The ‘Recognised Sustainable Investor’ (RSI) category is a mechanism that allows governments and firms to work together in a way that brings benefits to both. Governments want to ensure that foreign direct investment (FDI) is aligned with their development goals; firms want to be credited and recognised for good stewardship in their business operations, and also will gladly accept additional support, whether financial or non-financial.
The beauty of the mechanism lies in the fact that governments can work with firms to identify the specific development contribution that FDI is asked to make — for instance jobs, training or environmental protection — and so there is flexibility to tailor the RSI to the capacity of different firms to contribute in different ways.
The World Economic Forum (WEF) has worked with the Ghana Investment Promotion Centre on pioneering the RSI as part of a pilot project on facilitating sustainable FDI. As a result, the RSI was recently included in tax legislation. Ghana felt that it could better tailor and target its investment incentives this way. And now, there is a general shift across the world to what investment promotion agencies are calling ‘smart incentives’; the RSI represents a mechanism to deliver these.
There is an opportunity to work with both the public and private sectors to scale measures that facilitate sustainable investment. The aim is to address the mismatch in global capital flows: sustainability-focused finance increased by 80% in 2020 to $3.2tn; yet, over the same period, FDI fell by 35% globally.
To this end, the WEF is inviting governments, international organisations and firms to launch public–private projects that Enable Action on Sustainable Investment (Easi). Easi projects will create a mechanism to combine finance mobilisation and policy reform, thereby helping get capital flowing to where it is most needed in developing countries and emerging markets.
Matthew Stephenson is a policy and community lead for International Trade and Investment at the World Economic Forum
This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.