CYIL vol. 13 (2022)

MONIKA FEIGERLOVÁ CYIL 13 ȍ2022Ȏ regulate in social and environmental matters. 77 Second, investment norms can contribute to the objective of sustainable development by incentivizing investments in economic activities that are ‘green’. The latter incentive function has been primarily realized at the domestic policy level. The question that is posed in this contribution is whether international investment agreements can also have such positive effect on green investment promotion and facilitation and can help the domestic investment legislation to be effectively implemented. Protection provided by the IIAs’ to a ‘sustainable development friendly investment’ would clearly signal a host State’s goals and its policy priorities. Especially developing countries that need to attract foreign investment can tailor the definition of investment and develop criteria for sustainable development friendly investment to target desired assets and projects by only granting protection to investments that bring relevant benefits to the host country (e.g., technology and know-how, infrastructure, jobs). Economic development, social development, and environmental protection are interdependent and mutually reinforcing components of sustainable development. The concept of sustainable development can thus concern many other provisions of the IIAs than just the definition of investment, including, for example, the right to regulate, the incorporation of references to multilateral environmental agreements and labour conventions, requiring an environmental or climate impact assessment of the investment projects, imposing obligations on investors (responsible business practices in line with the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises), or incorporating race-to-the bottom clauses that disallow relaxing existing environmental standards in order to encourage investment. Conclusion It is estimated that transitioning to a low-carbon and climate resilient economy by mid century will require significant investment, including private sources of capital on a much larger scale than ever before. Ensuring that the investment contributes to decarbonisation, climate neutral economy, and sustainable development is all the more important when countries face various social, pandemic, and environmental challenges. The legal framework for foreign direct investment is primarily a matter of domestic policy. Nevertheless, international investment agreements could also play a positive role and push for climate resilient investments or investments which further sustainable development. Support for green investment under IIAs can complement other efforts to remove barriers to green investment, such as frequently reported lack of transparency and standards. In general, there is no unique definition and common understanding among (foreign and domestic) investors and governments of what green investing entails. There have already been efforts to define ‘green’ activities in various policy areas and by various fora. A number of countries have adopted taxonomy on sustainable activities to support climate action with little or no direct linkage to foreign direct investment policies.

77 For an overview of provisions usually contained in the IIAs that can have sustainable development implications see e.g., SCHACHERER, S., HOFFMANN, R. T. International investment law and sustainable development. In: KRAJEWSKI, M. and HOFFMANN, R. T. Research Handbook on Foreign Direct Investment . Cheltenham: Edward Elgar Publishing, 2019, pp. 570–580.

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