Global foreign direct investments (FDI) dipped by eight per cent in 2024. This dip in FDI endangers the progress on the Sustainable Development Goals (SDGs) that rely on international project finance, according to the latest Global Investment Trends Monitor.
This assessment was released by United Nations Trade and Development (UNCTAD) on January 20, 2025.
International project finance, a key driver for infrastructure and energy investments, faced challenges, with the number of deals falling by 26 per cent and their value declining by nearly a third.
International project finance deals in developed economies witnessed a dip by 29 per cent, continuing the downward trend observed in 2023. This decline was widespread across all industries and countries with very few exceptions.
In developing economies, international project finance dropped by 23 per cent in number and 33 per cent in value, mainly due to fewer deal announcements in Asia. Several large emerging markets, including Brazil, China, India, Indonesia and Mexico experienced declines in project numbers significantly larger than the global average.
International project finance, especially critical for infrastructure development, continued the decline that started in 2023 due to high interest rates. Deals fell by 31 per cent in number and 26 per cent in value.
International project finance in renewable energy, a major driver of growth in project finance in recent years, further slowed by 16 per cent in both number and value, following the decline in 2023.
By region, international project finance in renewable energy generation fell by 22 per cent in North America, 18 per cent in developing Asia, and 14 per cent in Latin America and the Caribbean. Africa was the only region to see an increase of eight per cent.
The global investment environment remains challenging for sectors critical to achieving the SDGs in developing countries, which rely especially on international project finance.
The number of SDG-related investments fell by 11 per cent in 2024.
While there has been some growth in renewable energy and health and education, three sectors – infrastructure, agrifood systems, and water and sanitation saw fewer internationally financed projects in 2024 than in 2015, when the SDGs were adopted.
Looking to 2025, moderate FDI growth is expected, supported by improved financing conditions. However, risks and uncertainties including geopolitical tensions and global economic instability pose significant challenges.
The continued decline in international project finance underscores the need for robust, diversified strategies to attract and sustain investment, especially in sectors critical for sustainable development. For both developed and developing economies, the stakes are high as they navigate this complex landscape.