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1 April, 2022updated 20 Apr 2022 09:25

Pandemic sees investment promotion agencies increase focus on ESG and sustainability

A report shows that IPAs have ramped up their ESG, sustainability, inclusivity and tech focuses during the Covid-19 pandemic.

By Sofia Karadima

The Covid-19 pandemic not only shook up both the global economy and the world of foreign direct investment (FDI), it also highlighted the critical role of investment promotion agencies (IPAs) in promoting national sustainable development, according to the Global IPA Perception Study 2022.

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The study, which was prepared by KPMG in partnership with the Annual Investment Meeting (AIM) Congress, was launched during the 2022 AIM event that took place in Dubai.

“Since investments are vital for sustainable development and job creation, it was imperative for governments to plan immediate, short-term and post-Covid revival measures for business and industrial recovery,” said Mohit Bhasin, global co-lead, economic growth, at KPMG International, and national lead for economic development advisory at KPMG in India, in the report. “Here, subnational, national and global IPAs played a critical role in retaining businesses, ensuring business survival and providing immediate handholding and aftercare to businesses in need.”

The study stresses how essential sustainable development is for IPAs, with areas of focus including environmental, social and governance (ESG), sustainability, inclusivity and technology use, among others.

All eyes on ESG

Embracing ESG has become a key part of an IPA’s agenda, with the study revealing that nearly 64% of IPAs assess the ESG impact of the investment proposals that they receive.

However, the report states that “while respondents have started measuring the ESG impact of the projects, [which is] a promising sign, targeted execution of these mandates and enforcement of these standards will ultimately define its success”.

Sustainability comes to the fore

The report also highlights that IPAs are heavily focusing on investment sustainability. It states that “sustainability, with regard to return on investments, green FDI and the quality of investments, is gaining traction around the world [due to] rising awareness [of the issue] and the emergence of alternate resources and investments”.

The majority of IPAs consider sustainability to be a major focus area. However, the level of importance varies depending on the region or country’s economic status.

The data shows that 69% of the respondents identified investment sustainability as a “very strong” or “strong" focus area. At the other end of the scale, 6% of IPAs do not consider sustainability to be an immediate priority.

A focus on inclusivity

Promoting inclusivity has become another key parameter for IPAs in the post-Covid landscape. More specifically, the report reveals that “the focus of the respondents is shifting towards inclusiveness [through] developing economies initiatives to promote diversity and inclusion, while the developed economies continue to build on the existing policies and framework".

Around 57% of the respondents stated that investment inclusivity is a “very strong” or “strong" focus area, comprising several factors including hiring an innovative talent base, supporting remote work and gender inclusivity.

However, 9% of respondents state that inclusivity is "less of a focus area" and 3% consider it not to be an immediate priority.

Social changes and awareness are among the drivers of the strong push towards inclusivity, according to the report.

Technology use rises in importance

Technology use is another significant area for IPAs, more so since the Covid-19 pandemic put so many restrictions on the physical world.

“From crisis comes opportunity, and IPAs have been instrumental in integrating technology with their regular operations to enhance investor relations and investment facilitation,” said Bhasin in the report.

Indeed, 80% of the respondents stated that they use technology in the investor tracking process of the investment life cycle and 77% leverage technology for investment engagement. The study reveals that 63% of the respondents have used technology in monitoring IPA performance, followed by location assessment (60%) and opportunity qualification (60%).

The report highlights that “technology adoption standards across the investment lifecycle remain strong [through] monitoring and evaluation, opportunity qualification and location assessment as potential areas for stronger digitisation”.

Technology use, digitalisation, inclusivity, sustainability and ESG are only some of the key areas for the IPAs, which have faced several challenges throughout the pandemic. However, the past two years have underlined the significant role IPAs play in the foreign investment ecosystem, as well as the importance of them being both agile and responsive when it comes to supporting the evolving needs of investors.

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