Stephen Prendiville looks at how sustainability efforts to date are contributing to Ireland’s attractiveness to investors and how Ireland can continue to thrive in this area
The EY European Investment Monitor, published in May 2022, has demonstrated how Ireland’s sustainability credentials are helping to bolster our position among Europe’s most attractive FDI destinations.
Ireland has enshrined climate action law, holding itself to carbon budgets that include sectoral emissions ceilings and producing a climate action plan each year that sets a clear direction.
The stability this offers provides positive momentum for sustainability and climate action, which is a factor in Ireland being an attractive destination for investment. It shows that sustainability can and must be a value-led proposition.
Sustainability KPIs
According to the EU European Investment Monitor, Ireland rated extremely well when it comes to a range of key sustainability performance measures.
Eighty-eight percent of respondents said Ireland performs as well as, or better than, the European average for the presence of workforce and skills to facilitate sustainability projects. Eighty-six percent said the same for the availability of financing for sustainability projects and for regulation to support sustainable business practices. Ireland’s potential as a location to decarbonise the supply chain was rated as better or as good as the European average by 83 percent of respondents.
The presence of an ecosystem of innovative cleantech and sustainability businesses (82%), local consumers’ concern for sustainability and climate change (81%), and the proportion of renewables in the electricity supply chain (79%) were also rated as at least as good or better than the European average.
Government action
Sustainability also figured strongly when respondents were asked to name priority areas for Government action to maintain Ireland’s FDI attractiveness. Investment in the decarbonisation of Ireland’s energy system and measures to accelerate progress towards a net-zero economy were highlighted as key areas of policy focus.
Budget 2023 maintained a stable set of incentives, grants and other drivers for decarbonisation and positive change across the economy. The carbon tax was adjusted in line with prior commitments, and the overall result was stability in Budget 2023.
These findings should come as no surprise. Sustainability issues have been ascending the corporate agenda for many years. In many key areas, the corporate and investment worlds appear to be ahead of governments when it comes to actions to tackle climate change and other environmental, social and governance (ESG) issues.
At last year’s COP 26, it was highlighted that companies and governments must work collectively to advance climate action and decarbonisation at the scale demanded. While governments toil with difficult long term implications, businesses can move nimbly and take necessary action on much shorter timescales – which in turn will help governments take brave steps forward.
Foreign direct investment
From an FDI perspective, sustainability is likely to grow in importance in the coming years. FDI decision-makers will increasingly look at sustainability factors when choosing locations for new investments. And this will be driven by compelling business reasons.
The first of those will be companies’ own requirements to decarbonise. New regulations like the Corporate Sustainability Reporting Directive (CSRD) will see companies being held to account for their performance in relation to decarbonisation and other sustainability targets.
That will fundamentally change the equation when it comes to energy supply, for example. The availability of renewable energy will move from being a ‘nice to have’ to an absolute essential. Companies which have set 2030 as their target date for achieving net zero carbon will require electricity supplies generated exclusively from renewable sources well in advance of that date.
While Ireland is viewed quite favourably at present for the proportion of renewables in its electricity supply chain, that position can change very quickly. Massive investments are required to make the grid capable of carrying more than 80 percent renewables by 2030, especially while there are barriers to renewable energy developments which need to be removed or mitigated.
Rapid progress will be required in both of those areas if Ireland is to retain its attractiveness for inward investment.
Ireland leading the global community
While there is an opportunity for Ireland to be a significant part of the global climate action story, with the associated benefits to the Irish economy, there is no arbitrage opportunity when it comes to climate.
Ireland is and can continue to lead the global community as we move forward on our sustainability journey together. We have some natural strengths, including a stable economy, vibrant tech and innovation ecosystems and an educated workforce.
We are also a hub of global finance and technology companies accessing the European market. We can do more, and the European Business Attractiveness Index highlights that we are in a strong position to do so.
Stephen Prendiville is Head of Sustainability at EY Ireland