Investment Treaties and Climate Change: Supporting climate-friendly investment and policy space for climate action - 08 June 2022

The Regional Centre of Excellence (‘RCE’) of the Financial Services Commission, Mauritius (‘FSC’) in collaboration with the Organisation for Economic Co-operation and Development (‘OECD’), has the pleasure to invite you or a representative(s) from your organisation to attend a joint virtual workshop on “Investment Treaties and Climate Change: Supporting climate-friendly investment and policy space for climate action” on Wednesday, 08 June 2022 at 13.00-16.00 hrs (Mauritius Time).

Overview of the Workshop

The Challenge of Climate Change

Climate change is a defining challenge for government policymakers and our societies.  It was once, mainly considered an environmental issue, but now it has existential economic and security implications.

The 2015 Paris Agreement includes two key innovations amongst many others. First, governments set a clear objective of less than 2 degrees Celsius warming, with a stretch objective of 1.5 degrees. It is generally recognised that to achieve 1.5 degrees, global greenhouse gas emissions will need to be ‘net zero’ by 2050. Second, governments expressly identified the objective to make “finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” (Paris Agreement, art. 2.1(c)).

In its 2021 report, the Working Group II of the Intergovernmental Panel on Climate Change (IPCC)   concluded that humanity may struggle to adapt to the consequences unless emissions are quickly reduced.

“Any further delay in concerted anticipatory global action… will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all.”^[1] The report, approved by 195 governments, found that the dangers from climate change are bigger and unfolding faster than previously expected.

Yet, global emissions continue to accumulate rapidly, with 2021 emissions’ expected to be only slightly lower than the record 2019 levels – while UN Environment Programme reports that a 55% reduction in emissions by 2030 en route to zero in 2050, is needed to remain on track.

The recognised urgency for public policy interventions has generated a broad range of government commitments to take action on climate, albeit with still limited effects on emissions to date. Attention has expanded from environment ministries to finance ministries, trade ministries, and central banks.

Investment treaties

Investment treaties (including investment provisions in broader trade agreements) typically provide covered investors with insurance-type protection from government actions such as discrimination, uncompensated expropriation of property, denial of justice, or limitations on rights to transfer capital.

Many treaties also apply or have been interpreted to apply to a range of non-discriminatory government actions.

The drafting and scope of covered investment protections are not uniform among investment treaties worldwide; some contain more precise and narrowly-drafted provisions.

In Investor-State Dispute Settlement (ISDS), a covered investor generally has access to an arbitral tribunal to seek remedies if it alleges that the government has violated the treaty provisions on protection. Claimants, typically seek damages including lost profits which are available under prevailing interpretations.  ISDS arbitration awards are enforceable by domestic courts including against the assets of award debtor governments around the world under applicable treaties.  Most investment treaties provide coverage to investors in all sectors without regard to climate considerations.

Session 1

Investment treaties and climate change – impact on government policy space for climate measures

Speakers:

• Federico Ortino, King’s College London, “Overview of investment treaties and government policy space, and specificities in the climate policy context” (TBC)

• Suzy Nikiema, International Institute for Sustainable Development (IISD), “Recent developments and policy proposals to address government policy space in investment treaties” (TBC)

The first session of the workshop will consider the impact of investment treaties on government “policy space” from the perspective of climate change.  Many recent investment treaty developments have been driven by the quest for a balance between investor protection and governments’ right to regulate.

Efforts to achieve this balance have inspired innovation in treaty policy, led some countries to exit investment treaties perceived as outdated, and informed treaty policy and practice worldwide.

Several climate specificities, however, may invite revisiting some elements of the debate: (i) there is a recognised need for many profound and rapid regulatory changes to address the climate crisis; (ii) the long-term nature of many climate threats, powerful lobbies and a range of other factors make the political economy of climate measures particularly challenging; and (iii) emissions anywhere have a global impact. Each government concerned with climate change has an interest in the more than 2,500 investment treaties.

The session will look at new policies that governments have included in their treaties to address concerns about policy space, whether they take account of climate specificities, whether they have been effective, and whether new policies are under consideration.  It will also consider whether investment treaties could play a role in strengthening domestic climate policies.

 Session 2

 Investment treaties and climate change – alignment of finance flows

 Speakers:

• Butch Bacani, Programme Leader, UNEP Principles for Sustainable Insurance Initiative, “The UN Principles for Sustainable Insurance and its Net-Zero Insurance Alliance” (TBC)

• David Gaukrodger, Senior Legal Adviser, Investment Division, OECD, “The alignment of finance flows under the Paris Agreement” (TBC)

• Dr Drishtysingh Ramdenee, Economic Development Board, (TBC)

The discussion in the second session of the workshop will consider whether portfolios of counterparties (covered investors) under investment treaties need to be aligned with the Paris Agreement and net zero, current degrees of alignment of portfolios as seen by governments, experts, and stakeholders, and possible areas for action. The discussion will include consideration of the comparative importance of Paris alignment for governments and private entities.

