhancing investment facilitation, and leveraging digital solutions will be crucial. These efforts are essential not only for attracting FDI but also for mobilizing funds towards sectors critical for sustainable development, such as renewable energy, agrifood systems, and infrastructure.

As nations navigate these complexities, collaboration between governments, private sectors, and international organizations remains paramount. This collaborative approach is vital for fostering a conducive global investment climate, driving equitable growth, and advancing towards a more sustainable future for all.

Disclaimer: the Newsletter Investors Board is not an investment advice. The sole purpose of its publication is informative.

Sources: mckinsey.com, unctad.org, news.un.org

The Rise Fund Private Equity Global Forum TPG UN Trade and Development (UNCTAD) 麦肯锡

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