?? Towards Sustainable Financing in Emerging Markets

In 2022, cascading economic shocks and overlapping crises, such as the situation in Ukraine, high food and energy prices, and mounting debt pressures, fueled global investment concerns. These challenges created fears of a recession and financial market turbulence, affecting international investment flows. Rising commodity and service prices, along with uncertainty, influenced #investor decisions worldwide.

However, emerging markets, such as #Africa, recorded the greatest decline in #FDI. Despite its abundant natural resources, young population, and rapidly expanding consumer markets, Africa, which is fast becoming a destination for an increasing number of international investors, saw a sharp fall in the value of FDIs in the continent in 2022, according to UNCTAD World Investment Report 2023 https://bit.ly/46t6HRc

While greenfield projects increased by 39% to 766, with Africa hosting six of the top 15 greenfield investment projects, international project finance deals targeting developing nations such as Africa decreased by 47% in value, according to the report.

With the exception of a few African countries, which recorded a rise in FDI, the report showed that Africa saw a significant decline in the value of FDI inflow. In North Africa, Egypt saw FDI more than double to $11 billion, driven by cross-border merger and acquisition (M&A) sales, while West African economic giant Nigeria saw FDI flows turn negative to -$187 million as a result of equity divestments. While FDI flows to Ghana fell by 39%, in East Africa, flows to Ethiopia fell by 14%, while flows to Uganda grew by 39%.

Developing nations such as Africa require renewable energy investments of almost $1.7 trillion per year to accomplish the Sustainable Development Goals (SDGs) by 2030, but only received $544 billion in clean energy FDI in 2022, according to the report. The report noted that although global investments in renewables have nearly tripled since 2015, the majority of the money has gone to industrialised countries.

Investment needs are much higher in developing economies than in developed economies, relative to their existing asset bases. In developing countries, energy investment is needed not only for the transition but also to ensure access to sustainable and affordable energy for all. Installed capacity in renewable energy needs to increase by a factor of 2.5 in the most advanced economies, but by a factor closer to 25 in LDCs.

But how can investments support a future that is good for people and the planet, especially for developing countries? As governments and investment stakeholders from around the world gather in Abu Dhabi this week for the #WorldInvestmentForum 2023, there is reason to be optimistic that the discussions and conversations at the forum will bring solutions to the investment challenges faced by the world's developing countries amid today's global crises.

?In his opening statement at the forum, United Nations Secretary-General António Guterres urged participants to “work towards delivering $500 billion in annual investment for developing countries.

?As the forum enters its second day, let us hope for new ideas and conversations that will spark action, release additional finances, and generate urgent support for large investments in Africa and other poor countries.

#WIF2023 #SustainableFinance #GlobalBusiness