A look at investment problems in 2025

Ifnn– In 2025, two forces have simultaneously shaped global investment flows: the convergence of financial reporting standards under IFRS (and its sustainability-related frameworks) and the tightening of tax and tariff regimes in major economies. Together, these factors have raised the cost of capital in some sectors, increased regulatory uncertainty, but also improved transparency and comparability—making cross-border investments more attractive to institutional investors. Below is a structured overview of mechanisms, data-driven insights, and real-world examples from the United States, the United Kingdom, and Japan.

Mechanisms of Influence in 2025

IFRS and Information Quality

Greater comparability and reduced information asymmetry: Adoption of IFRS standards (especially IFRS 9, 15, 16, and 17 in insurance) has facilitated cross-border capital flows for non-U.S. firms.

Impact on cost of capital and risk coverage: Disclosure of credit/market risks under IFRS 9 and lease obligations under IFRS 16 has made financial statements more realistic. This slightly raised debt costs in some industries but improved risk assessment for institutional investors.

Sustainability standards: The integration of sustainability reporting with ISSB frameworks has strengthened London and Tokyo’s appeal to ESG funds, even though compliance costs remain high.

Tariffs and Industrial Policy

Strategic tariffs (especially U.S.–China): Technology-related tariffs and restrictions on semiconductor and advanced equipment exports have fragmented supply chains, redirecting FDI toward lower-risk jurisdictions with strong industrial incentives.

Geographic reallocation of investment: Rising “nearshoring” and “friendshoring” in Europe and East Asia, focusing on supply security and reduced sanction/tariff risks.

Tax Tightening

Global minimum tax (15% effective rate): Multinationals can no longer rely on low-tax jurisdictions, shifting investment decisions toward infrastructure, skills, and regulatory stability.

Enhanced oversight and anti-avoidance: Country-by-country reporting and stricter transfer pricing rules have reduced profit-shifting margins, increasing incentives for real investment in CapEx and R&D.

Comparative Snapshot 2025: U.S., U.K., Japan

Real-World Examples

IFRS 17 in Insurance (Europe/U.K./Japan): Full implementation since 2023, operational maturity by 2025. Profitability ratios were restated; insurers adjusted portfolios to reduce earnings volatility. Cost of capital initially rose, but access to long-term institutional capital improved.

Global Minimum Tax (GLoBE) and FDI Geography: Multinationals in tech and pharma shifted focus from tax optimization to ecosystems with strong R&D and skilled labor (U.K.: R&D incentives; Japan: advanced industrial chains).

Technology Tariffs and Supply Chain Reallocation: Export restrictions redirected semiconductor capacity to Japan/Korea and expanded investment in Europe. The U.S., via the CHIPS Act, attracted green and chip investments, though projects remain dependent on skilled labor and regulatory timelines.

Sustainability Standards and ESG Flows in London: Integration of ISSB-aligned sustainability disclosures attracted ESG portfolio flows to U.K./EU firms with stronger transparency. Compliance costs are high, but valuation premiums in clean industries are evident.

Macro-Level Outcomes in 2025

Selective investment and reduced FDI dispersion: Capital flows concentrate in jurisdictions with stronger reporting transparency (IFRS/ISSB), robust R&D ecosystems, and clear industrial policies. High-risk tariff/sanction zones see relative declines.

Dual cost of capital: Elevated interest rates in early 2025 and compliance costs for IFRS/sustainability delayed marginal projects. Yet firms with strong disclosures enjoy better debt spreads.

Sustainability as a prerequisite: ESG disclosure is now a “ticket to entry” for major funds. Non-compliance raises capital costs and limits access to London/Tokyo markets.

Policy Note Recommendations

Data pillars:

FDI and portfolio flows (UNCTAD, IMF WEO 2024/2025)

Effective corporate tax rates and global minimum tax adoption (OECD Tax Database 2025)

Cost of capital indicators (IMF, Fed, BoE, BoJ)

IFRS/ISSB adoption reports (IFRS Foundation, FCA, JSDA)

Geopolitical/tariff analysis (Atlantic Council reports on strategic technology/export controls)

Outputs:

Comparative country–policy–capital cost–FDI table

Charts: effective tax rates, FDI flows by sector, valuation premiums for sustainability disclosures

Case studies: IFRS 17 impact on a European insurer; CHIPS Act semiconductor project in the U.S.

Sources and Methodology

This analysis draws upon insights from major international organizations and financial institutions, including the IMF World Economic Outlook (2024/2025), UNCTAD World Investment Report (2025), OECD Tax Database (2025), IFRS Foundation and ISSB bulletins, and Atlantic Council reports on industrial policy and technology trade restrictions.

Note: The Data, translation, of this text were prepared with the assistance of artificial intelligence tools, ensuring clarity,

comparability, and accessibility for a general investor audience.

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