Investing in infrastructure

Infrastructure investmentWilliam Topaz McGonagall is universally acknowledged as the worst poet who ever wrote in the English language, but that didn’t stop him having an intuitive grasp of the economics of infrastructure investment. As he argued in “The Newport Railway” published to celebrate the Tay Bridge and the trains it carried to Dundee, “the thrifty housewives of Newport/To Dundee will often resort/Which will be to them profit and sport/By bringing cheap tea, bread, and jam/And also some of Lipton’s ham/Which will make their hearts feel light and gay/And cause them to bless the opening day/Of the Newport Railway. It was a win-win for people on both sides: And if the people of Dundee/Should feel inclined to have a spree/I am sure ’twill fill their hearts with glee/By crossing o’er to Newport/And there they can have excellent sport”.

At the OECD, we’re more into free verse than rhyming, so we talk about investing “to meet social needs and support more rapid economic growth”. The social needs and benefits can be vast in developing countries in particular. Take sanitation for example. In many urban areas, infrastructure hasn’t expanded as much as population, leaving millions of citizens with no access to piped water and modern sanitation, or forced to live near open sewers carrying household and industrial waste. Water-related diseases kill more than 3.4 million people every year, making this the leading cause of disease and death around the world according to the WHO.

According to the OECD’s Fostering Investment in Infrastructure, it’s going to cost a lot to keep the thrifty housewives across the globe happy over the next 15 years: $71 trillion, or about 3.5% of annual world GDP from 2007 to 2030 for transport, electricity, water, and telecommunications. The Newport railway was privately financed, as was practically all railway construction in Britain at the time, but in the 20th century, governments gradually took the leading role in infrastructure projects. In the 21st century, given the massive sums involved and the state of public finances after the crisis, the only way to get the trillions needed is to call on private funds.

There are several advantages to attracting private capital for governments, apart from the money. Knowledgeable investors bring skills and experience in designing, building and running projects. But will fund managers be willing to commit to investments with long life cycles when their shareholders are demanding quick returns and high yields?

The opportunities are there, but the infrastructure sector presents specific risks to private investors, and since private participation in infrastructure delivery is relatively recent in many countries, governments do not necessarily have the experience and capacity needed to effectively manage these risks. Fostering Investment in Infrastructure brings together the lessons (both positive and negative) learned from the OECD’s Investment Policy Review series, and lists the most useful policy takeaways for the various components of the investment environment, such as regulation or restrictions on foreign ownership, based on the actual experiences of a wide range of countries.

Some of the advice sounds like no more than common sense, but given the difficulties many infrastructure projects get into, it seems that many governments fail to take what the report calls a “holistic” view before signing deals. For example, the report warns governments to make sure that arbitration procedures are clear and coherent so that disputes that can be settled quickly and don’t end up as lengthy, costly cases before international tribunals.

Likewise, given that most infrastructures are built on or under land, you’d think it wasn’t necessary to insist on having a “clear and well-implemented land policy”. Experience shows otherwise. For example, the US newspaper The Oklahoman describes how in its home state plans to develop wind farms met opposition from the oil and gas industry over access to the surface in the early 2000s, and that now, as development moves closer to suburban areas, there are calls for tighter regulation from property owners.

As the OECD report points out, investors are going to be unwilling to commit funds if they think policy regarding the basics is likely to change over the life-cycle of the project, and even less willing when policy changes within the term of a single administration.

Apart from the discussion on core conditions, there is a detailed look at investing in low-carbon infrastructure, such as wind farms. It makes sense to look at this separately because the business model of the sector is so different from traditional energy production and distribution. For electricity generation for instance, highly centralised power stations serving a wide area are replaced by small-scale distributed generators that may only serve a single building. Feed-in tariffs are a popular means of encouraging low-carbon renewables – paying producers for extra energy they feed into the main grid via a Power Purchasing Agreement (PPA). But awarding PPA purely on a least-cost criterion can tip the balance away from renewables in favour of incumbent producers, as happened in Tanzania.

The lessons then are a mix of useful checklist and interesting insights. In a poem written not long after the one quoted above, our man McGonagall describes how if you get it wrong, you may not live to regret it: “the cry rang out all o’er the town/Good Heavens! the Tay Bridge is blown down”.

