Finance, investment & trade: Ireland’s blueprint for the future

Navigating Ireland’s strategic shift towards sustainable trade and finance

Finance, investment, and trade are critical pillars of our global economy, driving growth, innovation, and development. These areas involve managing financial resources, allocating capital to productive ventures, and exchanging goods and services across borders. Effective financial systems and robust trade policies create a dynamic environment that fosters economic stability and prosperity between nations.

International trade and investment support 1.3 million jobs in Ireland. The Trade and Investment Report reveals that Ireland’s total trade in 2023 exceeded €1 trillion, including a trade surplus of €64 billion, reflecting the strength of its enterprise sector[1] though strains are being felt at home against the backdrop of current global geopolitical, economic, and environmental tensions.

Addressing climate change through global trade and investment policies presents a huge opportunity to support the implementation of climate goals and identifying development opportunities within the context of the Nationally Determined Contributions (NDCs) included in the Paris Agreement.

Following the recent US election and the potential withdrawal of the United States from the Paris Agreement and the Carbon Border Adjustment Mechanism (CBAM) in Europe – what does this mean for the global trade and investment competitiveness?

Recent developments in Ireland’s finance, investment, and trade sectors highlight the country’s commitment to adapting to rapidly changing global market behaviours towards sustainability. Ireland’s Trade and Investment Strategy 2022-2026 outlines a focus on sustainable growth, market diversification, and higher living standards.[2]

Additionally, Ireland’s International Climate Finance Roadmap aims to establish the country as a global centre for Sustainable Finance by 2025[3], leveraging its expertise in Green Bonds, sustainable investments, and aligning finance with the SDGs and Paris Agreement.

With COP29 emphasising trade and investment policies to support climate goals, and the launch of the Baku Initiative for Climate Finance, Investment, and Trade (BICFIT), it remains to be seen how these initiatives will further impact Ireland’s finance, investment, and trade landscape, particularly in terms of sustainability and maintaining its attractive position in the global market.

Insights from COP 29

Money and investment were the focus of talks on day one of COP 29, with a crucial report from the Independent High-Level Expert Group on Climate Finance emphasising the need to increase annual climate finance to $1.3 trillion by 2035[4,5]. The report highlighted that insufficient investment before 2030 would lead to a more challenging and costly path to climate stability, underscoring the necessity for immediate and substantial financial commitments.

However, it remains clear that securing these funds is complex, with many Western governments hesitant to increase contributions without similar commitments from countries like China. The anticipated withdrawal of the United States from future funding agreements has further complicated negotiations. Among the proposed solutions, multilateral development banks (MDBs) such as the World Bank, which are undergoing reforms to increase their lending capacity, have pledged to ramp up their climate finance to $120 billion annually by 2030, with an additional $65 billion expected from the private sector[6].

Additionally, there is growing support for raising fresh funds by taxing polluting sectors such as aviation, fossil fuels, and shipping, although a formal agreement on this is yet to be reached.

The Irish delegation to COP29, led by Minister Eamon Ryan, is focusing on key issues such as climate finance, adaptation, loss and damage, and mitigation[7]. While this focus is promising for advancing a low-carbon Irish economy and stepping up to address our role in the climate crisis globally, the effort required from businesses is substantial.

KPMG Ireland’s Michael Hayes highlighted that businesses are under immense pressure due to new reporting regulations such as the CSRD in Europe, SEC requirements in the USA, and ISSB standards globally[8]. Investors are increasingly prioritising greener businesses, consumers demand sustainable products, and employees seek to work for environmentally responsible companies.

Additionally, the Carbon Border Adjustment Mechanism (CBAM) in Europe adds further pressure by imposing tariffs on carbon-intensive imports like steel, aluminium, and cement. In this context, some businesses will emerge as winners in the transition, while others may struggle. However, those that prioritise their ESG agenda are more likely to succeed in this evolving landscape.

In summary

In conclusion, Ireland's strategic initiatives in finance, investment, and trade underscore its commitment to sustainability and economic resilience, aiming to maintain its attractive position for businesses in the global market.

However, these initiatives will have significant implications for businesses and corporates operating within Ireland and Europe alike. They will need to adapt to evolving policies surrounding ESG reporting and transition planning to remain competitive and sustainable.

For more insights and to explore how KPMG can support your business navigate the ever-changing regulatory landscape and develop a meaningful decarbonisation journey, get in touch with our team below today.