Investment to tackle climate change falls amid global crises

Crossborder investment in climate change mitigation and adaptation is projected to decline in 2022 against the backdrop of a global investment downturn, according to a new report published by the UN Conference on Trade and Development (UNCTAD).

Citing a bleak outlook for global foreign direct investment (FDI) in 2022, the report re

leased in the lead-up to the UN climate change conference COP27 shows the number of new investment projects falling across most industries, notably those tackling climate change.

Between January and September 2022, climate mitigation and adaptation sectors had, respectively, 7 per cent and 12 per cent fewer new projects announced, in stark contrast to the previous year’s strong acceleration.

Mitigation projects accounted for 94 per cent of international

climate investments, whereas adaptation ones continued to lag far behind.

Most mitigation investments are in renewable energy and, to a lesser extent, in various energy efficiency projects.

Overall, developed economies made up two thirds of interna

tional project finance deals and greenfield investments in renewables.

Europe alone accounted for more than half of renewables’ projects, with more than 700 in the first three quarters of 2022.

North America and developing Asia attracted about 200 projects each, while Latin Amer

ica and the Caribbean and Africa had about 150 and 100 respectively.

The report found that new investment project announcements – an indicator of forward trends – weakened in the first three quarters of 2022, while

pointing to the ongoing tightening financial conditions and higher investor uncertainty.

The number of greenfield project announcements – mostly in manufacturing – dropped by 10 per cent, whereas that of international project finance deals – mostly in infrastructure – stagnated at the 2021 level. In both cases, monthly numbers show a downward trend.

The biggest declines in new investment projects were registered in developed economies and in Latin America and Central Asia.

According to the report, project numbers fell across most industries, with a few exceptions, notably in extractives and petrochemicals.

In terms of value, greenfield projects still experienced growth, due to a few large announcements concentrated in electricity and gas supply.