Management consulting firm Kearney's ‘2026 Foreign Direct Investment Confidence Index’ reflects a global investment environment shaped by intensifying geopolitical tensions, expanding industrial policy and accelerating technological competition.

The survey shows that companies are committed to international investment despite mounting uncertainty, with 88% of respondents saying they plan to increase FDI over the next three years, which signals sustained confidence in long-term global opportunities.

The recent escalation of conflict in the Middle East adds a layer of uncertainty to the global investment environment, with the potential to disrupt, delay or redirect FDI flows, depending on how risks evolve, the report says.

“Capital continues to flow, but companies are becoming more selective about where they invest as they weigh technological capabilities, geopolitical risks and the growing influence of industrial policy,” says Kearney Global Business Policy Council partner and MD and report co-author Erik Peterson.

“Investors still believe in the value of FDI, but they are recalibrating how they make their decisions in a more turbulent operating environment.”

Executives remain alert to rising global risks, even as investment intentions are strong. Geopolitical tensions rank as the most likely development over the next year, as reported by 36% of respondents, followed by commodity price increases and political instability in developed markets at 30%.

Simultaneously, industrial policy is playing a central role in shaping investment decisions, with 84% of investors saying industrial policy is extremely or very important in determining where they invest, and 57% believing it has a positive impact on their company’s business performance.

However, nearly nine in ten investors report at least moderate business risk from competing national industrial policies, which underscores the complexity created by overlapping policy frameworks, the report outlines.

Further, investors view infrastructure development and tax incentives as the most effective industrial policy tools, with about 80% saying infrastructure investment is effective in achieving economic and security goals, while enthusiasm for tariffs and export controls is significantly lower.

“Industrial policy is reshaping the global investment landscape and fast becoming a key factor in FDI decision-making,” says Kearney Global Business Policy Council principal and report co-author Terry Toland.

“Investors are weighing the opportunities created by subsidies and other policy incentives with the complexity of competing industrial policies across markets.”

Meanwhile, the report shows that technological and innovation capabilities rank as the most important factor influencing where companies choose to invest, surpassing traditional considerations such as regulatory efficiency and domestic economic performance.

Investors cite technological innovation as the strongest or tied strongest reason to invest in ten of the 25 markets on the Index, underscoring the growing importance of innovation ecosystems in attracting global capital.

As investment in AI, digital infrastructure and data-driven technologies accelerates worldwide, markets with strong innovation ecosystems are increasingly viewed as the most attractive destinations for long-term investment, Kearney notes.

Investors' preference for technologically advanced economies is evidenced by the US maintaining its position as the world’s most attractive destination for foreign direct investment for the fourteenth consecutive year.

Investors continue to cite the country’s technological leadership and economic resilience as key reasons for investing.

LOCATION, LOCATION

However, despite the US maintaining its top ranking, investor sentiment has softened, with net optimism about the market’s three-year economic outlook falling by 17 points compared with 2025.

Further, Canada holds the second position for the fourth year in a row and continues to close the gap with the US. Investors point to Canada’s natural resource base, stable economic fundamentals and growing technology capabilities as key strengths.

Similarly, Asia shows particularly strong momentum in this year’s rankings. Japan rises to third place, supported by investor confidence in its innovation ecosystem and targeted investment incentives. China climbs to fourth, reflecting the scale of its domestic market and its continued progress in technology development.

Asia claims the largest share of markets on the Index for the first time in more than a decade. The shift underscores a growing investor focus on markets that combine technological capability, economic growth potential, and geopolitical relevance.

Additionally, so-called middle power economies are also gaining prominence in this year’s results, Kearney notes.

Singapore posts one of the most notable improvements in the rankings, while South Korea also climbs in the Index, reflecting strong investor interest in its technological innovation and advanced industrial capabilities.

These markets are viewed as strategic investment hubs, offering growing roles in global supply chains.

The report shows that emerging markets remain dynamic and increasingly interconnected with global investment flows. China, the United Arab Emirates (UAE) and Saudi Arabia rank as the top three markets on the Emerging Markets Index for the third consecutive year, while Thailand and Malaysia posted some of the largest gains in the rankings amid ongoing supply chain diversification.

Several emerging markets, including China, the UAE, Brazil, Mexico, Thailand, Malaysia and India, also appear on the global rankings, which highlights the growing overlap between global and emerging investment destinations.

Investor sentiment toward emerging markets has improved modestly year over year, with investors expressing the strongest optimism about the economic outlook for markets such as the UAE and Thailand.

The results suggest that more companies are looking beyond traditional investment hubs as they expand supply chains and pursue growth opportunities across a broader set of emerging markets, Kearney says.