Sanyo Electric Company, whose products include solar energy systems, fuel cells and rechargeable batteries, recently announced a €150m investment to launch a new energy and ecology business in Europe in the next 18 months. The reason? Company directors think that Europe’s market for environmentally friendly products will “grow dramatically” in the next few years as a result of government regulation.

Hiromoto Sekino, chief operating officer of Sanyo’s International Business Group, has gone on the record to say that “strong regulations are a positive thing for us”, announcing the company’s ambition to become the number-one supplier of environmentally friendly products in Europe.

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According to Mr Sekino, the company already invests 43% of its R&D spending on energy and ecology-related products and expects this area of its business to generate around one-third of sales. “We plan to achieve European sales of €3.7bn by 2010,” he said.

Countries like Germany and Denmark, which force electricity companies to buy energy from renewable sources at a fixed price, have already seen significant increases in the market for renewable energy as a result of government buy-back programmes.

Consumer demand across Europe for environmentally friendly products is also opening new markets. Sanyo is investing more than €20m to boost production of rechargeable batteries at its facility near Budapest in Hungary. The new facilities will reach full scale production by September 2006.

Daniel Chudnovsky, Professor of International Business and Development Economics at the University of San Andrés in Argentina, argues that investments such as these are causing environmentalists to look again at the potential benefits of FDI. He says: “From being accused of investing in developing countries to take advantage of lax regulations, multinational companies are now increasingly considered as leaders in introducing good environmental management practices and in diffusing environmentally sound technologies.”

Prof Chudnovsky admits evidence in support of both arguments is hard to come by, but he says he has no doubt that many multinational companies “have the potential to be a more conducive agent for introducing environmentally sound technologies”.