Going Green: The Power of Green FDI

Green FDI in emerging markets are extremely important. We all know that they're important because they're FDI and FDI bring GDP contribution, job creation, transfer of knowledge, productivity improvements.

They're also important because they're green and emerging markets need the private capital to reach their climate ambitions.

Green FDI has tripled in the past seven years and we see even sectors where they take a big share of the FDI.

We look at automotive, electric vehicles take up to 70% of the total FDI in automotive.

We look at energy renewables, take up to 80% of the total FDI in the sector, but this is clearly not enough.

We need more green FDI to flow into more sectors, agriculture, infrastructure, and others.

We need green FDI to flow into more emerging markets.

Emerging markets have been the least contributing to climate change at least per capita, but the most affected by it.

So coming out of COP 27, the real question is not why, but how.

And this is what we wanted to spend time on. We found three main vectors to increase green FDI.

The first is to agree on a global and objective definition of what green FDI is.

This will increase the global collaboration, will reduce the greenwashing and combat the greenwashing.

And third, will bring analytical rigor to the global conversation.

Second, we need to reduce the risk of doing business, especially for investors in emerging markets, to do that multilateral development banks, development financial institutions, have a big role to play, and they need to revamp their operating model and fix the balance sheet so that they can scale the funding and be able to blend, to provide blended finance to the investors and reduce their risk of doing business.

And third, host countries will need to set themselves up for success.

They will need to set their ambition for climate and the path forward to achieving it.

They will need to go through a fundamental reform journey.

They will need to tailor their offering, their capability, and their value proposition for green FDI.