Chapter I: Global Investment Trends and Prospects

Global foreign direct investment (FDI) flows in 2021 increased to $1.58 trillion, up 64% from 2020. (p. 2)
However, the global investment environment has changed dramatically in 2022 with the war in Ukraine, the negative effects of China’s zero Covid policies, and significant rises in inflation globally. (pp. 2-3)
These changes are likely to cause investor uncertainty and interest rate increases, leading to lower global FDI in 2022. Early indicators from early 2022 appear to confirm this trend. (pp. 2-4)

FDI flows in 2021 recovered strongly in all regions, with the increase in flows to developed economies accounting for most of the growth. (p. 7, Figure I.5, Table II.3) FDI in most developed economies increased, largely due to financial flows from corporate restructurings, mergers and acquisitions (M&A), and strong fluctuations in conduit FDI. (p. 8)
The United States was by far the largest recipient of FDI, followed by China, Hong Kong, Singapore, and Canada. (p. 9, Figure I.7)

In 2021, FDI to developing economies increased by 30 percent from 2020, due to strong growth in developing Asia, recovery in Latin America and the Caribbean, and an upswing in Africa. (p. 11)
Developing Asia is the largest recipient region of FDI in the world, accounting for 40 percent of global inflows. (p. 13)
In 2022, FDI trends to developed economies are uncertain, while FDI flows to developing economies will likely endure strong negative effects due to the impact of the war in Ukraine and rising interest rates. (p. 12)
2021 FDI outflows from developed economies rose to US$1.3 trillion from US$408 billion a year earlier. The United States, Germany, Japan, China, and the United Kingdom were the top five sources of outbound FDI. (pp. 20-21, Figure I.14)

In 2021, cross-border M&A transactions, announced greenfield projects, and project finance deals all increased in value and in number, though recovery of greenfield projects was more moderate and stagnant with respect to developing countries. (p. 22)
2021 international project finance activity grew by 68 percent over 2020 levels to 2,115 projects, driven by investments in renewable energy. The value of projects rose above US$1 trillion for the first time ever. (pp. 23-24)
Cross-border M&A hit US$728 billion in 2021, up 53% compared to 2020. In services, cross-border M&A doubled to US$461 billion. (p. 25)

Investment in SDG-related sectors increased by 70 percent in 2021 compared to 2020, driven mostly by project finance investments in renewable energy. (p. 26)
Climate change investments fall into two categories: mitigation investments into cleaner or more energy efficient technologies, and adaptation investments directed to improve resilience and adapt to the consequences of climate change. Mitigation projects, largely renewable energy and energy efficient projects, comprise 95 percent of international climate investments. (pp. 33-34)

International production gained strength in 2021, with all indicators of FDI rising, and with FDI stock reaching US$45 trillion, or almost half of global GDP. (p. 39, Table I.16)

2021 saw increased internationalization of the world’s top 100 MNEs, mostly related to sales, due to high demand in specific sectors like healthcare and construction materials. (p. 40)
Digital MNEs need little investment in physical assets to do business across borders. From 2016 to 2021, sales of UNCTAD’s top 100 digital MNEs grew five times faster than sales of traditional MNEs. (pp. 42-43, Table I.18)

Only the most dynamic and productive small- and medium-sized enterprises (SMEs) invest abroad, and, even so, SME investment activity has declined from 880 projects in 2015 to only 195 in 2021. (p. 47)