Sustainable impact – how foreign direct investments (FDI) contribute to achieve the sustainable development goals (SDGs)

Suehrer, Juri (2021) Sustainable impact – how foreign direct investments (FDI) contribute to achieve the sustainable development goals (SDGs). Doctoral thesis, Northumbria University.

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Abstract

This thesis explores the investment opportunities related to the Sustainable Development Goals 2030 (SDGs) and, at the same time, addresses the lack of academic research on the role of Foreign Direct Investment (FDI) in achieving the sustainable development agenda by the United Nations. The thesis hereby provides a significant contribution to academic research as well as to professional practice.

Currently, research and analysis conducted on the role of FDI in achieving the SDGs have so far focused on either a specific sector or a certain country or region. The SDGs are, however, a global agenda and all 17 Sustainable Development Goals are closely interlinked. Additionally, the professional world, as well as multilateral organizations, are unable to provide ideas and solutions on how to create tangible investment opportunities arising from the SDGs. This study closely examines why there seem to be substantial obstacles in channelling FDI into SDG investment projects. This study also takes the SDG performance measurement aspect into consideration by looking at the expected return of SDG investment projects and how to determine and measure sustainable economic, environmental, and social impact. As a case study, this research further explores government intervention to promote SDG-relevant projects and encourages thought leadership to achieve sustainable impact.

For the data collection, this study applies an inductive research strategy to especially observe patterns while conducting a semi-structured interview approach, where templates have been developed by the most significant factors within this research topic. Outcomes from the research interviews are nurtured from an interpretivist theoretical perspective. The research participants of this study were put into public and private sector groups. As the topic of this research project is relatively current, the study lays a heavy focus on academic journals as well as publications and reports from multilateral and international organizations due to the limited literature that exists. The urgency of this research topic is eminent, as many organizations are seeking ways to implement the SDGs in their strategic planning processes while investors are also looking for opportunities to deploy capital into SDG investment projects. The impact perspective is hereby especially important, as it takes into consideration non monetary returns on investments. Finally, the study explores the approaches of how to bridge the SDG funding gap through FDI and the necessary practical steps to accelerate the progress on the SDGs considering its 2030 finish line.

n terms of academic contribution, this study finds that current investment policies and regulatory obstacles constitute major barriers to achieving the SDGs. The study finds further that the SDGs are often considered a pure branding tool. Multilateral organizations are unable to develop policy frameworks that allow investment promotion agencies to create and profile investment opportunities. Further, the study reveals, how responsibilities on implementing and reporting on the SDGs are being pushed back-and-forth between different entities as no clarity exists on the responsibility of SDG selection, implementation, and reporting. The study, therefore, recommends the creation of an overarching Impact Investment Framework, which allows the cascading of SDG investment opportunities at country levels while measuring investment needs and SDG contribution at the same time. The study also developed fundamental principles that are necessary to implement this framework successfully.

From a practical contribution standpoint, this study offers an overview and comparison of the existing SDG reporting measures and finds that the SDGs have two major shortcomings for foreign investors. From an investment attraction and promotion perspective, the majority of the Least Developed Countries, which the SDGs target, are unable to promote themselves to foreign investors, due to political instability, lack of governance and political institutions as well as corruption. On the other hand, the investors are also unable to identify SDG investment opportunities, The study, therefore, recommends the development of a global SDG investment policy, which constitutes a binding agreement that defines the responsibilities for SDG selection and implementation as well as determines the actual funding needs and FDI opportunities as a baseline for investors to tap into the SDGs. Additionally, the study also recommends the development of a global SDG Investment Project Platform, a globally binding certification standard for SDG investors as well as the implementation of a tendering process, where countries and location can present their SDG investment opportunities and investors can pitch for such projects. This study also finds that countries must establish governance structures that allow adequate investment promotion of their FDI locations.

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