International private sector investment flows to developing and transition economies in sectors relevant for the sustainable development goals (SDGs) are on course to fall by about one third in 2020 because of the COVID-19 pandemic. In the first three quarters of the year, the value of newly announced greenfield investments shrunk by 40% and that of international project finance (used for large infrastructure projects requiring multiple investors) by 15%.
Except for renewable energy, where growth in new projects continued but was cut to one third of the pre-COVID level, investment activity fell sharply across all SDG sectors. In infrastructure and infrastructure industries (including utilities and telecom) international project finance announcements were 62% lower in value. Greenfield project values across food and agriculture, water and sanitation, health and education were all one to two thirds lower than in 2019 (table 1).
The decline in SDG-relevant investment was much larger in developing and transition economies than in developed countries. This in contrast with the impact of the pandemic on overall foreign direct investment (FDI), where a 21% decline in developing and transition economies in the first half of 2020 was overshadowed by a 75% drop in developed countries. In the latter group, gains in investment in renewable energy and digital infrastructure are a first sign of the asymmetric effect that public support packages in developed countries will have on global SDG investment trends.
This paper highlights the private sector involvement in investments to ease national fiscal constraints and to enhance efficiency in the provision of key services.