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Sustainability also figured strongly when respondents were asked to name priority areas for Government action to maintain Ireland’s FDI attractiveness. Investment in the decarbonisation of Ireland’s energy system and measures accelerate progress towards a net-zero economy were highlighted as key areas of policy focus.
Budget 2023 maintained a stable set of incentives, grants and other drivers for decarbonisation and positive change across the economy. The carbon tax was adjusted in line with prior commitments and the overall result was stability in Budget 2023.
These findings should come as no surprise. Sustainability issues have been ascending the corporate agenda for many years. Indeed, in many key areas, the corporate and investment worlds appear to be ahead of governments when it comes to actions to tackle climate change and other environmental, social and governance (ESG) issues.
At last year’s COP 26, it was highlighted that companies and governments must work collectively to advance climate action and decarbonisation at the scale demanded. While governments toil with difficult long terms implications, business can move nimbly and take necessary action on much shorter timescales – which in turn will help governments take brave steps forward.
From an FDI perspective, sustainability is likely to grow in importance in the coming years. FDI decision makers will increasingly look at sustainability factors when choosing locations for new investments. And this will be driven by compelling business reasons.
The first of those will be companies’ own requirements to decarbonise. New regulations like the Corporate Sustainability Reporting Directive (CSRD) will see companies being held to account like never before for their performance in relation to decarbonisation and other sustainability targets.
That will fundamentally change the equation when it comes to energy supply, for example. The availability of renewable energy will move from being a ‘nice to have’ to an absolute essential. Companies which have set 2030 as their target date for achieving net zero carbon will require electricity supplies generated exclusively from renewable sources well in advance of that date.
While Ireland is viewed quite favourably at present for the proportion of renewables in its electricity supply chain, that position can change very quickly. Massive investments are required to make the grid capable of carrying more than 80% renewables by 2030 while there are barriers to renewable energy developments which need to be removed or mitigated.
Rapid progress will be required in both of those areas if Ireland is to retain its attractiveness for inward investment.
While there is an opportunity for Ireland to be a significant part of the global climate action story, with the associated benefits to the Irish economy, there is no arbitrage opportunity when it comes to climate. COP27 will focus the world on the very real adaption challenges being faced by many in the global community who, without support, will continue to suffer significant hardship. Ireland is a small open economy, that needs a healthy and stable global community to continue to prosper.
The same applies to the other sustainability measures where Ireland scored well. This is a highly dynamic environment and other locations are pouring resources into them to gain competitive advantage. The Irish government will need to follow suit if we are not to fall behind.
Furthermore, there is a clear view among respondents that the cleantech and energy sectors will play a key role in Ireland’s future attractiveness. The development of those key sectors will require ongoing investment in skills and innovation if they are to realise their potential.
Very encouragingly, the EY European Investment Monitor found that Ireland looks likely to maintain or improve its attractiveness for FDI in the years ahead with 37% of respondents believing that Ireland's attractiveness will improve over the next three years with 39% thinking it will remain the same.
Additionally, we can see from other findings that we are beginning to earn a reputation in the sustainability space. An opportunity exists to build on that reputation by visibly highlighting and celebrating our sustainability achievements to maintain and further improve Ireland’s attractiveness for FDI.
Ireland is and can continue to lead the global community as we move forward on our sustainability journey together. Some natural strengths, including a stable economy, vibrant tech, innovation ecosystems and an educated workforce will all aid this.
Ireland is and can continue to lead the global community as we move forward on our sustainability journey together. We have some natural strengths, including a stable economy, vibrant tech and innovation ecosystems, educated workforce and so on. We are also a hub of global finance and technology companies accessing the European market. We can do more and the European Business Attractiveness Index highlights that we are in a strong position to do so.