Led by the Financial Stability Board (FSB) and its Task Force on Climate Disclosure (TCFD), governments, businesses, and many others have intensively focused their work on finance flows and the climate since the 2015 Paris Agreement. Recently, better disclosure and a heightened sense of urgency have led to growing public and private sector commitments to net zero and Paris alignment.

As other public sector financial actors that provide insurance services are seeking to align with the Paris Agreement and net zero, attention to Paris alignment may be overdue for investment treaties. Recent editorials and articles in the business press have explicitly called for a rethink of investment treaty policies since they are perceived to interfere with the alignment of finance flows with climate goals:

The prospect of “bailing out” fossil fuel projects risks disincentivising the steps needed now, from both markets and government, to secure swift decarbonisation. … As figures from Mark Carney to John Kerry have made clear, any hope that we have of transitioning away from carbon at the necessary pace will rely on private markets. Capital must be allocated quickly towards renewables. … [G]overnments will confuse things if they pay up in a way that means fossil fuels cannot lose. While renewables will remain the safe play long-term, the pace of capital’s shift away from fossil fuels may decrease.[2]  

The discussion will consider whether investment treaty policymakers can learn from the net zero alignment activities of other actors with influence on finance flows.

The workshop is targeted at investment and climate policymakers, investors, financial institutions and actors, civil society representatives, and academics from around the world. It builds on the OECD’s ongoing work on these issues with governments, experts, and stakeholders.

1           IPCC Working Group II Sixth Assessment Report, “Climate Change 2022 – Impacts, Adaptation and Vulnerability – Summary for Policymakers”.

2           Financial Times editorial board, Governments should not foot the bill for stranded assets: Treaties that lead to fossil fuel bailouts need a rethink (21 Feb. 2022).

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Agenda

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Mr. Winfrid Blaschke

Deputy Head Investment Division, OECD

He is the Head of the Investment Standards & Capital Flows Unit and Deputy Head of the Investment Division at the OECD. Prior to joining the OECD, he worked at the European Commission (on financial regulation and trade and investment issues), at the European Central Bank (on financial stability), and as an economist at the IMF (on the launch of the Financial Sector Assessment Program and on stress testing). Before switching to the public sector, he worked in the private financial sector, at the Chicago Board of Trade and at Citibank.

Mr. David Gaukrodger

Senior Legal Adviser, Investment Division, OECD

He leads OECD policy analysis on investment treaties and works with OECD, G20 and other governments.

His current work addresses the Future of investment treaties with a focus on investment treaties and climate change. He worked earlier on the OECD Anti-Bribery Convention.

He has also helped in designing a G20-mandated peer review system to evaluate compliance with international standards for the exchange of tax-related information.

David was previously a Special Counsel with Sullivan & Cromwell LLP. He graduated from Sciences Po Paris with a “mention lauréat” and obtained law degrees with distinction from the University of Toronto and the Université de Paris I. He was a law clerk for Justice Gerard La Forest at the Supreme Court of Canada.

Mr. Dhanesswurnath Thakoor

Chief Executive, Financial Services Commission, Mauritius

He is the Chief Executive of the FSC Mauritius since 18 May 2020. He spearheaded results-driven initiatives at the level of FSC Mauritius to complete the action items to address strategic deficiencies identified by the FATF. These efforts have been instrumental for Mauritius to exit the FATF grey-list in October 2021.

Mr Thakoor has been at the forefront in the establishment of modern regulatory frameworks such as Peer-to-Peer Lending, Special Purpose Fund and robotic and artificial intelligence-enabled advisory services. He also spearheaded a number of digitalised-driven projects amongst which are the FSC One platform and the National Insurance Claims Database project.

Prior to joining the FSC Mauritius, he held the post of Assistant Director - Payments Systems and the Mauritius Credit Information Bureau at the Bank of Mauritius (BoM). He was also a member of the internal Fintech Committee and a member of the National Regulatory Sandbox License technical committee at the BoM.

Mr Thakoor represents the FSC Mauritius in a number of international regulatory bodies and committees including the International Organisation of Securities Commissions, the International Association of Insurers Supervisors, the International Organisation of Pension Supervisors and the Southern African Development Community (SADC) and Committee of Insurance, Securities and NonBanking Financial Authorities.

Mr Thakoor is a member of the Core Group for AML/CFT, the National AML/CFT Committee, the Interagency Coordination Committee, the National Regulatory Sandbox Licence Committee, the National Sanctions Committee, and the National Committee on Corporate Governance, the FSC Regional Centre of Excellence Governing Board and the Financial Reporting Council.

He holds a Masters’ Degree in Information Technology, Electronics and Systems Automation from Polytech Lille - France (Ex Ecole Universitaire d’Ingénieurs de Lille) and an MBA with Specialisation in Finance. He has over 25 years of Central Banking experience.

