Developing countries face $4trn investment gap in SDGs – UN

The UN Conference on Trade and Development (UNCTAD) on Wednesday warned that a green future would remain out of reach if the world doesn’t help developing countries close a two-trillion-dollar gap in investment toward an energy transition.


According to a new UNCTAD report, developing countries actually face a staggering four trillion dollar gap in sustainable development investments.


The UNCTAD Secretary-General, Rebeca Grynspan, said that a significant increase in material support for renewable energy in developing countries was crucial for the world to reach its climate goals by 2030, the News Agency of Nigeria reports.


While investment in renewables has nearly tripled since the adoption of the Paris Agreement almost eight years ago, poorer nations have been largely left out.


Grynspan said more than 30 developing countries had not registered a single international investment in utility-size renewable energy generation since the landmark climate change treaty was adopted in 2015.


According to UNCTAD, the amount of foreign direct investment in clean energy attracted by developing countries in 2022 stands at 544 billion dollars — well below needs.


Some good news from the report is that energy companies among the top 100 multinationals have been increasingly turning toward renewables and divesting fossil fuel assets at about 15 billion dollars per year.


However, the report shows an overall slower pace of investment in renewable energy in 2022, “as international project finance deals declined.”


In developing countries, the largest gaps in Sustainable Development Goal (SDGs)-related investments were in energy, water and transport infrastructure, UNCTAD said.


Foreign direct investment (FDI) is also on the decline, according to UNCTAD, as global flows fell by 22 per cent in 2022, to 1.3 trillion dollars, while in Least Developed Countries, the vast majority of which are in Africa, FDI inflows dropped by as much as 16 per cent.


UNCTAD’s report says that the slowdown was driven by “overlapping crises”: the war in Ukraine, high food and energy prices and debt pressures.


With these factors still in play during 2023, the agency said that it expects “downward pressure on global FDI” to continue this year.


The report calls for series of policies and financing mechanisms to be put in place to help developing countries attract necessary investments.


UNCTAD stressed the importance of debt relief for developing economies, to provide them with the fiscal space needed for clean energy spending and to help lower country risk ratings, a prerequisite for attracting private investment.


The agency also recommended reducing the cost of capital for clean energy investment through partnerships between international investors, the public sector and multilateral financial institutions – a measure that can reduce the spread on borrowing costs for energy investment projects in developing countries by up to 40 per cent.


Grynspan insisted that investment played a “huge part” in achieving the SDGs.


She said they were simply “too big to fail,” calling them “the only game in town” which requires collective action and global solidarity.


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