Useful links

OECD work on investment

Overcoming Barriers to International Investment in Clean Energy

investing in clean energyGeraldine Ang, OECD Investment Division and Climate, Biodiversity and Water Division

Most of us would agree that clean energy is a worthwhile goal, and the world has invested more than $2 trillion on renewable-energy plants in the past decade. In 2014, energy generators added more renewable capacity than even before. But are we doing enough? According to the IEA, cumulative investment in low-carbon energy supply and energy efficiency will need to reach $53 trillion by 2035 to keep global warming to 2°C. It sounds a lot, and it is, but it’s only 10% more than the $48 trillion that would likely need to be invested in any case in the energy sector if the economy continues to expand and demand for power continues to grow as it has been doing in recent decades.

And the price difference with other types of energy is shrinking. Clean energy, especially electricity generation from renewable-energy sources, is increasingly competitive with new-built conventional power plants. It could therefore play a significant role in the transition to a low-carbon economy and help to meet broader economic and development goals. For example, the fact that electricity generation from renewables such as wind or solar power can exploit small distributed systems makes this form of energy suitable for areas not served by the large, centralised grids of traditional systems.

However, the deployment of low-carbon technologies is heavily influenced  by government support, in particular in the solar- and wind-energy sectors. In the past decade, governments have provided substantial support to clean energy that has benefited both domestic and international investment. Globally, public support to clean energy amounted to $121 billion in 2013. At least 138 countries had implemented clean-energy support policies as of early 2014. Incentive schemes have contributed to enhancing clean energy investment worldwide, even if clean energy investment had to coexist with disincentives to investing in the sector, for example fossil-fuel subsidies, and the difficulties inherent in shifting away from fossil-fuels in the electricity sector, given the massive investments already made in traditional generation and the way electricity markets function.

Largely driven by government incentives, new investment in clean energy increased six-fold between 2004 and 2011, reaching $279 billion in 2011, before declining in 2012-13. Solar and wind energy have received the largest share of new investment – $114 billion and $80 billion respectively in 2013.

Prices of the equipment needed to generate clean energy, such as wind turbines and solar panels, have been falling, in part thanks to international trade and investment helping the solar photovoltaic (PV) and wind energy sectors to become more competitive. However, since the 2008 financial crisis, the perceived potential of the clean energy sector to act as a lever for growth and employment has led several OECD countries and emerging economies to design green industrial policies aimed at protecting domestic manufacturers, notably through local-content requirements (LCRs).

Local-content requirements typically require solar or wind power developers to source a specific share of jobs, components or costs locally to be eligible for policy support or public tenders. A new OECD report on Overcoming Barriers to International Investment in Clean Energy shows that as of September 2014, such requirements have been designed or implemented by at least 21 countries, including 16 OECD and emerging economies, mostly since 2009.

New, empirical evidence presented in the report shows that LCRs have hindered global international investment flows in solar PV and wind energy, reducing the potential benefits from international trade and investment mentioned above. This might be related to the fact that such policies increase the cost of intermediate inputs (the components needed to build the final products). This could lead to less competition in downstream segments of the value chain such as installation. Downstream activities are associated with more value creation than midstream manufacturing activities or upstream raw materials production and processing. The estimated detrimental effect of LCRs is slightly stronger when both domestic and international investments are considered. This indicates that LCRs do not have positive impacts on domestic investment flows.

In addition, according to results from a 2014 OECD Investor Survey of leading global manufacturers, project developers, and financiers in the solar-PV and wind-energy sectors on “Achieving a Level Playing Field for International Investment in Clean Energy”, LCRs stood out as the main policy impediment for international investors in solar PV and wind energy. It’s not surprising that a majority of international investors involved in downstream activities of the solar and wind-energy sectors selected LCRs as an impediment. More unexpectedly, a majority of international investors involved in upstream or midstream activities also identified LCRs as an impediment. This result suggests that LCRs can hinder international investment across the value chains.

