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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | November 2021
After a formal rest day ahead of the second week of negotiations, the theme of this Monday was Adaptation, Loss and Damage, with the goal of “delivering the practical solutions needed to adapt to climate impacts and address loss and damage”. Indeed while much of our attention is on the future and ways to avoid the potential catastrophic consequences of climate change from damaging the way of life for future generations, the simple reality is that for many people the damage is already here and the best that can be done is adaptation.
The UN Race to Resilience programme has launched a new framework to get cities, regions, businesses and investors to advance approaches to resiliency. A Global Resilience Index is also to be launched to improve how investors measure the resiliency of nations, corporates and their respective supply chains. The UK government also announced a new £290m funding package to improve climate resilience and adaptation measures in developing countries, while government representatives from around the world discussed how to further boost flows of climate adaptation funding, as much a key part of the “$100bn a year figure” as funding for clean energy generation or carbon reduction.
Negotiations on Article 6 continue, with parties attempting to finalise the Paris Agreement rulebook in relation to emissions trading. The carrying over of emissions reductions credits from the Kyoto Protocol period (or not) has emerged as the most contentious issue so far. If older credits were to be allowed for use under the Paris Agreement then the supply would be higher, having a negative effect on the price of new credits when traded, but if they were to be banned from the new regime then the supply would be lower and prices would be expected to be higher. Higher prices for carbon credits would likely be seen as a vote of market confidence. While developed countries have tended to support the exclusion of Kyoto Protocol activities and credits, developing countries often have taken the other side. An agreement on the Article 6 rules is an essential outcome of this COP26 in order to boost the use the international markets to finance the transition toward net zero. The voluntary carbon trading market is already growing quickly due to corporate demand as businesses seek to use carbon credits as part of their strategy to reach net-zero emissions. For reference, the CORSIA-eligible carbon credit price, launched by S&P Global Platts in January 2021, has surged from $0.8 per metric ton of C02 in January to over $7 by November of this year (a jump of over 800 per cent).
Over the weekend Andrew Williams, an asset finance partner, attended the International Chamber of Shipping’s “Shaping the Future of Shipping” conference in Glasgow. One of the main focuses of the panel was on R&D and there was broad consensus on the need for a significant increase in research funding to progress the energy transition in the maritime sector. To address this, a $5bn fund was proposed, financed by a levy of $2 per ton on marine fuel and with a target launch of 2030 (but this must first be approved by IMO member states). Interestingly the session was full of encouragement as to the availability of capital to fund the decarbonisation of shipping once the right projects are available with proven technologies behind them – this is of course a very similar conclusion to that which we have drawn in relation to other industries and technologies, perhaps most notably hydrogen. The conference preceded Wednesday’s transport day at COP26, which the firm will be represented at by Phil Roche and Christine Ezcutari.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Publication
On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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