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Sectoral FDI and environmental sustainability in Africa: the role of sustainable investment

Author

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  • Abdulrasheed Zakari

    (University of Wollongong)

  • Thanh Le

    (University of Wollongong)

  • Rabindra Nepal

    (University of Wollongong)

Abstract

Foreign direct investment (FDI), channeled effectively, has the potential to alleviate environmental pressures and strike a balance between economic advancement and environmental preservation. However, there has not yet been a study examining the impact of sustainable FDI and FDI inflows into key sectors, such as agriculture, manufacturing, and services on the environment in Africa. This study addresses the literature gap by exploring a dataset spanning 53 African countries from 1973 to 2021. Our findings reveal that environmental regulation plays a crucial moderating role in enhancing the positive impact of FDI on environmental quality in the agriculture, manufacturing, and service sectors. Additionally, we found that the channel through which FDI impacts environmental quality is sustainable FDI because of its power to reduce environmental degradation. These results highlight the need for targeted policies and sustainable FDI practices to promote greener economic growth and mitigate environmental degradation in Africa.

Suggested Citation

  • Abdulrasheed Zakari & Thanh Le & Rabindra Nepal, 2025. "Sectoral FDI and environmental sustainability in Africa: the role of sustainable investment," Empirical Economics, Springer, vol. 69(4), pages 1821-1850, October.
    • Handle: RePEc:spr:empeco:v:69:y:2025:i:4:d:10.1007_s00181-025-02813-1
    DOI: 10.1007/s00181-025-02813-1
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    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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