A green future will remain out of reach if the world does not help developing countries close a $2-trillion gap in investment towards an energy transition, the UN Conference on Trade and Development warned.
A new UNCTAD report said developing countries actually face a staggering $4-trillion gap in sustainable development investments.
UNCTAD Secretary-General Rebeca Grynspan said a “significant increase” in material support for renewable energy in developing countries was “crucial” for the world to reach its climate goals by 2030.
While investment in renewables has nearly tripled since the adoption of the Paris Agreement almost eight years ago, poorer nations have been largely left out.
Grynspan said over 30 developing countries had not registered a single international investment in utility-size renewable energy generation since the landmark climate change treaty was adopted in 2015.
According to UNCTAD, the amount of foreign direct investment in clean energy attracted by developing countries in 2022 stood at $544 billion–well below needs.
But the report has some good news—energy companies among the top 100 multinationals have been increasingly turning towards renewables and divesting fossil fuel assets at a rate of about $15 billion a year.
However, the report also shows an overall slower pace of investment in renewable energy in 2022 “as international project finance deals declined.”
In developing countries, the largest gaps in Sustainable Development Goal (SDGs)-related investments were in energy, water and transport infrastructure, UNCTAD said.
Foreign direct investment (FDI) is also on the decline, according to UNCTAD, as global flows fell 22 percent in 2022 to $1.3 trillion. In Least Developed Countries, the vast majority of which are in Africa, FDI inflows dropped by as much as 16 percent.
The UNCTAD report attributed the slowdown to“overlapping crises”—the war in Ukraine, high food and energy prices and debt pressures.
With these factors are still in play during 2023, the agency said it expects “downward pressure on global FDI” to continue this year.
The report called for a series of policies and financing mechanisms to be put in place to help developing countries attract the necessary investments.
UNCTAD stressed the importance of debt relief for developing economies to provide them with the fiscal space needed for clean energy spending and to help lower country risk ratings, a prerequisite for attracting private investment.
The agency also recommended reducing the cost of capital for clean energy investment through partnerships between international investors, the public sector and multilateral financial institutions—a measure that can reduce the spread on borrowing costs for energy investment projects in developing countries by up to 40 per cent.
Grynspan said investment played a “huge part” in achieving the SDGs. She said they were simply “too big to fail,” calling them “the only game in town,” which requires collective action and global solidarity. UN News