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Report on the Swedish Foreign Direct Investment Act (2023:560) and its Alignment with Sustainable Development Goals

Introduction: A Framework for Secure and Sustainable Investment

The Swedish Foreign Direct Investment Act (2023:560), effective from 1 December 2023, establishes a comprehensive framework for screening investments in nationally significant sectors. Administered by the Inspectorate for Strategic Products (ISP), the Act serves to protect Swedish security, public order, and safety. This legislative measure is a critical component of Sweden’s commitment to building strong, accountable institutions, directly supporting Sustainable Development Goal 16 (Peace, Justice, and Strong Institutions). By ensuring that foreign direct investment does not compromise national stability, the Act creates a secure environment conducive to long-term sustainable economic growth, aligning with SDG 8 (Decent Work and Economic Growth). As of 21 June 2024, 632 notifications have been filed, with 16 cases proceeding to in-depth investigation, demonstrating the Act’s active role in governance.

Scope of Review: Protecting Critical Sectors for Sustainable Development

The FDI Act mandates the screening of investments in “activities worth protecting.” This broad scope is designed to safeguard the foundational elements of a sustainable and resilient society. The categories of protected activities are intrinsically linked to several Sustainable Development Goals.

Categories of Protected Activities and their SDG Relevance

1. Essential Services: This includes infrastructure, energy, health, and food supply chains. Protecting these sectors is fundamental to achieving SDG 9 (Industry, Innovation, and Infrastructure) and SDG 11 (Sustainable Cities and Communities) by ensuring the resilience and reliability of services vital for the population.
2. Security-Sensitive Activities: Covering military activities, airports, and electronic communication, this category directly supports SDG 16 by protecting the core functions of the state and its critical infrastructure from adverse influence.
3. Critical Inputs and Raw Materials: The oversight of prospecting, extracting, and refining critical materials is crucial for sustainable industrialization and responsible consumption, aligning with SDG 9 and SDG 12 (Responsible Consumption and Production).
4. Processing of Sensitive Data: In an increasingly digital world, protecting sensitive personal and location data is essential for safeguarding individual rights and maintaining trust in institutions, a key tenet of SDG 16.
5. Emerging and Strategic Technologies: Screening investments in fields like nuclear technology, aerospace, and advanced software fosters secure innovation, contributing to SDG 9 by ensuring that technological advancements benefit society without creating security vulnerabilities.
6. Dual-Use Products: Regulating products with both civilian and military applications is a direct measure to promote peace and security, reinforcing the objectives of SDG 16.
7. Military Equipment: Oversight of the military equipment sector is a core component of national security and contributes to a stable and peaceful society as envisioned by SDG 16.

Investment Triggers and Governance Framework

The Act establishes low notification thresholds to ensure comprehensive oversight, reflecting a robust governance model in line with SDG 16. This approach ensures that even minority investments are reviewed for their potential impact on national security and, by extension, on the stability required for sustainable development.

Notification Thresholds

• Acquisition of voting rights reaching or exceeding 10, 20, 30, 50, 65, or 90 percent.
• Acquisition of 10 percent in a new greenfield investment.
• Gaining control or significant influence through other means, such as board representation or veto rights.

The regime’s applicability to all investors, including those from Sweden and the EU, prevents circumvention and promotes transparent and equitable governance. While only investments from non-EU investors can be prohibited, the universal filing obligation strengthens the overall institutional framework. This process supports SDG 17 (Partnerships for the Goals) by creating a clear and secure framework for international investment partnerships.

Screening Procedure and Enforcement

The procedural framework is designed for timely and thorough review, balancing the need for security with the facilitation of responsible investment that contributes to SDG 8 and SDG 9.

Review Timeline

• Phase I: The ISP has 25 working days from a complete notification to clear the investment or initiate an in-depth investigation.
• Phase II: An in-depth investigation must be concluded within three months, with a possible extension to six months, to decide on clearance (with or without conditions) or prohibition.

The investor is obligated to file, and the target entity must inform the investor of this duty. A stand-still obligation prevents the completion of an investment prior to approval. Non-compliance can lead to administrative fines of up to SEK 100 million and render the investment void if prohibited. This enforcement mechanism underscores the strength of the institution, a cornerstone of SDG 16. For investments not subject to mandatory filing, the government retains the right to initiate a review ex officio for up to five years, a risk that can be mitigated through a voluntary consultation process.

