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An international law framework for climate-aligned investment governance

CCSI | January 2024

An international law framework for climate-aligned investment governance

by Martin Dietrich Brauch, Elena Klonsky, Fanny Marie Everard, and Qiaozi Guanglin,
with Tyler Alviano, Justin Cuddihey, and Mary Wang

Executive Summary

• International law is indispensable in promoting international cooperation and collective action to facilitate and govern the domestic and international investment flows necessary to achieve climate-aligned, sustainable development, and in removing roadblocks for domestic measures aimed at fostering climate investment within or across borders.

• International law evolved and is structured in specific and often self-contained thematic areas, many of which are or could be relevant to investment governance, but fragmentation may lead to overlooking that relevance or cause one area of international law to undermine goals of others.

• This working paper (1) identifies areas of international law that are or could be relevant to investment governance, (2) highlights points of inconsistency, and (3) proposes a framework to reform and integrate international law with the objective of promoting and facilitating climate investment flows and achieving climate-aligned regulation of investment (hereafter, ‘climate-aligned investment governance’).

• Section 1 (International Human Rights Law) and Section 2 (International Labor Law) illustrate the interdisciplinarity between climate-aligned investment governance and human rights, including labor rights. Rather than proposing reforms to these areas of international law, the sections highlight how the two areas must form the bedrock of an international law framework to achieve climate-aligned investment governance, informing the reform of other areas of international law.

• International Human Rights Law is critical to climate-aligned investment governance in ensuring that climate investment respects the rights, needs, and priorities of investment-affected individuals, local communities, and Indigenous Peoples, particularly in developing countries, through participatory and inclusive investment processes, access to justice, accountability mechanisms, and legal protections against human rights violations by foreign investors.

• International Labor Law is critical to climate-aligned investment governance in including trade unions, industry, labor representatives, affected communities, and all other relevant actors in the formulation, implementation, and monitoring of climate investment policies that respect, promote, and realize international labor rights, and committing to domestic action, such as through creating or strengthening social safety nets, targeted education and training programs, pension funds, and just transition funds.

• Section 3 recommends reforming International Investment Law for climate-aligned investment governance by terminating or withdrawing from investment treaties, withdrawing advance treaty-based consent to investment arbitration, neutralizing survival clauses, and refraining from negotiating new investment treaties that fail to align with climate action. It recommends overhauling the existing international investment regime in favor of support to domestic administrative and judicial systems to facilitate investment governance, timelines to swiftly phase out fossil fuel investments on the basis of fairness and equity, and the facilitation of financial flows for climate investment.

• Section 3 recommends reforming International Trade Law for climate-aligned investment governance by, among other measures, renegotiating provisions in international trade agreements that hamper states’ ability to adopt climate investment policies to drive the net-zero energy transition, liberalizing trade in environmental goods and services, expanding carbon pricing mechanisms (cap-and-trade systems and carbon taxes), cooperating on adopting border carbon adjustments, harmonizing greenhouse gas accounting and reporting throughout value chains, and swiftly phasing out fossil fuel subsidies.

• Section 4 recommends reforming International Intellectual Property Law for climate-aligned investment governance by adopting measures aimed at accelerating the development and deployment of technologies and capital for climate investment through formal commitment, dedicated financing, and incentives for innovation ; facilitating and expediting climate-related technology transfer and rights involving intellectual property management, protection, and enforcement ; and creating favorable trading conditions, loosened administrative processes, and financial mechanisms to foster the transfer of low-carbon, environmentally sound technologies.

• The scope and depth of areas covered, issues discussed, and reform solutions proposed in this working paper are non-exhaustive. We did not intend, and could not have intended, to provide complete and definitive answers or conclusions. The reflections in this working paper serve as a preface on the need for coherence in international law for climate-aligned investment governance. We invite and hope to inspire further thinking, research, and discussion on how to bridge gaps and build cohesion among these and other areas of international law relevant to climate-aligned investment governance.

Read the full paper (pdf)

 source: CCSI