Unctad sees foreign investments for climate-related projects down in ’22

FOREIGN investments intended for climate change mitigation and adaptation projects are expected to decline this year, according to the United Nations Conference on Trade and Development (Unctad).

In its latest Investment Trends Monitor, Unctad said climate change-related investments have already plunged in the first three quarters of the year compared to last year.

Global climate mitigation investments declined 7 percent in the January to September this year compared to the same period in 2021 while funding for adaptation projects contracted 12 percent.

“The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession. Expectations for the full year are for a marked slowdown,” Unctad said in its report.

The largest decline in mitigation investments were noted in low carbon transport which suffered a 25-percent contraction followed by other energy efficiency at a decline of 10 percent and renewable energy, a contraction of five percent.

For adaptation investments, Unctad data showed financing for water management projects declined 19 percent and other adaptation measures, 6 percent.

Overall, Unctad said developed economies made up two thirds of international project finance deals and greenfield investments in renewables.

North America and developing Asia attracted about 200 projects each, while Latin America and the Caribbean and Africa had about 150 and 100, respectively.

International Finance deals on climate-change related projects in Southeast Asia contracted 13 percent to only 38 project deals compared to 58 in 2021 and 47 in 2020.

“The shift from fossil-fuel to green investments to support the energy transition risks a setback, due to the loss of momentum in renewables and high oil and gas prices,” the report said.

For now, the downward trend in investment is also affecting extractive industries and fossil-fuel-based energy generation, where project numbers dipped by about 16 percent in the first three quarters of 2022.

But the report warns that high profits of multinationals in these sectors, combined with the current energy crisis, could lead to a renewed push for investments in fossil-fuel based energy, whose production exacerbates climate change.

An early indication of that is the value of cross-border mergers and acquisitions in the extractive industry, which rose sixfold between January and September 2022.

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