As demonstrated in the OECD report, evidence-based analysis is needed to help policy makers design efficient clean-energy policies. Policy makers should reconsider measures in favour of domestic manufacturers for enhancing job and value creation in the clean energy sector if, as the OECD study suggests, the overall result is less investment and probably fewer opportunities for the very sector protectionism is supposed to help. Co-operation at a multilateral level is needed to address barriers to international trade and investment in clean energy.

Useful Links

OECD work on mobilising investment opportunities in clean energy infrastructure

Overcoming barriers to international investment in clean energy

The OECD’s Business and Finance Outlook looks at the Greatest Puzzle of Today

Business-Finance-Outlook-LaunchAdrian Blundell-Wignall, Director in the Directorate for Financial and Enterprise Affairs, Special Advisor to the Secretary-General on Financial Markets

The greatest puzzle today is that since the global crisis financial markets see so little risk, with asset prices rising everywhere in response to zero interest rates and quantitative easing, while companies that invest in the real economy appear to see so much more risk. What can be happening? The puzzle is even more perplexing when we see policy makers lamenting the lack of investment in advanced countries at a time when the world economy shows all of the characteristics of excess capacity: low inflation and falling general price levels in some advanced countries for the first time since the gold standard and despite six years of the easiest global monetary policy stance in history.

Will financial markets be proved wrong so that asset prices will soon collapse? Or, alternatively, will business investment take off and carry growth and employment to more acceptable levels validating the market optimism? The forthcoming OECD Business and Finance Outlook presents a reconciliation of these apparent contradictions based on the bringing together of new evidence about what is happening in some 10,000 of the world’s biggest listed companies as they participate in global value chains across 75 countries and which represent a third of world GDP. The salient points are these:

  • There is plenty of investment globally but from an advanced country perspective it is happening in the wrong places, as global value chains have broken down the links between policies conducted by governments inside their own borders and what their large global companies actually do. Short-termism too is apparent, where investors prefer companies that carry out more buybacks and dividends compared to those that embark on long-term investment strategies. Advanced country companies appear to prefer outsourcing investment risk to emerging market countries in global value chains when they can.
  • From a developing country point of view financial repression and exchange rate targeting are legitimate development strategies. Investment is enormous (running at double the rate per unit of sales in general industrial companies compared to those of advanced countries), but it is not well based on market signals and efficient value creation strategies. Instead, it is fostered by cross-border controls, the heavy presence of state-owned banks that intermediate the “bottled-up” savings into investment, local content requirements and pervasive regulations and controls. Over-investment—characterised as a falling return on equity in relation to the high cost of equity that opens a negative value creation gap—is a feature of many emerging market companies which, at the same time, are borrowing too heavily.
  • Concern about employment and growth in advanced countries has seen central banks vainly trying to stimulate investment at home: for six years they have kept close to zero interest rates and successive attempts at quantitative easing have been launched in the US, the UK, Japan and Europe. These actions are pushing up the value of risk assets in the search for yield, as pension funds and insurance companies face very real insolvency possibilities (with liabilities rising and maturing bonds being replaced by low-returning securities). The competition to buy high-yield bonds is seeing covenant protections falling, and less liquid alternative products hedged with derivatives are once more on the rise.
  • Many of these new products are evolving in what has come to be known as the “shadow banking sector”: as banks themselves have become subject to greater regulatory controls financial innovation and structural changes in business models are once again adjusting to shake off the efforts of regulators. Broker-dealers intermediate between cash -rich money funds on the one hand, which need to borrow higher-risk securities to do better than a “zero” return, and cash-poor institutional investors on the other, that need cash to meet margin and collateral management calls that the new-generation higher-yield alternative products demand. Shadow banking is focused on the reuse of assets and collateral. With this comes a new set of risks for financial market policy makers to worry about: leverage, liquidity, maturity transformation, re-investment and other risks outside of traditional banking system.

The Business and Finance Outlook provides evidence on some of these trends.

Nor are global value chains that facilitate the shift in the centre of gravity of world economic activity towards emerging markets serving economic development in the manner that might be expected.

Productivity of Sales versus Value Added in Advanced and Emerging Country Infrastructure & General Industrial CompaniesPrint

 Sales-per-employee, shown by the lines in the above graph, illustrate an astounding “catch-up” of emerging countries over the past decade. However, when company “value added” per employee is calculated (shown in the bars), there is much less sign of any emerging market catch up to advanced country productivity levels, in either infrastructure or general industrial companies.

