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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Conte ([log in to unmask])

*The Columbia FDI Perspectives are a forum for public debate. The views
expressed by the authors do not reflect the opinions of CCSI or our
partners and supporters.*

No. 371   November 27, 2023
*Developing country and industry materiality assessments to increase
sustainable FDI*
Nitesh Dullabh* <#m_-8085746220367636771__edn1>

This *Perspective* suggests the creation of country and industry
materiality assessments to promote sustainable FDI through an
environmental, social and governance (ESG) lens. National-level ESG
indicators that correspond to industry specific materiality assessment
framework indicators are bound to increase sustainable FDI. “Materiality
is a principle that corporate and sustainability leaders use to prioritize
their ESG topics. “Materiality assessments
formal exercises aimed at engaging stakeholders to address pertinent ESG
issues.. MNEs are more likely to engage in sustainable FDI if their own ESG
priorities are aligned with a host country’s ESG focus.

Host countries benefit from developing, refining and sharing the ESG topics
they determine are critical for them by, for example, creating specific
industry incentives that assist in the countries’ national ESG growth
strategies. By creating a common and shared ESG language, materiality
assessments help countries focus on their ESG issues that matter most to
them and provide a stronger foundation for analyzing investment risks and
opportunities. For example, a country might have prioritized such ESG
issues as water conservation, gender equity, cyber security, or conflict
minerals. These issues, and any opportunities to improve upon them, can
have strong long-term FDI consequences. Countries that focus on increasing
their FDI inflows through a sustainability approach can benefit from
adopting a materiality assessment approach to attract new sustainable FDI
into their respective economies.

Host countries can create materiality assessments in the following ways:

   - *Coordination across departments.* Investment promotion agencies
   (IPAs) should set up their own task force to develop a policy, process and
   assessment approach regarding materiality assessments, coordinating across
   governmental departments. The intention is to define key ESG topics that
   are relevant to sustainable development, identify and analyze current and
   potential investment risks and opportunities and then determining how to
   promote FDI at a national and/or industry level. The OECD FDI Qualities
   and the UN SDGs
   for example, can be used to define and measure FDI-specific sustainable
   development impacts in host countries.
   - *Determine stakeholders.* The IPA task force should be responsible for
   identifying and selecting key stakeholders. In addition to coordinating
   across governmental departments, it should also bring together other
   organizations that have a sustainable development agenda. These include the
   private sector, NGOs, trade unions, and other members of civil society.
   Stakeholder partnerships, as referenced in SDG17
   are important for diversity, equity and inclusivity purposes.
   - *Materiality assessment setup process.* Although there are many
   guidance documents aimed at supporting organizations undertaking a
   materiality assessment process, many highlight that materiality is
   This is also true for each host country conducting its own materiality
   process.  There are likely to be varying degrees of focus on
   prioritization, audience, framing, boundaries, scope, and characteristics
   of materiality. These differences extend to the methodologies to collect,
   score, measure, analyze, and validate data on materiality. Several
   industries have aligned their sustainability standards of materiality and
   disclosure with those developed by the International Sustainability
   Standards Board
   and the Global Reporting Initiative
   The materiality assessment process requires discussion and consensus and
   must ensure that the information disclosed is specific and concise for the
   intended MNE audiences.
   - *Analysis of insights.* Stakeholders should review results
   collectively, based on the IPA task force agreed scoring, ratings,
   rankings, and indicators. To do so, the IPA task force must aggregate the
   data in a way that helps stakeholders understand, visualize and discuss
   commonalities. Key country and industry ESG topics can include human
   rights, social conditions, climate change, energy, and water. Once these
   ESG issues have been scored and rated, they can be understood through a
   series of matrix graphs illustrating key ESG trends and priorities. For
   example, the graph’s X axis could represent “Country specific economic,
   environmental and social impacts” and the Y axis “Importance to

MNEs rely significantly on the health of host countries’ ESG indicators and
policies, and the systems around them. Changes or disruptions, from disease
outbreaks, climate change, biodiversity loss, to human/child labor
violations, can deeply affect the short-to-medium-term economic and social
performance of a host country and consequentially affect long-term FDI from

Country and industry specific materiality assessments provide accurate
insights into ESG priorities, helping to guide both host countries' FDI
policy and targeted investments from MNEs whose ESG priorities align. The
outcome of these assessments can also lead to the development of new
national ESG projects that further attract FDI. Consensus with
multi-stakeholder partnerships (across government, the private sector,
NGOs, trade unions, other members of civil society) on ESG priorities
creates a stronger and more enabling environment for MNEs.

Ultimately, an alignment between country led ESG indicators and industry
materiality assessments topics that coincide with MNEs’ specific ESG-related

* <#m_-8085746220367636771__ednref1> Nitesh Dullabh ([log in to unmask])
is the founder and CEO of 2POD Ventures, an advisory consultancy that
assists public, private and civil society actors in their respective ESG
transitions. The author wishes to thank Fabian Sack, Marsha Willard and
Lester Bouah for their helpful feedback. He also wishes to thank
Persephone Economou, Rainer Geiger and Gaurav Pundir for their helpful peer
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Nitesh Dullabh, ‘**Developing country and
industry materiality assessments to increase sustainable FDI,**’ Columbia
FDI Perspectives, No. 371, November 27, 2023. Reprinted with permission
from the Columbia Center on Sustainable **Investment (*
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at *[log in to unmask] <[log in to unmask]>
For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Conte, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 370, N. Jansen Calamita, ‘Unexpected opportunities to support
   investor-state dispute prevention through the WTO Investment Faciliatation
   for Development Agreement
   *Columbia FDI Perspectives*, November 13, 2023
   - No. 369, Karl P. Sauvant and Zbigniew Zimny, ‘How to get the best deal
   for massive FDI incentives
   *Columbia FDI Perspectives*, October 30, 2023
   - No. 368, Julien Chaisse, ‘Rethinking umbrella clauses in international
   investment agreements
   *Columbia FDI Perspectives*, October 16, 2023

*All previous FDI Perspectives are available at

*Other relevant CCSI news and announcements*

   - *November 28, 2023:* CCSI's Fall 2023 International Investment Law and
   Policy Speaker Series concludes with a panel on “*The Reform and Role of
   ISDS in the Legalization and Legitimacy of the Investment Treaty Regime*.”
   Each session will allow for Q&A and discussion with the panelists. The
   series is sponsored by Arnold & Porter, with media sponsor TDM. *For
   more details, and to register, visit our website
   - *Applications are now open* for our 2024 virtual Executive Training
   Program on Sustainable Investments in Agriculture
   which will be held from May 7-17, 2024. The interdisciplinary program
   explores challenges and solutions for advancing sustainable investments in
   agriculture. It includes asynchronous and synchronous components, including
   short and interactive live sessions dedicated to engagement with course
   lecturers and participants from around the world. Applications will be
   considered on a rolling basis until March 15, 2024. *For more
   information, and to apply, visit our website

Karl P. Sauvant, Ph.D.
Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Columbia Climate School
*Copyright © 2023 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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*Karl P. Sauvant, PhD*

*Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
| p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
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