Document Type

Memo/Briefing Note

Publication Date

8-2022

Abstract

As developing countries continue to be the most negatively affected by climate change and the energy transition, it is increasingly critical that they receive foreign direct investment and financial support to build climate resilience, adapt to climate impacts, avoid carbon lock-in and fossil fuel dependence, and leverage their rich endowments of renewable and extractive resources to prepare for the zero-carbon future.

There is a disconnect and fundamental misalignment between international investment law and the international climate change regime, comprising the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. Existing investment treaties—including their centerpiece, investor–state dispute settlement (ISDS)—are hostile to states’ ability to address the climate crisis and build a zero-carbon future. Investment treaties and ISDS will deter, delay or water down states’ climate-related measures, and increase their costs for states.

This briefing details how attempts to “re-balance” the international investment regime by refining investment protection and arbitration provisions do not address the fundamental misalignment of investment treaties with both climate goals and the broader sustainable development agenda. States can design treaties that support their national and global goals, reinforcing investment governance in treaties that can:

  • Promote specific climate-aligned investment, by identifying the barriers to such investment and fostering international support;
  • Strengthen governance of investment to minimize harms and leverage potential benefits; and
  • Encourage and facilitate cooperation.

Disciplines

Environmental Law | International Law | Law

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