Worse still, the “value added” productivity growth apparent in the rising columns prior to the crisis has not continued in subsequent years. This is no way in which to foster promises for ageing baby boomers, nor for the stable growth of employment for younger generations. The international financial and production systems will have to be reformed towards greater competition and openness if the world economy is to be put onto a more stable path.

Useful links

‌OECD Secretary-General Angel Gurría will present the findings in the Outlook at a launch event in Paris on 24 June 2015. This will be followed by a high-level roundtable debate on:

  • risks to the financial system in a low growth and low interest rate environment
  • whether pension funds and life insurers will be able to keep their promises

The event will be attended by representatives from the banking, insurance and pension fund sectors, senior pensions and insurance regulators, financial industry representatives, academics, journalists and other stakeholders.

OECD work on investment

OECD work on financial markets

More and better private investments

Erik Solheim, Chair of the OECD Development Assistance Committee (DAC)

Extreme poverty has been halved in a few decades and more than 600 million people have been brought out of poverty in China alone. Child mortality was also halved and children born today will reach 70 years of age on average. The enormous development progress over the past decades is one of the most significant achievements in human history and business and private investments have played an integral part.

Business and private investments under strong national leadership have been instrumental in all the greatest development success stories. Just think of Singapore, Korea, China, Ethiopia, Turkey and Rwanda. More and better business and investments will be crucial to eradicate extreme poverty by 2030 and implement the sustainable development goals to be agreed at the United Nations later this year. Only businesses can provide jobs for the around one million young Africans joining the labour market every month. Private investments are hugely important to green our agricultural systems and invest in clean energy for billions of people with little or no access to electricity. Private business is generally a huge force for good. But strong national leadership and responsible business conduct is necessary to avoid super-profits, exploitation of workers and degradation of the environment.

More investments

More of the $20 000 billion estimated to be invested around the world annually over the coming years must be directed to green investments in developing countries. Good investment policies are the most important thing. China now receives much more foreign direct investment in a single day than it did in the whole of 1980. Investments to Ethiopia have increased 15 times in just seven years as a result of good policies and focus on manufacturing, agriculture and energy. Development assistance can also help by reducing risk and mobilizing much more private investment. By blending public and private investments, the EU used $2billion in aid to mobilize around $40 billion for things like constructing electricity networks, financing major road projects and building water and sanitation infrastructure in recipient countries.

Better investments

We also need better investments and better business conduct. Corporate super-profits, corruption and tax avoidance must be stopped. Far too often, profits are private while the destruction of forest, pollution of rivers and the effects of climate changing gasses are borne by the public. Workers must make decent wages, work in safe environments and have the right to join unions.

The OECD has developed the Guidelines for Multinational Enterprises, which set out recommendations on what constitutes responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation.

Mechanisms are in place to deal with grievances and the Guidelines have had some great successes. The UK-based oil company Soco decided to halt oil exploration in Africa’s Virunga national park until UNESCO and the government of the Democratic Republic of Congo agree that oil production does not threaten the unique biodiversity in the area. G4S, a major global security guard employer, stood accused of underpaying and denying rights to employers in Malawi, Mozambique and Nepal while blacklisting union members. After mediation by a global union of 900 national unions, G4S agreed to improve employment standards across the company and to help improve the standards in the whole global security industry. The Norwegian salmon farming giant Cermaq stood accused of inadequately considering the environment and the human rights of indigenous people in Chile. The company agreed to enter into mutually beneficial agreements with indigenous peoples and to even further minimise risk of any environmental damage. The parties also agreed that certain claims about the company made by civil society groups were baseless and that future dialogue should start with mutual trust and clarification of facts, a win-win solution for both parties.

States must be responsible for framing the market in such a way that companies can make a healthy profit and provide jobs while protecting the environment and people’s rights. But companies can also be advocates for more responsible business conduct. The world moves forward when the best companies push others to improve social and environmental standards. Wilmar, the largest palm oil producer in Asia, became an advocate for conservation and after they themselves committed not to cut down rainforests.

