Search

Begin New Search Topic Investment Publication Year within 3 Years

81. The Implementation of Sustainability Taxonomies: The Case of South Africa

Author:
Sören Hilbrich, Kathrin Berensmann, Giovanna Artmann, Sam Ashman, and Theresa Herbold
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
In recent years, many jurisdictions have developed sustainability taxonomies that aim to increase transparency of financial markets and redirect capital flows to sustainable investments. Such sustainable finance policies can be important levers because today’s investments shape economic production processes for decades. This case study on South Africa’s Green Finance Taxonomy (GFT) addresses the question of what factors influence the adoption of sustainability taxonomies by potential users. It finds that one year after its publication, the GFT has hardly been used in practice. Important factors hindering an effective implementation are a lack of regulatory embedding, the absence of a legal recognition of the GFT by the European Union (EU), a hesitancy among financial market participants to build capacities to collect the necessary data, and fossil-fuel path dependencies in South Africa’s economy. These findings have important policy implications (e.g. regarding accompanying governance measures) for implementation processes in many countries in the coming years.
Topic:
Development, Economy, Capital Flows, Investment, and Sustainability
Political Geography:
Africa and South Africa

82. Are Global Value Chains for Sale? On Business-State Relations in the MENA Region

Author:
Nora Aboushady and Chahir Zaki
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
We use new data on political connections from the World Bank Enterprise Surveys to examine the impact of connections on firms’ participation in global value chains (GVCs) for six MENA countries (Morocco, Tunisia, Egypt, the West Bank and Gaza, Jordan, and Lebanon). In addition to political connections, we construct several measures of “political influence” based on available data on lobbying and grand corruption. We also explore whether political connections help firms overcome barriers to trade and investment and increase their participation in GVCs at the extensive and intensive margins. Our findings suggest that political connections do matter for firms’ GVC participation. The impact is more pronounced for firms that combine political connections with informal payments to influence policymaking. Our findings on the significance of trade and investment barriers for GVC participation for different categories of firms’ political influence are – however – inconclusive.
Topic:
Corruption, Development, Politics, World Bank, Business, Investment, Trade, and Global Value Chains
Political Geography:
Middle East, Palestine, Gaza, North Africa, Lebanon, Egypt, Jordan, Morocco, Tunisia, and West Bank

83. Implementation of the WTO Investment Facilitation for Development Agreement: Identification of Reform Needs and Development Policy Measures

Author:
Axel Berger, Ann Margret Bolmer, Florian Gitt, Zoryana Olekseyuk, and Marius Metz
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
More than 110 Members of the World Trade Organization (WTO), many of them developing countries and least-developed countries (LDCs), are negotiating a plurilateral Agreement on Investment Facilitation for Development (IFD). In contract to existing bilateral investment treaties that establish sweeping rules on investment protection and liberalisation, the IFD Agreement aims at increasing the transparency, predictability and efficiency of investment frameworks as well as improving inter-governmental coordination and international cooperation on investment matters. In view of the fact that WTO Members aim at concluding the negotiations by mid-2023, discussions are under way on how the IFD Agreement can successfully be implemented in developing countries, and LDCs in particular. The IFD Agreement includes a comprehensive section on Special and Differential Treatment, which grants developing countries and LDCs longer timeframes as well as technical assistance and capacity development to support implementation. The Agreement also foresees so-called needs assessments at the country level to evaluate countries’ readiness and support needs to implement the IFD Agreement. While such needs assessments have been extensively used in the context of the WTO Trade Facilitation Agreement (TFA), we lack insights into how such needs assessments can be operationalised in the context of investment facilitation and what kind of imple¬mentation challenges are prevalent, in particular in LDCs. To assess implementation gaps, barriers to successful implementation as well as national and international support actions, we conducted pilot needs assessments covering a selected group of IFD Agreement measures with a broad range of stakeholders in three LDCs, namely Lao People’s Democratic Republic (Lao PDR), Togo and Zambia. Our pilots indicate that 13 selected provisions of the IFD Agreement have not been sufficiently implemented across the three LDCs. In particular, 64 per cent of analysed provisions have only partially been implement, while the rest have not been implemented at all. These findings underline that, in order to benefit from the IFD Agreement, LDCs need substantial implementation support from the international community. The most striking, commonly identified barriers hindering the full implementation are lack of cooperation and coordination among investment-competent agencies, poor information management for investors as well as limited digitalisation and automatisation. To overcome these barriers, nationally identified actions may focus mainly on the creation of a single information portal for foreign investors and a single-window system to improve authorisation procedures, as well as a clarification of mandates and functions of relevant ministries and institutions. Our research also underlines the importance of a whole-of-government and multi-stakeholder approach. The establishment of a National Investment Facilitation Committee may prove to be an effective instrument to ensure coordination and communication between involved stakeholders. International support should complement national actions with technical assistance and capacity development in investment-related topics, improving information and communication technology (ICT) infrastructures and digitalised processes, as well as fostering the international exchange of best practices. Our pilot needs assessments emphasise that the WTO Secretariat and the negotiating Members should strengthen outreach activities to promote knowledge about the WTO IFD Agreement among national-level stakeholders. In general, our pilots underline that needs assessments are an important instrument for identifying persistent implementation gaps and tailoring technical assistance and capacity development to the demands of Members, especially LDCs.
Topic:
Development, Reform, Investment, WTO, and Development Policy
Political Geography:
Global Focus

