2021: The International Race To Invest

The month of Spotify Wrapped playlists and melancholic reminiscing about the days that flew by is here! It is only fair that as we approach the new year, we take stock of past decisions. One way to go about it is having a run-down of global investments trends and pioneering efforts of investors in 2021.

From a general perspective, this year things took a turn for the better for the global economy; the World Economic Forum projects a growth of 5.9%! Recovery for developing nations compared to developed nations could be more likely as growth projections show a relatively higher percentage for the former (7.2% for Asian developing countries while for advanced economies growth could be 5.2%). Even though investors are still skeptical, the overall investment trends are quite positive, especially because of long-term financing options becoming more favourable. Greenfield investment projects have gone down but FDIs in general have increased to more than $420 billion in developed and developing countries.

Investments In Healthcare

Investments in the healthcare sector this year have obviously been done keeping in mind the catastrophic incidents of the previous year - online medical schools. You’d be surprised to know that along with the above stated reason, a pandemic called Covid-19 was also a key factor in finally restructuring our healthcare systems. Turns out, there is nothing quite like an apocalyptic scare to get our governments working for the people.

By now, you must be familiar with Moderna, Pfizer, Astrazeneca and Janssen - you probably were jabbed with one of those. For obvious reasons, vaccines topped the priority list in 2021. Combating a fast-spreading virus and the stubborn investment sector became quite a task for governments. The returns in vaccine development have been very poor, mostly because of the scale and the low success rate of trials. This is where governments stepped up by providing funding to private developers. Since then, research and development of a Covid-19 vaccine has become a sort of race between governments and between private organizations.

Leading the game were high-income countries like the US and Germany who were the top investors in vaccine R&D. The US directed the majority of their funding towards development of Janssen and Moderna. India offered a Rs.900 crore grant in 2020 but reports show that none of it was received by the makers of the nation’s two top vaccines - Covishield and Covaxin.

Vaccine developments aside, vaccination drives around the world kicked off in 2021. In the most populated countries of China and India, these vaccination drives were looking to cover more than a billion people each. As of October 20, 2021, India announced that they have administered 1 billion Covid-19 vaccines.

Being prepared for another pandemic without our healthcare infrastructure crumbling, also has become a concern. This is where CEPI comes in. CEPI (Coalition for Epidemic Preparedness Innovations), a joint partnership of governments and NGOs that was launched in 2017, received majority of its funding from the UK, Germany and Norway. Along with giving £16 million to CEPI, the UK launched the Pandemic Preparedness Partnership mid-2021 with the aim to reduce the time it takes to make the vaccines by 200 days. Due to new Covid-19 variants popping up like weeds in a flower field every week, a global interest in developing a universal vaccine spread. The highly funded CEPI, spent $20.6 million to advance clinical trials conducted by Gritstone bio for second-generation vaccines.

Investments in Renewable Infrastructure

According to the most recent report by UNCTAD, the strongest growth was seen in the renewable energy sector due to increase in investments in such projects. The picture is not entirely rosy though, as there was a decline in investments to other projects relating to the SDGs. As for what governments plan to do and what they have actually done in 2021, the US Congress recently passed an ambitious bill regarding the same.

In November of 2021, President Biden signed the Bipartisan Infrastructure Deal, which has significant reforms for the renewable energy sector. While only on paper for now, with this deal the government plans to invest $7.5 billion into a network of electric chargers around the nation. This promotes and encourages more investments into the sector by private entities and will also help them accomplish the global goal of net-zero emissions by 2050, as discussed in COP26.

The Deal has also allocated most of the funds ($9.5 billion) for renewable fuels to the research and development of hydrogen. Wind energy secured $100 million and solar energy grabbed $80 million. But seeing as the lobbying against such bills has littered US political history, one can only hope they follow through with it.

As for India, renewable energy investments have gone up after the nation faced an increase in fuel prices due to its overwhelming dependence on oil imports. In early 2021, investments reached $6.6 billion, showing signs of recovery from the pandemic’s effects. The government even allocated $486 million in funds to the adoption of electric buses in all of its cities. An analysis by RMI estimates that this would reduce carbon emission by 1.2 million tons, and save the economy $493 million worth of oil imports. By the end of this year, more than 5,500 electric buses will be wheeling around the country, a sweet opening for what is to come.

An interesting recent development between India and the UK - the Green Grids Initiative discussed in the COP26, saw a strong backing by 80 countries for a future where electric grids around the world are linked. Another global initiative, one that is quite the topic of debate, would be BRI.

The enormous Belt and Road Initiative (BRI) launched by China in 2013, doesn’t only involve itself with highways, but also has many other projects under its figurative belt. Meant to connect and develop the Asian, African and Latin American regions, BRI’s success in 2021 is yet to be seen. In fact, low and middle-income countries that are part of the initiative have even cancelled projects worth billions after growing distrust of China’s intentions. A Saferworld report shows that the same BRI projects that increased local employment and contributed to economic growth, gave rise to internal conflicts within the nations of Uganda (regarding the Karuma hydropower dam) and Kyrgyzstan.

Keeping world-domination politics aside, BRI projects faced major setbacks in 2020 due to the pandemic too. China brought down its investments by $47 billion and went deeply in debt. Moreover, BRI’s reputation took a hit when US led G7 came out with the B3W which not only widened the infrastructure market for investors but posed a better, greener alternative to BRI.

BRI is not all bad, in fact it's vital for the countries lying alongside it that depend on infrastructure investments to boost their economy. OECD saw BRI as a solution to Asia’s investment shortfall, but it also leaves many countries vulnerable to debt distress.

Tech Investments And The Future

The latest tech bug that has bitten the world is Artificial Intelligence. Tech investments in AI boomed during the pandemic, and became a priority objective for many governments to invest in. McKinsey’s research on the impact of AI on the world economy showed that if this technology is adopted and absorbed in the right way, growth in GDP would increase by 1.2% every year! Not many countries are ready for such changes though. AI tech needs adequate infrastructure otherwise it could lead to wastage in millions.

For most of us, 2021 was the year we entered the real, physical world again. From video-conferences, online classrooms, online shopping and online ceremonies, we’ve entered a space where almost everything is half virtual and half physical; the hybrid way. Unbeknownst to us, this has also put a strain on the environment because of the upkeep backend units running AI take. So do we have to make a trade-off between conserving the environment and upgrading technology? Well, it's a no-brainer that to reduce our carbon footprint, we need to upgrade our current technology to more efficient systems.

The investment trends for clean tech companies have recently picked up. Forbes’ analysis on these investments point to software centric companies and start-ups being the only viable clean tech companies. Interestingly, investment management companies like BlackRock have made efforts to encourage their portfolio companies to become cleaner. Greed, for profit or just out of the goodness of their heart, investors directing their money towards a better outcome for this planet, is the best way to commence the new 2022.