Such business norms works best when leading global companies take the initiative. Last year, China was ranked by Forbes as home to the three biggest public companies in the world and five of the top 10. The OECD and China are now working on moving towards common standards for businesses. More global guidelines would make a huge difference because China now provides 1 out of every 5 dollars invested in Africa. Chinese companies are building important infrastructure around the world like the East African railroad linking Kenya with Uganda, Rwanda and South Sudan. Chinese companies are increasingly moving manufacturing plants to Ethiopia and Rwanda.

More and better private investment is necessary to eradicate poverty and provide food, electricity and jobs for a future 9 billion people without destroying the planet. More responsible business conduct is a hugely important part of that.

Useful links

The Global Forum on Responsible Business Conduct 18-19 June 2015 is held to strengthen international dialogue on responsible business conduct (RBC) and provide a ‌‌‌platform to exchange views on how to do well while doing no harm in an effort to contribute to sustainable development and enduring social progress.

Let’s talk money: What will it take to save our planet?

Step away from the subsidies
Step away from the subsidies

Ariana Mozafari, OECD Environment Directorate

That wise mantra that knowledge is power has clearly never stepped inside a business meeting. In this day and age, money is power. Money builds hospitals and roads and civilisations. The OECD can work its hardest to raise awareness on the truths of climate change, but the world won’t see developments in green technology and infrastructure unless we have eager investors backing up investment and research and development in low-carbon technologies.

In the past, many have claimed that environmental protection and green projects are a high-risk investment that can hinder economic development. Low returns and low confidence in green growth and high-capital needs in low-carbon infrastructure projects make investing in environmentally-friendly technologies a seemingly unprofitable business. Less-developed nations have even fewer incentives to invest: as they try to climb out of the poverty rut, how can they possibly spare financial resources to focus on preserving the environment?

Contrary to popular belief, climate change and economic development don’t have to be two opposing policies competing for governments’ attention. This week’s second annual Green Investment Financing Forum at the OECD showed that huge investors that have traditionally invested in fossil fuels and high-emissions activities are, in fact, the best financial resources to save our planet from climate disaster.

Like the Porter Hypothesis says, climate change action and economic growth can feed off  each other. The Green Investment Financing Forum gathered senior representatives from investment firms and institutional investors from around the world such as Goldman Sachs and Aviva. The GIFF proposed suggestions to achieve a balanced future global economy, which should ideally be centered on an environmentally-conscious, competitive and productive investment field that delivers the risk-adjusted returns that fiduciaries need. The discussions included:

  • Providing greater transparency in risk evaluation for investing in green projects. Green growth needs to become a predictable engine for business and the economy. Greater transparency means greater confidence in the investment project, which will hopefully facilitate more long-term investments in green infrastructure.
  • Driving up demand for investing in green growth. There should be a competitive and open market for providing environmentally-conscious products and services. There needs to be a shift to a customer-focused approach to drive up competition.
  • Creating more financial literacy, so that politicians can create policies that have positive incentives for businesses and mainstream investors can understand how to invest in the sector. We need to know what businesses expect in return for their investments, and we need to create efficient and effective incentives and solutions that benefit them directly.
  • Improving data collection and disclosure for banks, investors, and businesses. We need to know how companies view green growth and the carbon content of their businesses and assets if we’re going to attract more investors towards green growth. Governments and international bodies should be able to track past green investments and how they perform.

Professor Daniel Esty, Hillhouse Professor of Environmental Law and Policy at Yale University, also argued that finding capital is not the issue in furthering green technology—in fact, financial resources are abundant. According to Esty and the Connecticut Green Bank, the world needs more innovative projects for green growth.

Esty also urged governments to steer private capital in the direction of low-carbon investment, with a three-step plan outlined below. The current actions governments are taking, he said, are not enough to save our planet from climate change.

  1. Governments need to provide clarity and normalize the marketplace. Leaders need to change the image of green investments to prove that these environmentally-friendly projects will not be “high-risk” financial ventures.
  2. Governments should minimize the soft costs for these green projects. Examples of these include mitigating building and permit costs to encourage green growth.
  3. Governments must also frame a new idea of what is “clean energy.” Leaders should not be pushing renewable energy standards that allow burning “biomass” (aka firewood), for example, to slide by as “clean energy reform.”

