On November 10, 2014, Aniket Shah, Program Leader for SDSN’s Financing for Sustainable Development Initiative, presented at a discussion on Africa and Private Investments in Sustainable Development Goals at the New York office of United Nations Conference on Trade and Development (UNCTAD).

Shah’s presentation is available for download here.


Africa and Private Investments in Sustainable Development Goals

10th November from  1:15 to 2:45
Hosted by UNCTAD in DC2 (44th Street) room 1122

SPEAKERS

James Zhan is Director of the Investment and Enterprise Division at the United Nations Conference on Trade and Development (UNCTAD). Mr. Zhan is also team leader of the annual UNCTAD World Investment Report, and chief editor of the journal Transnational Corporations. Mr Zhan has 26 years of international and national experience in the areas of investment, trade, technology, enterprise development and business linkages. He has published over 80 articles and books on economic and legal issues

Aniket Shah has been seconded from Investec Asset Management to join SDSN from 2014-2015, where he is the Head of Financing for Sustainable Development Initiative. At Investec Asset Management, an international investment management firm based in South Africa and the UK, Aniket currently serves as an investment strategist. In this role, Aniket works with the world’s largest institutional investors, from both the public and private sectors, to develop long-term portfolio investment strategies with a focus on emerging markets and Africa.

Co-chaired by Chantal Line Carpentier, Ph.D. Chief, UNCTAD New York Office and Felix Dodds, Tellus Institute

Background Information

Background information on Investment in Sustainable Development briefing: This will focus on how to mobilize and channel investment into key Sustainable Development sectors in Africa and in light of the Intergovernmental Committee of Experts on Sustainable Development Financing.

For generations policy makers have sought to align the interests of the financial markets and society.

Nowhere is this tension more keenly and persistently felt than in the relentlessness of the capital markets to allocate capital to short term, unsustainable uses. Policy-makers need to plan for the long-term and tackle a range of environmental and social issues, such as poverty, climate change and human rights. As well as Nexus issues such as Water-Energy-Food.

Adopting the conventional definition of sustainable development and applying it to capital markets, sustainable capital markets would be: “capital markets that finance development that meets the need of the present, without compromising the ability of future generations to meet their own needs.”

Public policy makers have traditionally tended to focus on the flow of aid when considering traditional sustainable development issues.

However, private capital in the tens of trillions is allocated matters far more than how the tens of billions of dollars of official assistance get dispensed.

A primary failure of the capital markets in relation to sustainable development as one of misallocation of capital. This, in turn, is a result of global governments’ failure to properly internalize environmental and social costs into companies’ profit and loss statements. As a consequence, the capital markets do not incorporate companies’ full social and environmental costs. Indeed, until these market failures are corrected through government intervention of some kind, it would be irrational for investors to incorporate such costs since they do not affect financial figures and appear on the balance sheet or – therefore – affect companies’ profitability. This means that corporate cost of capital does not reflect the sustainability of the firm. The consequences of this are that many unsustainable companies have a lower cost of capital than they should and so are more likely to be commercially successful than their more sustainable competitors.

Trends in African investments

The 2014 World Investment Report reveals that after a decline in 2012, global foreign direct investment flows rose by 9 per cent in 2013, with growth expected to continue in the years to come. The Report offers a global action plan for galvanizing the role of businesses in achieving future sustainable development goals, and enhancing the private sector’s positive economic, social and environmental impacts.

FDI inflows to Africa rose by 4 per cent to $57 billion, driven by international and regional market-seeking and infrastructure investments. Expectations for sustained growth of an emerging middle class attracted FDI in consumer oriented industries, including food, IT, tourism, finance and retail.

The overall increase was driven by the Eastern and Southern African subregions, as others saw falling investments. In Southern Africa flows almost doubled to $13 billion, mainly due to record-high flows to South Africa and Mozambique. In East Africa, FDI increased by 15 per cent to $6.2 billion as a result of rising flows to Ethiopia and Kenya. FDI flows to North Africa decreased by 7 per cent to $15 billion. Central and West Africa saw inflows decline to $8 billion and $14 billion, respectively, in part due to political and security uncertainties.

Intra-African investments are increasing, led by South African, Kenyan, and Nigerian TNCs. Between 2009 and 2013, the share of announced cross border greenfield investment projects originating from within Africa increased to 18 per cent, from less than 10 per cent in the preceding period. For many smaller, often landlocked or non-oil-exporting countries in Africa, intraregional FDI is a significant source of foreign capital.