LEVERAGING FOREIGN INVESTMENTS TO SUPPORT CLIMATE CHANGE ADAPTATION IN THE GLOBAL SOUTH: CERTIFYING CLIMATE-NEXUS INVESTMENTS AND CONDITIONING PROTECTIONS.

• Author: Pavlik, Zachaey

1. INTRODUCTION 205 II. A COMPLICATED WEB: COLONIAL AND IMPERIALIST ROOTS, THE GLOBAL CLIMATE CRISIS, AND THE CURRENT STATE OF MULTILATERAL CLIMATE AND INVESTMENT AGREEMENTS 207 A. Colonialism Still Affects Global South Capacity for Climate Change Adaptation 208 B. A Delicate Balance: Pressure on Global South States to Decarbonize and the Fundamental Need for Development 210 C. The Climate Change Regime Promises Climate Support but Is Insufficient 213 III. THE STATUS QUO: IIAS PROMOTE INVESTMENTS BUT DO LITTLE OR NOTHING TO FURTHER CLIMATE CHANGE GOALS 215 A. IIAs Promote Investments, Including "Climate-Nexus" Investments, That Are Fundamentally Connected to Climate Change 216 B. Current Approaches to IIAs Are an Important Beginning but Leave Many Holes 218 1. Environmental Protection in Preambular Language Is Necessary but Not Sufficient 218 2. CSR Language: Another Key Ingredient in the Mix 219 3. Existing Exception Provisions Do Not Provide Adequate Regulatory Space for States to Protect Environmental Interests 220 IV. A PATH FORWARD: CONDITIONING IIA PROTECTION FOR CLIMATE-NEXUS INVESTMENTS ON CERTIFICATION 222 A. Required Elements of Successful Redrafting Language 222 1. States Should Establish a Clear Regulatory Interest in the Environment 222 2. States Should Lay Forth Unambiguous, Reasonable, and Transparent Parameters 223 3. Any Provision Should Include an Effective Enforeement Mechanism 224 4. Climate Conditioning Language Is Strongest as a Discrete, Standalone Article 226 B. Effective Conditioning for Climate-Nexus Investments: Sample Language 227 V. IDENTIFYING AND OVERCOMING CHALLENGES TO THE PROPOSED INVESTMENT PARADIGM 231 A. Conditioning Climate-Nexus Investments Could Affect the Financial Viability of Investments for Investors 232 B. Global South States Risk Losing Foreign Investment Vital to Development 233 C. Certification Conditions, if Rejected by the Global North, Could Result in International Political Gridlock 235 D. Conditioning Investment Actions Is Both Feasible and Necessary 236 VI. CONCLUSION 237 I. INTRODUCTION

   Climate science increasingly highlights the tension between humanity's desire for development and the fundamental need to protect the environment. (1) Foreseen in 1992 and broadly identified in the United Nations Framework Convention on Climate Change (UNFCCC), (2) these tensions remain unresolved. Initial formulations of developed-state leadership, mitigation, and technological and financial support, embodied in the UNFCCC (3) and retained by the international climate regime, (4) are woefully insufficient to offset the adverse effects of climate change on many Global South (5) states struggling to adapt. For example, the United Nations Environment Programme (UNEP) estimates the annual climate change adaptation costs for Global South states will likely reach $160-340 billion USD by 2030, (6) a sum five to ten times greater than what finance pipelines currently provide. (7) In addition, attaining the 45% reduction in global greenhouse gas emissions required to keep planetary warming to the 1.5[degrees]C aspirational goal outlined in the Paris Agreement appears dubious when current pledges project no more than a 5--10% reduction. (8) Most Global North states are not on track to meet even these inadequate pledges. (9) The situation is dire and its circumstances are unprecedented.

   International investment law provides an avenue for scaling up financial resources to address climate change in the Global South. This body of law is an established component of the international legal landscape, with implementing instruments in 212 world economies. (10) Currently, 2,604 international investment agreements (IIAs) are in force; (11) additionally, in 2016 foreign direct investment (FDI) reached $1.75 trillion USD, with more than a third of that going to Global South states. (12) The international investment regime largely rejects environmental considerations, and conspicuously maintains traditional principles of economic efficiency and development as its core drivers. (13) Nevertheless, the nature of many international investments, especially in sectors implicating natural resources and extractive industry, makes the international investment regime and climate change fundamentally related. The former should incorporate the latter to achieve equitable climate development and responses in the Global South.