And, overall, governments should be subsidising industries who are the “winners” in green development and stepping away from subsidising fossil fuels, taking the golden opportunity to do so in today’s low-interest economy. Just take a look at Indonesia’s government if you need some low-carbon inspiration. They seized the opportunity to reform fossil fuel subsidies and put the money towards better use to help the poor and reduce carbon emissions.

The road to climate change is a long one, and yet the need for policymakers to shift archaic policies towards greener growth has never been more critical. As Nobel Peace Prize winner Al Gore commented on the nature of drastic policy changes throughout history: “After the last no, comes a yes.”

Useful links

For more policy suggestions that facilitate low-carbon investment, check out the OECD’s policy highlights on Investment in Clean Energy Infrastructure and the OECD’s report for the G20 on Mapping Channels to Mobilise Institutional Investment in Sustainable Energy.

The Policy Framework for Investment: What it is, why it exists, how it’s been used and what’s new

PFI toolkit

Today’s post is from Stephen Thomsen who leads the OECD’s work on investment policy reviews

Of all the acronyms in existence, “PFI” has to be one of the most popular. For many people, it is the Private Finance Initiative but that is only one of at least 40 meanings of the PFI, including institutes devoted to everything from pet foods to pellet fuels. For us at the OECD and for the many emerging economies we have been working with, the PFI stands for the Policy Framework for Investment. Our PFI means exactly what it says: it is a policy framework to stimulate investment and to enhance the impact from that investment.

Most people would agree on the potential benefits of investment. It can bring increases in productive capacity and other assets, including intangible assets such as intellectual property – all of which can contribute to productivity increases. As Nobel-prize winning economist Professor Paul Krugman famously remarked, “Productivity isn’t everything but in the long run it is almost everything.”

But many of us would also agree that the benefits from investment can sometimes be disappointing, not only on efficiency grounds but even more importantly as to its development impact. Some investment can even be detrimental in social or environmental terms.

The PFI looks at the investment climate from a broad perspective. It is not just about increasing investment but about maximising the economic and social returns. Quality matters as much as the quantity as far as investment is concerned. The PFI also recognises that a good investment climate should be good for all firms – foreign and domestic, large and small.

So how does it work? The PFI looks at 12 different policy areas affecting investment: investment policy; investment promotion and facilitation; competition; trade; taxation; corporate governance; finance; infrastructure; policies to promote responsible business conduct and investment in support of green growth; and lastly broader issues of public governance. These areas affect the investment climate through various channels, influencing the risks, returns and costs faced by investors. But while the PFI looks at policies from an investor perspective, its aim is to maximise the broader development impact from investment and not simply to raise corporate profitability.

The PFI is essentially a checklist which sets out the key elements in each policy area. The value added of the PFI is in bringing together the different policy strands and stressing the overarching issue of governance. The aim is not to break new ground in individual policy areas but to tie them together to ensure policy coherence. It doesn’t provide ready-made reform agendas but rather helps to improve the effectiveness of any reforms that are ultimately undertaken. It’s a tool, not a magic wand.

The best way to understand the PFI is to see how it has been used. Over 25 countries have undertaken OECD Investment Policy Reviews using the PFI, most recently Myanmar. Several other reviews are in the pipeline. The PFI is a public good and hence it is possible for a country to undertake its own self-assessment, but in practice the combination of part self-assessment by an inter-ministerial task force and part external assessment by the OECD has proven to be a good formula. The PFI has also been used for capacity building and private sector development strategies by bilateral and multilateral donors. It has also been used as a basis for dialogue at a regional level, such as in Southeast Asia.

The PFI was originally developed in 2006 and has been updated in 2015 to reflect developments in the many policy areas mentioned above. Approaches to international investment agreements have evolved over the past decade. The OECD Guidelines for Multinational Enterprises have been substantially updated, partly to reflect the development of the UN Guiding Principles for Business and Human Rights. The OECD Principles of Corporate Governance and OECD Guidelines on Corporate Governance of State-Owned Enterprises are currently under review. The new PFI also places even more focus on small and medium-sized enterprises and on the role played by global value chains. It has incorporated gender issues, a vital element of inclusive development, and now has a chapter on policies to channel investment in areas that promote green growth.

