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Mainstreaming sustainable development into investment and financial decision-making

Mainstreaming sustainable development into investment and financial decision-making The success and credibility of a strategy for sustainable development depends on the extent to which key stakeholders act in accordance with it. For example, a strategy that emphasizes the promotion of renewable energy or energy efficiency is undermined if investments are made by private sector or public sector organizations in fossil fuel power plants. This means that key financial decisions have to be coherent with the NSDS, and that at the same time, the integration of sustainable development objectives into companies’ decision-making should be one of the key objectives of the NSDS. To achieve this, a number of different actors must be involved, notably: government departments, the private sector and financial institutions both in-country and overseas (see Box 9.9). Given the importance of foreign investment in developing countries, the situation is complicated by the need to address foreign-owned companies and the financial institutions that support them. Most corporate decisions on foreign direct investment (FDI) involve the participation of a financial institution – either directly through the provision of a loan to cover establishment costs, or indirectly through, for example, the provision of risk insurance. Local financial institutions, which in developing countries are increasingly foreign-owned, are also important sources of finance for productive enterprise.