   The perpetuation of an artificial dichotomy between international investment law and environmental and climate impacts ignores the ways many international investments exacerbate climate change and affect vulnerable Global South communities. (14) This Note introduces the term "climate-nexus investments" to refer to investment activities that directly or indirectly exacerbate climate change and its effects, locally or globally, often as a result of the destructive nature of such investments. (15) It argues that Global South host states should take advantage of the demand for raw materials to secure capital for climate change adaptation and that investment capital channeled through IIAs presents a tool these states should leverage to mitigate the adverse environmental impacts of investments. (16) Specifically, Global South states should redraft IIAs to create a certification scheme for climate-nexus investments that conditions investment agreement protections upon certification. Climatenexus investments should trigger an obligation by investors to provide support to help offset the environmental and climate damage these investments cause in Global South host states.

   This Note explores how Global South states can, and should, leverage IIAs to secure climate benefits. Part II provides background on international investment law, investment agreements, and the climate crisis. It underscores the colonialist roots of the international investment regime's power imbalances and examines the shortcomings of current multilateral environmental agreements in providing the necessary climate support to the Global South. Part III highlights how international investments implicate environmental and climate issues, and the conspicuous absence of effective environmental considerations in IIAs. Part IV elaborates key features of an effective environmental and climate protection provision in an IIA and offers sample language for such a provision. Part V surveys potential obstacles to the proposed incorporation of environmental and climate interests into the international investment regime and ultimately concludes that, while significant, these obstacles can and must be overcome.

2. A COMPLICATED WEB: COLONIAL AND IMPERIALIST ROOTS, THE GLOBAL CLIMATE CRISIS, AND THE CURRENT STATE OF MULTILATERAL CLIMATE AND INVESTMENT AGREEMENTS

   Far from being a unique phenomenon, the disadvantages many Global South states experience while struggling to effectively confront climate change arise from the same systematized and institutionalized Western imperialist and colonialist structures responsible for the disparity in power, wealth, and capacity in other realms of contemporary relations between the hemispheres. (17) Global South states experience more adverse effects from climate change due to geographical position and dependence on sectors, such as agriculture, that are dramatically affected by a changing climate. (18) They also have less capacity to implement the expensive and technical adaptations required to effectively confront climate change. (19) Though many multilateral environmental agreements address these economic disparities by requiring Global North states to provide financial resources and technologies to Global South states, (20) treatment of Global South states trends towards equality and not equity, yielding insufficient results. (21)

   1. Colonialism Still Affects Global South Capacity for Climate Change Adaptation

      The colonialist period was defined by widespread exploitation of the labor (i.e., people), land, and natural resources of the Global South by the Global North and set Western ideas of economics and markets as the metrics for measuring wealth and power. (22) It essentially established an economic relationship between the Global North and Global South cementing the Global North as the consumer and the Global South as the provider of raw materials. (23) The respective capacities and roles of Global North and Global South states reflect this dynamic within the contemporary international investment regime, in which Global North states largely export capital while Global South states import capital. (24) Ultimately, colonialism gave Global North states the financial and political agency to become capital-exporting states and boxed Global South states into the role of capital-importing states, making any chance of redefining these roles increasingly difficult.

      One consequence of this colonialist legacy is the different capacities of states to adapt to climate change. The resource-poor and agriculture-dependent Global South is disproportionately vulnerable to climate change and relatively unable to adapt to its effects. (25) Despite only accounting for 13% of the global population, 18% of climate-related disasters occur in Least Developed Countries (LDCs), (26) and these countries suffer a hugely disproportionate 69% of deaths resulting from climate-related disasters. (27) Climate change is an expensive problem. (28) Global North states confront the capital-intensive challenges of the climate crisis from a relatively well-situated position, due in part to vast available capital, technological expertise, robust infrastructure, strong medical networks, and comprehensive trade and economic systems. (29) For the Global South, development decisions require an additional balancing of priorities and the choice often becomes one between confronting climate change or developing fundamental infrastructure. (30) Global South states often must look to foreign capital for funds to combat the climate...