This paper focuses on the actual and potential role of foreign direct investment (FDI) in achieving the transition to a low-carbon, just and sustainable world and, more specifically, FDI flows into developing countries.
The particular implications of FDI on the environment – both potentially positive and negative – have given rise to an interest in the concept of “green FDI”. In short, “green FDI” can be thought of as FDI that advances progress on environmental and climate goals, protection and resilience, and avoids negative impacts on the environment or climate. But beyond that broad notion, there is no clear agreement about what “green FDI” actually is or should be. Various public and private sector actors have taken steps to define green FDI, calculate present flows and stocks, and assess funding gaps that must be filled in order to meet the challenges as defined in the Sustainabe Developmet Goals, the Paris Climate Agreement, and other environmental treaties and initiatives.
There is reason to be hopeful about the potential contributions of green FDI; but real progress requires a more accurate and robust definition of “green FDI”, and stronger commitments across different layers of government and by private sector actors to ensure FDI helps address modern environmental challenges. This paper attempts to aid the effort by taking stock of where we are and highlighting potential ways forward.