Ukraine, high food and energy prices, debt: Global FDI fell 12% in 2022 due to multiple crises

Overlapping global crises like the war in Ukraine, high food and energy prices and debt pressures slashed foreign direct investment (FDI) flows in 2022, the United Nations trade and development body UNCTAD’s World Investment Report 2023 has shown.

The report, released on July 5, 2023, noted that global FDI fell 12 per cent in 2022 to $1.3 trillion. The decline was felt mostly in developed economies, where FDI fell by 37 per cent to $378 billion.

But flows to developing countries grew by four per cent. But this growth was uneven, a statement by UNCTAD said. A few large emerging countries attracted most of the investment while flows to the least developed countries declined.

The report also analysed how investment policy and capital market trends impact investment in the UN-mandated Sustainable Development Goals (SDG), particularly in clean energy.

International investment in renewable energy generation, including solar and wind, continued to grow — but at a slower eight per cent than the 50 per cent growth recorded in 2021. Notably, projects announced in battery manufacturing tripled to more than $100 billion in 2022. 

The publication also noted 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.   

Although investments in renewables have nearly tripled since 2015, most of the money has gone to developed countries.

Developing countries need renewable energy investments of about $1.7 trillion each year but attracted only $544 billion in clean energy FDI in 2022, according to the UNCTAD analysis.

The report shows that more than 30 developing countries still haven’t registered a large international investment project in renewables.

The analysis called for urgent support to developing countries to enable them to attract significantly more investment for their transition to clean energy. It proposed a compact setting out priority actions, ranging from financing mechanisms to investment policies, to ensure sustainable energy for all.