Linking FDI and Sustainable Environment in EU Countries

Abstract

The aim of this study is to emphasize the link between the foreign direct investments (FDIs) and the sustainable environment in EU countries. We also focus on investigating the influence of other factors related to business environment on FDIs, considering the investors’ sustainable choice for the host countries, grouped according to FTSE Russell criteria. Using panel methodology and applying Ordinary Least Squares (OLS) method of data analysis, the authors reached the conclusion that a better-rated business environment, with concern for sustainability, has more of a chance to attract larger sums of FDIs, mostly in the case of developed economies. This fact proves that the main advantage considered by a foreign investor in developed EU countries is represented by CO2 emissions (sustainable environment) and a good ease of doing business environment. The study highlights the factors that influence the decision of investing in developed countries, rather than in emerging and frontier ones. This paper contributes to the existing literature by identifying the group of countries which need a more sustainable approach to attract a large amount of FDIs, given that the inflow of FDIs is a crucial factor of economic growth, a possible source of innovation and technology, and a way to reduce poverty.

Financial Development, Trade Openness, and Foreign Direct Investment: A Battle Between the Measures of Environmental Sustainability

“…Moreover, it allows the transfer of technologies, predominantly in the form of new capital diversities, which resultantly permits a country to invest in different R&D activities which ultimately promotes environmental sustainability. Findings are supported with past studies (Blanco et al, 2013;Fauzel, 2017;Jafri et al, 2021;Mukhtarov et al, 2021;Dornean et al, 2022).…”

“…First, we observe that ED and ES are two distinct dimensions of EQ, thus, to the best of our knowledge, the focus of most of the researchers remains on ED, and the area of ES remains less focused on by prior researchers (Ganda, 2019;Ahmed et al, 2020). Second, we figure out that researchers are wrongly interpreting the impact of different factors on ES, as their findings are based on the explicit measures of environment quality, i.e., CO 2 or GHG emissions, which is not an appropriate measure of ES, instead it is an indicator of environmental pollution (Ahmed et al, 2020;Gu et al, 2020a;Gu et al, 2020b;Ali et al, 2021;Zhao et al, 2021;Dornean et al, 2022). Third, though the study believes that some attempts have been made by several researchers to scrutinize the role of FD in ES by using an appropriate proxy of ES (i.e., adjusted net savings), these studies are rare.…”

Ecological Footprint, Economic Uncertainty and Foreign Direct Investment in South Africa: Evidence From Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Approach

“…Based on previous literature reviewed, the model of this study was structured to investigate the impact of economic uncertainty, ecological footprint and bio capacity on foreign direct investment in South Africa. This research model is based on the framework posited by Chipalkatti et al (2021) which also guided the research of Dornean et al (2021). Their model includes the impact of environmental, governance, and macroeconomic factors on FDI inflows.…”

“…Nonetheless, Paul and Feliciano-Cestero (2021) indicated that the impact of FDI inflows on economic growth in different countries varies based on the level of its financial development. Furthermore, environmental, governance, institutional and economic factors have been noted to influence FDI and its ability to positively or negatively affect the productivity and development in a country (Chipalkatti et al, 2021; Dornean et al, 2021; Nguyen, 2017).…”

“…FDI inflows that are environmentally conducive are more acceptable and encouraged by countries (Golub et al, 2011). In addition, Countries with sustainable environment and eco-friendly, clean production activities attract more inflows of FDI (Dornean et al, 2021).…”