Foreign investment shrank sharply across the world last year because of “a cascading crisis of health, climate change and economic shocks causing investor uncertainty”, said trade body Unctad in its World Investment Report released this month. Investment in renewable energy, needed to get us to
net-zero carbon by 2050, was particularly under pressure.
The
“polycrisis” challenge has fallen particularly hard on the world’s developing economies, whose poorly developed capital markets force them to rely on foreign investment flows for around three-quarters of their energy investment needs.
In the report, UN Secretary General Antonio Guterres gave special priority to energy investment, noting that the number of people living without electricity rose last year for the first time in decades. The International Energy Agency puts the number at nearly 775 million. “It is beyond time to democratise access to safe, reliable, affordable energy sources for all people, everywhere,” said Guterres.
Noting a 12 per cent fall in foreign direct investment (FDI) to US$1.3 trillion last year, the World Investment Report reaffirmed that investment in energy infrastructure was a problem of
particular concern. It flagged a massive US$4 trillion annual investment shortfall across the UN’s sustainable development goal sectors, up from the US$2.5 trillion gap in 2015. The renewables transition accounted for around half of this shortfall.
Even though renewable energy investment has nearly tripled since 2015 (remaining ahead of new investment in fossil fuels), most of it was focused on rich economies and a small, select group of developing economies led by Brazil, Vietnam, Chile and India. Over 30 developing economies failed to attract even a single significant international investment in renewable power generation, Guterres said.
The report noted that to meet the
Paris climate goals, installed solar power needs to be lifted fivefold to 5,221GW by 2030, wind power almost fourfold to 3,337GW and renewable power threefold to 10,772GW – with a total price tag of around US$5.7 trillion a year. This will involve an annual US$338 billion for solar power (against actual investment last year of US$170 billion) and US$413 billion for wind (against US$249 billion last year). Despite a need for over US$1 trillion a year for renewables investment, actual investment last year amounted to just US$471 billion.