84. Trade and Climate Change: How to Design Better Climate-Related Provisions in Preferential Trade Agreements

Author:
Clara Brandi, Kateryna Holzer, Jean-Frédéric Morin, Harro van Asselt, and Katherina Weber
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
To bring our economies on a path to climate neutrality, investments in carbon-intensive production processes have to stop. At the same time, we need to mobilise large amounts of capital for investments conducive to a just transition. Reforming the financial sector in a way that allows this redirection of capital flows to take place is crucial. As one element of a comprehensive sustainable finance strategy, taxonomies can potentially play a pivotal role in this regard. By providing common definitions for sustainable economic activities, these taxonomies aim to increase transparency on financial markets and help market participants to align their investment decisions with sustainability considerations. This policy brief presents policy recommendations concerning the implementation of sustainable finance taxonomies based on experiences with the South African Green Finance Taxonomy (GFT). It mainly builds on data collected in semi-structured expert interviews with different stakeholders of the GFT conducted in South Africa between February and April 2023 (Hilbrich et al., 2023). The implementation phase of the GFT has revealed multiple challenges, including a need for improved regulatory embedding and enhanced capacities on the part of potential users. This has led to a low uptake by market participants.
Topic:
Climate Change, Environment, Investment, Trade, Fossil Fuels, and Preferential Trade Agreements
Political Geography:
Global Focus

85. Trade and Investment Cooperation between South Korea and the Visegrad Group

Author:
Grzegorz Mazur
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The Visegrad group (V4) is a political alliance of four countries of Central Europe - the Czech Republic, Hungary, Poland and Slovakia, reaching its roots to the beginning of the 1990s, when the countries started reforming their political and economic systems from centrally planned to democratic free market economies. The coalition - consisting of countries with similar historical experience, transformation challenges and level of socio-economic development - aimed at regional co-operation and mutual support on their strategic goal of full membership in the European Union (EU). The V4 countries are currently full members of the EU (since 2004) with dynamic and competitive economies. The four countries form a market of over 60 million consumers with a share of ca. 7.7% of the EU’s GDP (Table 1). Over last three decades V4 countries have experienced high economic growth, closing a development gap with highly developed countries of the EU. Their economies have opened up to the global trading system, changing directions (mostly towards other EU countries) and expanding volumes of their international trade. Liberalizing economies have become attractive destinations for FDIs due to their central location at the continent, well-educated society as well as restructuration and privatization of many economic sectors (Mazur, 2009). Joining the European Union in 2004, V4 countries became part of the European Single Market leading to various consequences for economic policy and business conditions. While membership in the EU brought new economic opportunities and enhanced the countries’ business attractiveness, it has also had relevant consequences for their trade co-operation with third countries. The V4 states adopted all rights and commitments from the EU’s Common Trade Policy and have since been developing their trade and economic co-operation with third countries, including the Republic of Korea, commonly with other EU partners and exclusively at the EU level.
Topic:
Economics, Investment, Trade, Visegrad Group, and Cooperation
Political Geography:
Asia, South Korea, and Central Europe

86. Scaling Investment in Renewable Energy Generation to Achieve Sustainable Development Goals 7 (Affordable and Clean Energy) and 13 (Climate Action) and the Paris Agreement: Roadblocks and Drivers

