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Relationship Between Pillars of Sustainability and Foreign Direct Investment Inflows: Evidence From Emerging Economies

Author

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  • Tusharika Mahna
  • Sonali Jain
  • Surendra Singh Yadav

Abstract

The study highlights the sustainable determinants of Foreign Direct Investment (FDI) inflows that the host nations entail by boosting foreign trade with the rest of the world. We cumulate four pillars of sustainability (environmental, economic, governance, and social) and identify the influence each pillar has on FDI inflows. The study uses a two‐step system and difference Generalised Method of Moments (GMM) to assess the dynamic panel data for the top 20 emerging nations specified by IMF from 2005 to 2019. The results exhibit that past year values of FDI inflows influence the current year values, and a significant relationship exists between sustainable determinants and FDI inflows arriving in emerging economies. The pollution haven hypothesis has also been observed by deploying linear and non‐linear associations of carbon emissions. Through the findings, we conclude that the quality of FDI must improve for host nations to prosper along the other dimensions of sustainability. The results also suggest that host countries' MNEs and businesses adopt sustainable practices and innovative strategies to automate FDI towards the attainment of sustainable development goals (SDGs) by 2030. The implications will aid host economies' policymakers in reiterating the sustainable determinants of FDI and foreign investors in acknowledging the choice of the economy to invest in.

Suggested Citation

  • Tusharika Mahna & Sonali Jain & Surendra Singh Yadav, 2025. "Relationship Between Pillars of Sustainability and Foreign Direct Investment Inflows: Evidence From Emerging Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 3044-3063, July.
    • Handle: RePEc:wly:ijfiec:v:30:y:2025:i:3:p:3044-3063
    DOI: 10.1002/ijfe.3057
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