We have also taken advantage of the focus on the PFI to address issues of how to move from PFI assessments to actual implementation of reforms on the ground. For this reason, the donor community has been strongly involved in the discussions surrounding the update. Experience at country level and consultations on the PFI update have led to greater co-operation between the OECD and the World Bank Group on investment climate reforms. In this way, the PFI can provide a platform for co-operation among international organisations, allowing them to provide more effective and complementary advice and support.

The update of the PFI has not been a purely technocratic exercise. The new PFI represents the collective wisdom of experts, policy makers, business people and other stakeholders. It has been presented in regional forums in Southeast Asia, Southern Africa and Latin America, as well as in Brussels and Washington D.C., led by a Task Force co-chaired by Finland and Myanmar. As a result of these inclusive consultations, the PFI strikes a balance between what investors want and the broader interests of society. The updated PFI will be launched at the OECD’s Ministerial Council Meeting in June this year.

So the next time you hear someone speak of the PFI, it might well be the Policy Framework for Investment.

Useful links

Updating the Policy Framework for Investment

OECD Forum 2015. Investing in the Future: People, Planet, Prosperity

OECD Forum home pageForum 2015, Investing in the Future: People, Planet, Prosperity will take place in Paris on 2-3 June. It will be organised around five themes: Investment; Inclusive growth; Innovation; the New Climate Economy; and Sustainable Development Goals


45 million people are unemployed in the OECD, which increases the risk of poverty, ill health, and the levels of inequality within our societies.
This legacy of the crisis is undermining the confidence and trust of citizens in everything from governments to markets, businesses and institutions at large.

The Forum will discuss how to promote access to more and better quality jobs, but also how governments, universities, business and civil society can address growing inequality by expanding access to education.

What skills will be needed to make people more resilient and entrepreneurial? And how to promote the exchange of knowledge between people, universities and business that leads both to innovation and more inclusive growth models.

The Forum will also reflect on actions aimed at reducing the gender gap and enhancing the role of women in economies and societies at large, in the context of the celebration of the 20th anniversary of the Beijing Declaration and the G20 commitment to reduce the gender gap in workforce participation by 25 % by 2025.

Read more on inclusive growth


New technologies and business models are essential to help achieve a NEW CLIMATE ECONOMY, which combines strong economic growth while minimising impacts on the environment.

This will be an important issue in the run up to the COP 21 negotiations in Paris and discussion will be informed by the joint OECD, International Energy Agency (IEA), Nuclear Energy Agency (NEA) and International Transport Forum (ITF) work on aligning policies for the transition to a low carbon economy.

The Forum will be an opportunity to reflect on the importance of a coordinated approach to: mobilise infrastructure investment; rethink taxation and urban development; address resource scarcity and the food-water-energy nexus.

Cities will play a key role in this new economy. Cities already generate around 80% of global economic output, and use around 70% of global energy. 54 % of the world’s population lives in cities today, and this figure is expected to increase to 70% by 2050


The Forum will explore the importance of INVESTMENT in placing economies on sustainable growth paths; addressing inequalities; fostering innovation; helping the transition towards low-carbon economies; and financing the Sustainable Development Goals (SDGs).

Investment is still lagging compared to pre-crisis levels, dampening demand and constraining potential growth. Breaking this vicious cycle is a priority to restore dynamism to our economies and create jobs.
Read more on investment
Ongoing innovation in ICT, renewable energy, nanotech, telemedicine, biotechnology, Big Data and the “Internet of Everything” is offering promising solutions in areas such as health, ageing, climate change, food security and represents an increasingly significant source of future economic growth.

The update of the OECD Innovation Strategy will feed into Forum debates with particular emphasis on governments’ ability to meet social and environmental challenges by creating an enabling environment fostering innovation.

Read more on innovation

Better Life Index

‌‌‌‌The OECD will present the 2015 Better Life Index update, incorporating new data and communicating what has been learned from almost 90 000 user responses received since 2011. The Index will be available in seven languages: English, French, Spanish, German, Italian, Portuguese, and Russian.

A complimentary site, highlighting Italian well-being priorities will be launched in conjunction with Expo Milan 2015 in English and Italian.