Author:
Mithatcan Aydos, Perrine Toledano, Martin Dietrich Brauch, Ladan Mehranvar, and Theodoros Iliopolous
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
The zero-carbon energy transition is the solution to the 2022 energy crisis and a fundamental part of the solution to the global climate crisis. Yet, there are relatively low levels of investment in renewable energy in developing countries, hindering their achievement of the Sustainable Development Goals (SDGs) and contribution to the Paris Agreement goals. In 2021, the Asia–Pacific region (excluding China) accounted for less than 8% of investments in energy transition technologies, Latin America and the Caribbean for less than 4%, and Africa and the Middle East for less than 2%. Annual investment in zero-carbon energy in developing economies other than China has stagnated since the Paris Agreement was signed in 2015. To put the world on track to reach net-zero emissions by 2050, annual capital spending on zero-carbon energy in developing countries must increase by more than seven times, to more than USD 1 trillion, by the end of the 2020s. There is therefore an urgent need to address the drivers of public and private finance for investment in renewable electricity generation, network infrastructure, and enduse sectors to meet the Paris Agreement and two complementary SDGs: ensuring access to affordable, reliable, sustainable, and modern energy for all (SDG 7); and taking urgent action to combat climate change and its impacts (SDG 13). This report sheds light on roadblocks to scaling up investments in renewables while distilling solutions from international experience and brings clarity to where international and national efforts should urgently be focused to address the deterrents of investment in renewables and enable zero-carbon energy security and prosperity.
Topic:
Climate Change, Investment, Renewable Energy, Carbon Emissions, Paris Agreement, Energy Transition, and Net Zero
Political Geography:
Global Focus

87. Finance For Zero: Redefining Financial-Sector Action to Achieve Global Climate Goals

Author:
Lisa Sachs, Nora Mardirossian, and Perrine Toledano
Publication Date:
06-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
As of 2023, the financial system is woefully misaligned with the world’s climate goals. Six times the current annual level of investment in non-fossil fuel investments is needed between 2023 and 2030 to stay on a 1.5ºC warming pathway.1 The ratio of clean-energy lending and equity underwriting by banks relative to fossil fuels needs to reach 4 to 1 by 2030, whereas for 1,142 assessed banks, the ratio was between 0.8 and 1 at the end of 2021.2 As providers, underwriters, and fiduciaries of trillions of dollars of capital flows annually, financial institutions (FIs) play a critical role in decarbonizing the economy and scaling access to clean, affordable energy. Optimally, the roles and opportunities for the financial sector should be guided by an official pathway and associated policy tools, such as carbon pricing, public finance and guarantees, strategic subsidies, sectoral regulations, and so on. Unfortunately, that policy framework to shape and guide the financial sector does not yet exist. In the absence of strong government leadership, there has been a proliferation of bottomup models, tools, metrics, methodologies, and initiatives designed to measure and evaluate the climate performance of financial institutions. While the rapid growth of these initiatives demonstrates the financial sector’s engagement, meaningful progress in realigning global finance to support climate goals has been limited. These frameworks and tools often overstate or misrepresent the extent to which they support meaningful action toward achieving climate goals, and at times rely on misaligned targets or metrics that undermine their effectiveness as tools for setting or assessing corporate commitments. Overall, existing commitments and strategies are not sufficiently aligned with the actions needed from financial sector actors to achieve climate goals. There are deep and inherent limitations to bottom-up approaches to achieving decarbonization, some that are within the capability of financial institutions to address but many that are beyond their remit. This report focuses on the things the financial sector can and should do even in the absence of a robust long-term policy framework. Part 1 of this report urges FIs and their alliances to be clear in their commitments, pledges, and communications about their climate-related objectives and corresponding strategies, their limitations, if any, and how they measure success. Current climate-related pledges, alliances, frameworks, and tools at times confuse or conflate risk mitigation with climate action, relying on targets and metrics that may not be fit for purpose. Whether intentionally or unintentionally, FIs and their alliances can misrepresent or overstate the effectiveness of their approaches in contributing to climate action. This misrepresentation can be exacerbated by the use of misleading metrics or strategies, such as selling or legally spinning off high-emitting assets or using offsets in net-zero pathways. FIs should communicate clearly and accurately about their climate-related pledges and commitments, including whether their goal is to contribute to climate action or to mitigate their own financial risk and how their business strategies will be aligned to achieve those goals. FIs should ensure that targets, metrics, and methodologies are aligned with their goals and business strategies and do not misrepresent the effectiveness of their strategies. FIs’ commitments and strategies are shaped by their financial interests and their interpretation of their fiduciary and other legal duties and obligations; because of perceived tensions between legal obligations and certain climate-oriented strategies, FIs and their alliances should provide clear, public explanations of how their interpreted fiduciary and other legal duties shape their climate-related strategies. Part 2 of this report proposes how financial institutions can and should contribute to, and not undermine, climate goals, under current policy conditions. While many of these actions are relevant for a risk-mitigating approach for FIs and their alliances, these recommendations go beyond risk mitigation in order to guide those FIs and their beneficiaries that seek to have real climate impact.
Topic:
Climate Change, Investment, Sustainability, Financial Institutions, and Financial Systems
Political Geography:
Global Focus

