Foreign investment significantly contributes to sustainable development, but not all countries, segments of the populations, and regions benefit. Globally, over 10 million new jobs were created from greenfield FDI over the years 2019-2023 – 6.1 million in developing and emerging economies. Many of these jobs are for women: the share of female workers in foreign firms is 9% higher than in their domestic peers on average. However, most of these jobs are in low-skilled positions. Furthermore, the job-creation intensity of FDI is declining, with potential adverse long-term impacts on the crucial role of FDI in providing jobs and incomes. Foreign investment is shifting to sectors such as renewables, semi-conductors, and ICT, activities with lower job creation potential yet crucial for the green and digital transitions. Swift policy intervention is needed to reap the benefits of FDI for both people and the planet. This includes orienting technical and financial support to the right activities and population and rapidly adapting the workforce to emerging skills in demand by MNEs.

Many developing countries use targeted tax incentives to enhance sustainable development. According to the OECD Investment Tax Incentives Database, over a third of the almost 500 incentives covered can be linked to advancing the Sustainable Development Goals (SDGs). Among the 52 developing economies covered, 46 offer at least one incentive tied to the SDGs and nearly half (48%) provide incentives focused on the environmental sustainability of investments, while 40% utilise tax incentives to bolster employment and facilitate job creation. Yet, the effectiveness of such support is often not assessed. Regular evaluation is essential to avoid wasteful tax expenditures and inefficient use of public resources.

Our recent survey shows that sustainable development considerations are important for IPAs when setting their priorities. Most (87%) OECD IPAs use indicators linked to job creation and skills to prioritise investment attraction, and about 50% use indicators related to decarbonisation. IPAs also engage in policy advocacy by transmitting business concerns to policymakers, including with respect to operating more sustainably.