Professor Federico Ortino

King’s College London

He is a Professor of International Economic Law, and Associate Director of Centre for International Governance and Dispute Resolution (CIGAD) at The Dickson Poon School of Law, King’s College London.

He is a member of the ILA Committee on the Rule of Law and International Investment Law; founding Committee Member (and former co-Treasurer) of the Society of International Economic Law; consultative member of the Investment Treaty Forum; one of the general editors of the International Trade and Investment Law Series with Hart Publishing; editorial board member of the Journal of International Economic Law, Journal of International Dispute Settlement and Journal of World Investment and Trade.

He has been involved as expert in projects with UNCTAD, ITC, OECD, IISD, and WEF. He is a Consultant to Clifford Chance.

Dr. Suzy Nikièma

International Institute for Sustainable Development (IISD)

She is the Lead, Sustainable Investment for the Economic Law and Policy Program (ELP) at the International Institute for Sustainable Development (IISD), and ELP's regional coordinator in Africa.

She provides legal and policy advice, as well as technical assistance on sustainable investment to developing country governments, with respect to the negotiation, implementation, and drafting of investment treaties and treaty templates, and has published widely on the subject.

She has assisted countries in designing their domestic investment laws. Suzy Nikièma has also led a number of training sessions on mining issues in Africa on behalf of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). Suzy is the Editor-in-Chief of the French edition of Investment Treaty News (ITN).

She is a lecturer on investment law and mining law at the University Saint Thomas d'Aquin (USTA) and University Aube Nouvelle (U-AUBEN), both in Burkina Faso.

Mr. Butch Bacani

Programme Leader, UNEP Principles for Sustainable Insurance Initiative

He leads UN Environment Programme’s (UNEP) Principles for Sustainable Insurance Initiative (PSI), the largest collaboration between the UN and the insurance industry endorsed by the UN Secretary-General and insurance industry CEOs.

He leads initiatives that contribute to achieving the Paris Climate Agreement, UN Convention on Biological Diversity, and the UN Sustainable Development Goals (SDGs).

These include creating the Net-Zero Insurance Alliance, supporting the Glasgow Financial Alliance for Net Zero (GFANZ), convening the world’s leading insurers to pilot the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), championing nature-positive insurance, developing “Insurance SDGs”, creating a Sustainable Insurance Facility with V20 finance ministers for the most climate-vulnerable countries, and working with the California Insurance Commissioner to develop the world’s first sustainable insurance roadmap.

He co-led the development of the first global sustainability guide for the insurance business, the creation of the UN-convened Sustainable Insurance Forum for regulators and supervisors, and forged the PSI’s partnership with the world’s inclusive insurance community. He was part of Insurance ERM’s inaugural list of the most influential people leading and shaping the insurance industry’s response to climate change.

Butch has authored pioneering studies on sustainable insurance and responsible investment. Prior to the UN, he was in the insurance industry for over a decade. Butch is also involved in the InsuResilience Global

Partnership, Insurance Development Forum, California Climate Insurance Working Group, Microinsurance Network, and World Benchmarking Alliance.

Dr Drishtysingh Ramdenee

Head, Services and Emerging sectors Directorate, Economic Development Board of Mauritius

The Directorate oversees such clusters like seafood, fisheries and aquaculture, port development, ocean activities, ICT, Knowledge, Agro Industry, Innovation, Renewable Energy, Creative Industries, Sports Economy, Biotechnology, Deep Ocean Water Applications and other emerging sectors. Dr Ramdenee also oversees the innovation department namely with regards to innovative and technical projects as well as requests falling under the Regulatory Sandbox licence. Drishty Ramdenee is an author of more than 50 scientific publications and co-authored the ‘Advances in Wind Power’ edited by Rupp Cariveau. He has also been three times recipient of the University level entrepreneurship award for the Bas St Laurent region (Canada) and won the national level Force Avenir award for Science and Technology in 2012. Dr Ramdenee has expertise in the energy sector namely as a Canada trained mechanical engineer in thermodynamics and aero elasticity. He worked on several projects pertaining to renewable energies and thermodynamics and headed the Quebec’s institute of industrial maintenance till mid-2016.  

Dr Drishtysingh Ramdenee is also presently, the officer in charge of the Mauritius Institute of Biotechnology Limited (MIBL).

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Highlights of the workshop

The RCE of the FSC Mauritius in collaboration with the OECD, thank you for attending the virtual workshop on “Investment Treaties and Climate Change: Supporting climate-friendly investment and policy space for climate action” on Wednesday, 08 June 2022.

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Mrs. Namratta Seetamonee Sewnundun on rce@fscmauritius.org or by phone Ms. Kirti Tohul, (230) 4045652 or (230) 4037000 Ext: 7253

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