How Investment Promotion Agencies can help us reach the UN's Sustainable Development Goals

To invest and promote investment is to think about the future. Because of previous generations’ investments in the future, more people today have access to healthcare, education and decent work than ever before. Now, however, the delivery of the UN’s Sustainable Development Agenda is being threatened by climate change and inequalities which threaten to undo those gains.

Investment Promotion Agencies (IPAs), which serve as an intermediary between investors and government, can play a pivotal role in channelling investments in inclusive and sustainable economies that can unlock significant opportunities for shared prosperity.

This is particularly true when it comes to their role in attracting foreign direct investment (FDI), which IPAs can do in a manner that also pushes a country toward meeting the Sustainable Development Agenda.

FDI flows in 2021 stood at $1.58 trillion. The regular parameters that track FDI suggest that such inflows not only lead to capital generation but also job creation, knowledge transfer, innovation and inclusive growth. IPAs are contributing to the Sustainable Development Goals (SDGs) primarily by promoting economic growth and employment, the building of resilient infrastructure, supporting industrialisation and innovation and ensuring access to modern energy.

In 2021, SDG investment increased by 70% from 2020, with a combined value of greenfield investment and international project finance in SDG sectors valued at $371 billion in 2021. This momentum in international project finance highlights the emergence of risk-sharing arrangements between domestic capital, and enables governments that are actively participating to initiate such projects.

To this end, governments have liberalised their regulatory framework and are proactively targeting FDI in line with their national objectives. South Africa has provided cash grants of up to $3 million to cover the costs of retrofitting existing industrial facilities to use renewable energy through rooftop solar panels. The Netherlands has offered a partial deduction of tax against investment in environmental technology. Meanwhile, India had liberated renewable energy generation and distribution projects by allowing up to 100% FDI ownership. New Zealand’s IPA has an internal framework to assess the regional and sustainability impact of projects that aid in earmarking special assistance accordingly. Similarly, Invest in Denmark and Germany Trade and Invest have developed and implemented a sustainability evaluation tool.

UNIDO (United Nations Industrial Development Organization) and the World Bank monitor SDG 9.2.1: “Manufacturing value added as a proportion of GDP and per capita.” To this end, in 2021, the Government of India announced the Production-Linked Incentive (PLI) Schemes for 13 key sectors to create national manufacturing champions and generate employment opportunities for the country’s youth.

The minimum production spurred by PLI Schemes is expected to be over $500 billion in 5 years. This will improve the indicator score, which has already risen from 13.5% in 2000 to 15.5% in 2019. Similarly, the credit growth to industry accelerated to 13.6% year-on-year from 3.3% in October 2021. Size-wise, credit growth to micro and small industries rose by 20.4% year-on-year. This work is improving the India’s performance on SDG 9.3.2, which examines the proportion of small-scale industries with a loan or line of credit. Commercial bank branches per 100,000 adults — monitored by UN SDG indicator SDG 8.10.1 — in India were reported at 14.74 branches in 2020 by the World Bank.

The COVID-19-induced lockdowns were a wake-up call to the need for stronger statistical and ICT foundations. IPAs have been digitising their services and exploring new opportunities for operations and outward-facing activities. Invest India, the national IPA of India, launched the India Investment Grid (IIG) which provides an online platform to support investment by showcasing opportunities and connecting potential investors to projects and key contacts. Similarly, the National Single Window System (NSWS) has been created as the single point of entry for foreign investors, accelerating and streamlining procedures. The portal is rapidly gaining traction with over 44,000 approvals being facilitated and more than 28,000 currently under process since its launch a year ago.

There are 231 unique indicators included in the global SDG database. This great variation means that some Goals, such as SDG 3 Good Health & Well-Being and SDG 7 Affordable and Clean Energy, have much more data available than others, such as SDG 13 Climate Action. Because of this variance, coordination within national data ecosystems is imperative for relaying and utilising the data needed for critical policy decisions.

SDG-themed investment is also an important investment strategy for institutional investors, responsible for managing over $126 trillion worth of capital globally. These investors — including sovereign wealth funds, pension funds, bank, insurance companies, endowments and more — want investment opportunities across the world that will maximise their returns and minimise risk.

IPAs can offer this to them, while also ensuring that investment in their respective countries is harnessed to work toward the UN’s SDGs and improving the lives of ordinary people.