Analysis of the Swedish Foreign Direct Investment Act and its connection to Sustainable Development Goals

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 9: Industry, Innovation and Infrastructure: The article directly connects to this goal by focusing on the protection of “activities worth protecting,” which include essential services like infrastructure, energy, and construction, as well as emerging and strategic technologies. The FDI Act aims to ensure that the development and control of this critical infrastructure and innovation remain secure.
• SDG 12: Responsible Consumption and Production: The Act’s coverage of “inputs and raw materials critical to Sweden and the EU” relates to the sustainable and secure management of natural resources. By screening investments in the prospecting, extracting, and refining of these materials, the policy contributes to national and regional control over critical supply chains.
• SDG 16: Peace, Justice and Strong Institutions: This is a central theme of the article. The establishment of the Swedish Foreign Direct Investment Act (2023:560) and the empowerment of the Inspectorate for Strategic Products (ISP) are direct examples of building effective, accountable, and transparent institutions. The Act’s purpose is to “safeguard Swedish security, as well as public safety and public order,” which is a core objective of SDG 16.
• SDG 17: Partnerships for the Goals: The article discusses a national policy (the FDI Act) that regulates international financial flows (foreign direct investment). This relates to creating policy coherence for sustainable development, where economic policies are aligned with national security and public safety objectives. The Act is a tool for managing global partnerships and investments in a way that supports national strategic interests.

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 9: Industry, Innovation and Infrastructure

  • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure. The article highlights that the FDI Act protects “essential services,” which include “infrastructure, energy, health, food supply chains, public transport and construction,” as well as “airports, power plants and electronic communication.” The screening process is designed to ensure this infrastructure remains resilient and secure from adverse foreign influence.

• SDG 12: Responsible Consumption and Production

  • Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources. The Act explicitly covers “inputs and raw materials critical to Sweden and the EU, including prospecting, extracting, refining and sales.” This demonstrates a policy aimed at securing the management of critical natural resources.

• SDG 16: Peace, Justice and Strong Institutions

  • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article describes the entire framework of the FDI Act and the role of the Inspectorate for Strategic Products (ISP). It details a clear, time-bound procedure for screening investments (Phase I: 25 working days, Phase II: three months), which is a hallmark of an effective and accountable institution.
  • Target 16.a: Strengthen relevant national institutions… to prevent violence and combat terrorism and crime. The Act’s stated purpose to “safeguard Swedish security, as well as public safety and public order” directly aligns with this target by strengthening a national institution (ISP) to mitigate security risks associated with foreign investments.

• SDG 17: Partnerships for the Goals

  • Target 17.14: Enhance policy coherence for sustainable development. The FDI Act is a clear example of policy coherence. It balances the economic goal of attracting foreign investment with the national goals of security and public safety, ensuring that one policy area does not undermine the other.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Existence of a national legal framework for investment screening: The article is entirely about the Swedish Foreign Direct Investment Act (2023:560). The existence of this law itself serves as a primary indicator that Sweden has established an institution and a process (relevant to Target 16.6) to protect critical infrastructure and resources (relevant to Targets 9.1 and 12.2).
• Number of investment notifications filed: The article explicitly states that “As of 21 June 2024, 632 notifications had been lodged for screening.” This figure is a direct quantitative indicator of the institution’s activity and the law’s implementation, measuring the volume of investments being reviewed.
• Number of in-depth investigations initiated: The text mentions that “the ISP had initiated in-depth investigations in 16 cases.” This serves as an indicator of the number of cases that were flagged as potentially problematic and required further scrutiny, reflecting the effectiveness of the initial screening phase (Phase I).
• Number of investments prohibited: The article notes that “no investment had been prohibited” as of the given date. This is a key outcome indicator for the screening process, measuring the ultimate enforcement action taken by the institution to protect national security.
• Scope of protected sectors: The seven categories of “activities worth protecting” (e.g., essential services, critical raw materials, emerging technologies) act as a qualitative indicator. This list defines the scope of the policy and shows which areas the government has prioritized for protection to ensure resilience and security.

4. Table of SDGs, Targets, and Indicators

Source: nortonrosefulbright.com