Developing nations face $4tn investment gap

A new report by the United Nations Conference on Trade and Development (UNCTAD) revealed that developing countries are grappling with an annual investment deficit of $4 trillion in their pursuit of the Sustainable Development Goals (SDGs). The deficit has surged from $2.5 trillion since the adoption of the SDGs in Paris in 2015, raising concerns about achieving these crucial global targets.

UNCTAD’s World Investment Report 2023 expressed deep concern regarding the insufficient investment levels. The report highlighted that approximately $1.7 trillion is required annually for renewable energy projects in 31 developing countries. However, in 2022, these countries were only able to attract $544 billion in investment. This significant gap between the required funds and the actual investments received poses a major challenge for these nations in meeting their renewable energy goals and transitioning to sustainable power sources.

Rebeca Grynspan, the Secretary-General of UNCTAD, emphasised the urgency of increasing investment in sustainable energy systems in developing countries to achieve global climate goals by 2030.

The report identified energy, water, and transport infrastructure as the areas with the largest investment gaps. The reasons behind these gaps are attributed to both underinvestment and additional needs.

UNCTAD’s report called for immediate action, suggesting various priority measures ranging from financing mechanisms to investment policies. The current global environment for international business and cross-border investment was described as challenging, with geopolitical tensions and recent financial sector turbulence adding to investor uncertainty. The report expects downward pressure on global foreign direct investment to persist throughout 2023.

While investments in renewable energy have shown growth since 2015, the majority of funding has flowed to developed countries. To address this disparity, the report stressed the need to provide immediate support to developing countries to attract a more substantial amount of investment for their clean energy transition.

UNCTAD underscored that the investment deficit was primarily driven by factors such as the Ukraine-Russia war and mounting debt pressures. The report emphasised the necessity for collective efforts from global stakeholders to establish an enabling environment and mobilise the required resources, facilitating sustainable and inclusive development aligned with the 2030 agenda.

Furthermore, UNCTAD highlighted the importance of debt relief to provide fiscal space for developing countries to make the necessary investments in clean energy transition.