Report: The Impact of Foreign Acquisitions on Swedish Firms’ Carbon Emissions and Energy Use
Swedish firms have lower carbon and energy intensities in their production after foreign acquisition, according to this report from the National Board of Trade Sweden. This finding is stronger for more carbon- and energy-intensive firms. With this in mind, there is hardly ground for environmental considerations to be used to limit foreign direct investments.
Erik Merkus, what is this report about?
We studied the potential effect of foreign acquisition of Swedish firms on environmental outcomes. More specifically, we looked at carbon emission and energy use before and after the foreign acquisition of Swedish firms.
Why has the National Board of Trade analysed this question?
Reports on the effects of foreign acquisition on firms have predominantly focused on economic outcomes such as productivity and employment. As environmental considerations are much less frequently assessed, this report aims to fill that gap. Foreign direct investment (FDI) can play a large role in the green transition, by, for instance, providing the necessary funding to decarbonise the production or adopt more energy efficient technologies.
The report looks for synergies between two important strategies for Sweden. The first is Sweden’s Strategy for Foreign Trade and Investments, which aims to attract more foreign investments to Sweden. The second strategy builds on the long-term goal to become a net-zero economy by 2045 through the adoption of low-carbon and energy-efficient technologies. As we show in this report synergies between these strategies exist and indeed mutually support each other.
Finally, in these turbulent geopolitical times, the discussion around foreign direct investments should not just take economic considerations into account but it should also include the security dimension. Future challenges, including climate change and extreme weather events, are part of this economic security dimension. Environmental outcomes should therefore be part of any assessment of the social benefit of foreign direct investments.
What did you find?
We identified that Swedish firms have lower carbon and energy intensities in their production after foreign acquisition. This finding is stronger for more carbon- and energy-intensive firms. With this in mind, there is hardly ground for environmental considerations to be used to limit foreign direct investments.
A second result is that we find no evidence that foreign entities specifically target Swedish firms with low carbon or energy intensities in their production. It seems that Swedish firms in general are interesting candidates for foreign acquisition.
What are the most important lessons learnt?
The most important lesson that we can draw from this report is that foreign investments can play an important role in the green transition. Sweden’s goal to become a net-zero economy by 2045 requires large investments in low-carbon and energy-efficient technologies. Foreign direct investments can play a role in providing the necessary funds, so that Swedish industry can retain its competitiveness while also reducing its environmental footprint. An open and transparent investment climate can support the green transition by attracting foreign capital to speed up this process.
The analysis uses Swedish data. Do you think that the results hold elsewhere?
The need for low-carbon and energy-efficient technologies is not just present in Sweden. Financial barriers to make these investments exist globally, and most countries have sustainability goals aiming to clean up their industrial production. Inflows of capital are therefore needed everywhere. We see no reason to expect that the results are only valid for Sweden, and indeed can extend to other high-income countries too.
The results also feed into recent discussions at the European level, with the publication of the Clean Industrial Deal that aims to decarbonize the European industry by attracting foreign investments.
What do you want the results in the report to achieve?
The results indicate that the benefits of foreign investments stretch beyond the economic realm, and indeed affect environmental outcomes too. In this day and age when economic security is an important element in policy discussions, we should include these aspects to understanding of the benefits of foreign direct investments.
The report shows a strong correlation between investments, security, and sustainability. Foreign investments are related to positive environmental outcomes, and potentially contribute towards the green transition. We hope that the results of the report can affect decisions in several areas, such as the costs and benefits of foreign direct investment, economic security, but also in the green transition and the decarbonization of industry.
What is the National Board of Trade Sweden?
The National Board of Trade is the Swedish government agency for international trade, the EU internal market and trade policy. Our mission is to facilitate free and open trade with transparent rules as well as free movement in the EU internal market. We provide the Swedish Government with independent analyses, reports and policy recommendations and take into account the views of businesses of all sizes in international trade policy-related matters.