88. Provisions on Liability for Decommissioning Upstream Offshore Oil and Gas Infrastructure in Investor-State Contracts

Author:
Martin Dietrich Brauch, Juan Carlos Fernández-Rodríguez, and María José Roa
Publication Date:
08-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
•Decommissioning upstream offshore oil and gas operations involves dismantling infrastructure and equipment and mitigating their environmental impacts when the oil or gas resource becomes depleted or economically unviable. Stricter climate policy and the energy transition away from fossil fuels are likely to accelerate decommissioning processes.  • Domestic statutes, decrees, and regulations that apply to the oil and gas industry are ideally suited for governing decommissioning liability. In principle, these instruments are not subject to negotiation with private entities, reducing their leverage in setting decommissioning obligations, in particular those related to environmental and financial matters. • Oil and gas contracts between the host state and private oil and gas companies may include decommissioning provisions, whether to govern the issue comprehensively where statutory or regulatory frameworks are silent on the issue or to complement them.  • Where statutory and regulatory frameworks are insufficient, contracts should include provisions governing decommissioning as an integral stage occurring at the end of the project (and not as a post-project activity), factoring in the health, environmental, safety, and financial risks it entails throughout the project’s life cycle. • As part of an analysis commissioned by the Institute for Energy Economics and Financial Analysis (IEEFA), this paper examines contractual provisions related to decommissioning or abandonment of offshore oil and gas extraction infrastructure from various jurisdictions for which contracts are available on ResourceContracts.org. • Not every contract includes decommissioning provisions or requires the oil and gas company to develop a decommissioning plan; across contracts that do, the scope of provisions varies significantly. Certain contracts refer to a standard to be applied in decommissioning activities, with varying stringency levels. While some contracts refer to industry best practices, not all of them define what they entail. Not all contracts contain environmental protection and rehabilitation obligations specific to decommissioning.  • Certain contracts require approval and oversight by a state agency to ensure that the oil and gas company prepares and submits an appropriate decommissioning plan and that the decommissioning process takes place as set out in the applicable statutes and regulations, the contract, and the plan itself. The effectiveness of these mechanisms depends on the rigor and regularity with which the government assesses and inspects decommissioning plans and processes.  Where feasible, climate concerns should be added to standard environmental warranties. Contracts could restate environmental and climate-related requirements as forward-looking warranties made by the company to remove any ambiguity about its obligations and the consequences of failing to meet them. • To avoid a scenario where the government must cover decommissioning costs in case of noncompliance by the oil and gas company with its decommissioning obligations, contracts should create a dedicated decommissioning fund, with sufficient money to cover all decommissioning (including expected post-decommissioning) costs, and:  o Require the oil and gas company to fully prefund the decommissioning fund as part of capital and operating expenditures, with contributions assured by the ultimate parent company and beginning before project construction. Determine that funds be set aside in an escrow account dedicated to decommissioning in an independent private banking institution and in the form of a specific financial instrument that guarantees decommissioning without freezing the oil and gas company’s funds to develop the project.  o Require the company to meet the full costs of decommissioning if the offshore extraction infrastructure is transferred to third parties or if the fund is insufficient, extending the liability to the ultimate parent company whenever possible. o Require the parties to renegotiate as needed to adjust decommissioning activities or increase or decrease their costs. o Provide for tax deductibility and cost recoverability of fund contributions, to promote companies’ compliance with their obligation to contribute to the fund.  • Contracts should outline objective conditions for the release of decommissioning liability, along with any subsisting obligations that the oil company and its ultimate parent company retain in perpetuity after decommissioning or after the sale or transfer of the upstream asset. • Contracts should not include non-fiscal stabilization provisions, to ensure that states can enforce any new or amended statutes or regulations governing decommissioning liability, without having to compensate oil and gas companies that are party to pre-existing contracts.
Topic:
Climate Change, Infrastructure, Investment, Sustainability, and Contracts
Political Geography:
Global Focus

