In this session, senior climate, energy and financial policy leaders provided investment treaty policy makers with analysis of the climate crisis, the Paris Agreement and other government climate commitments. They discussed the importance of emissions generated or supported by different economic sectors covered by investment treaties, and the development of net zero pathways. They also described recent climate policy action and developments relevant to international investment policy, and the urgency of broad-based and consistent climate action across different policy areas.

This session identified obstacles to Paris and Net zero commitments for investment treaty policies and how they could be addressed. It drew on insights and experiences from other actors and policy areas with influence on finance flows. The nature of government action at issue in investment treaty policies was considered from the perspective of climate commitments. Building on work to date at the OECD on art. 2.1(c) of the Paris Agreement and investment treaties, as well as increasing attention to art. 2.1(c) elsewhere, the discussion considered the finance flows associated with investment treaties, their relation to climate policies and developments in finance flow alignment. The discussion also drew on the 2022-2023 survey of climate policies for investment treaties.

Climate action following Paris or net zero commitments by public and private financial actors includes immediate action in the short-term, normally focused on reducing the provision of services or support to high-carbon activities. Climate action today rather than tomorrow has major long-term climate benefits; delay is correspondingly harmful. The existence of easily-identified unaligned activities can facilitate immediate action, and the need for results by 2030 adds urgency. Track 1 discussions have taken note of the proposed climate-based sectoral carve-outs and climate-based withdrawal from a major investment treaty due to continued excessive coverage and promotion of fossil fuels. This session considered policy issues and proposals relating to climate-based carve-outs of fossil fuels.

Climate action requires substantial regulatory change and faces substantial political economy hurdles: investment treaties should ideally encourage and at least not dissuade necessary government climate action. Attention to policy space and government incentives is thus important for remaining areas of sectoral coverage or for investment treaties with sectoral coverage not yet subject to any alignment. This session compared different approaches and proposals to address incentives for government climate action beyond sectoral coverage. The session considered the potential role of implementation mechanisms for investment treaties in Paris and Net zero alignment. In addition, the recent development of treaty-based investment facilitation were considered as an additional complementary policy from the perspective of the Paris Agreement.

The concluding session gathered key ideas from the discussion and consider the way forward.