89. Effective Shareholder Engagement to Address the Food Sector’s SDG-Related Impacts in Mexico

Author:
Nora Mardirossian
Publication Date:
11-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Globally, there is growing investor engagement on environmental and social issues. Over 550 financial institutions participate in net zero alliances,1 the largest-ever number of ESG-related resolutions was filed in 2023 (over 500),2 and global sustainable fund assets hit nearly $2.8 trillion at the end of June 2023.3 Corporate sustainability reporting standards and regulations – many of which are international, have extraterritorial reach, or cover global value chains – have proliferated and are reinforcing the larger trend. Traditional investing has historically focused on mitigating financial risk without being cognizant of other important external risks. Sustainable investing takes a wider view that is explicitly interested in sustainability issues, but some approaches are more progressive than others. Some sustainability or ESG investment efforts focus on sustainability impacts only to the extent they are linked to or overlap with financial materiality. Some large institutional investors, particularly those considered to be universal owners, express an understanding that system-level issues like climate change, biodiversity loss, and inequality present risks to the entire economic system, and thus to their entire portfolios.4 Some mainstream investors have acknowledged they have a responsibility to manage severe environmental and social risks, in line with international standards.5 Other smaller and philanthropic funds use an impact investing strategy that focuses more on driving sustainability impacts, with a less explicit focus on returns.6 Rather than investment decision making (i.e., deciding what to invest in either by screening or excluding companies or entire sectors that are seen as high risk or by targeting investments in areas that have some kind of positive sustainability potential through impact investing), this report focuses on the more effective strategy for public equity investors to influence companies’ SDG-related impacts: active ownership through shareholder engagement and advancing and voting on resolutions.7 Through active ownership, investors use their leverage to influence the conduct and decision-making of the firms they own, to avoid sustainability and human rights risks or to capitalize on sustainability and human rights opportunities. This report considers how active investors can best exercise their leverage in the particular context of Mexico’s food sector. Although active ownership efforts have grown globally, they remain limited in Mexico and other emerging markets. Investors have an opportunity to do more to help address critical SDG-related issues in these contexts through their active ownership efforts. By doing so, they can be more responsible in ensuring respect for human rights, protecting shared systems, and supporting their long-term financial interests. Importantly, they can also ensure they comply with – and support their portfolio companies in complying with – emerging legal frameworks requiring reporting and due diligence on the impacts of their global value chains, including in Mexico.8 This report summarizes key opportunities and barriers facing investors who wish to more actively drive positive SDG outcomes in Mexico’s food sector through shareholder engagement. First, this report discusses the food sector-related SDG challenges globally and then those that are most important in Mexico. It identifies influential companies investors can engage with and surveys benchmarks on those companies’ SDG disclosure. Next, the report provides an overview of the status of and legal context for sustainable investing in Mexico. Then, it considers the extent and nature of investor influence over companies in Mexico. Based on this analysis, the report concludes by providing recommendations for investors on influencing portfolio food sector companies’ management of their SDG-related impacts in Mexico. The recommendations draw upon existing standards and guidance that bear on the roles and responsibilities of investors. This report’s primary aim is to provide guidance to Mexican and foreign institutional investors who can use their shareholdings to engage with food sector companies with a footprint in Mexico. Other stakeholders may also find this report valuable, including those interested in opportunities for the financial sector to advance the SDG-alignment in the Mexican food sector or any sector in any comparable emerging market.
Topic:
Markets, Food Security, Sustainable Development Goals, Investment, Sustainability, and Shareholder Value
Political Geography:
North America and Mexico

90. COSCO in Piraeus: Investment Embeddedness and the Question of Chinese 'influence'

Author:
Konstantinos Tsimonis and Andrew J. Nathan
Publication Date:
12-2023
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
Professor Tsimonis will present his research around the landmark investment of China Ocean Shipping Company (COSCO) in the port of Piraeus and discuss its political, social, economic and environmental repercussions. The speaker will approach COSCO's investment as an embedded phenomenon and unpack the agency of local, regional and global actors in order to assess the question of 'Chinese influence'. This talk will introduce to the Weatherhead audience the context of Chinese activities and policies in Greece. The speaker will also discuss the challenge and the necessity for developing independent China expertise in countries with no China studies tradition, as a way to mitigate the political risks arising from the PRC's global economic outreach.
Topic:
Infrastructure, Economy, Investment, and Foreign Influence
Political Geography:
China, Greece, and Asia