International investment agreements (IIAs) are increasingly incorporating new provisions seeking to support sustainable investment. Initially, these treaties mostly covered investment facilitation understood in its traditional sense, including matters ranging from transparency, exchange of information and streaming of administrative process to the establishment of national focal points to support foreign investors. More recent initiatives have, however, started to address broader measures on which states can rely to improve their own domestic climate for sustainable investment. Provisions of this type have appeared in the context of the negotiation of the World Trade Organization (WTO) Investment Facilitation for Development (IFD) Agreement, the conclusion of the Investment Protocol to the African Continental Free Trade Agreement (AfCFTA) and in the Sustainable Investment Facilitation Agreement (SIFA) between the European Union and Angola, among others.

While new IIA provisions on sustainable investment have the potential to position foreign direct investment (FDI) more closely with the Sustainable Development Goals (SDGs), it is important to identify the conditions under which their positive effects could materialise. Harnessing sustainable investment requires a whole-of-government approach, focusing on the adoption of policies that contribute to improving the climate for investment. The OECD (2022) Council Recommendation on Foreign Direct Investment Qualities for Sustainable Development (FDIQR), and the related guidance under the OECD FDI Qualities Policy Toolkit, sets out an ambitious framework, supporting governments in enhancing the impacts of FDI on inclusive and sustainable development. This instrument – which over 50 governments (both OECD and non-OECD members) have already adopted and are actively implementing – can, therefore, provide guidance on how to strengthen the consideration of sustainable investment in IIAs, with special focus not only on investment facilitation but also broader sustainable investment policy considerations.

The purpose of the report is to clarify the rationale for the inclusion in IIAs of provisions on sustainable investment and to determine how they align with international standards on sustainable investment, identifying areas where a stronger integration of sustainable investment objectives could be pursued. In this exercise, the report relies on the principles of the FDIQR, as one specific framework – among many existing ones – that seeks to support governments in maximising FDI’s contribution to sustainable investment. The FDIQR goes beyond a narrowly understood concept of investment facilitation to examine also other areas – such as the suitability of institutional mechanisms surrounding the investment, the existence of conducive legal and policy frameworks, the availability of technical and financial support, and co-operation with the broader stakeholder community – that can contribute to establishing a domestic climate conducive to sustainable investment.

The report identifies the potential “added value” of sustainable investment provisions included in IIAs. First, they might have a “signalling value”, insofar as they outline the priorities, objectives, and actions that the treaty parties are willing to pursue in promoting sustainable investment. Alternatively, or in addition, IIA provisions on sustainable investment serve to formalise parties’ co-operation on sustainable investment in selected areas, further contributing to the implementation of initiatives that can foster improvements in the domestic investment climate.

The report also takes stock of IIA provisions on sustainable investment, analysing them against the FDIQR. The analysis is limited to a sample of nine IIAs, selected based on three criteria (i.e., year of adoption or signature, subject-matter, and type of treaty). The sample includes the Brazil-Morocco Cooperation and Facilitation Investment Agreement (2019), the Modernized Chile-Canada Free Trade Agreement (2019), the Singapore-Chile-New Zealand Digital Economy Partnership Agreement (2020), the Switzerland-Indonesia Bilateral Investment Treaty (2022), the Singapore-Australia Green Economy Agreement (2022), the Investment Protocol to the AfCFTA (2022), the EU-New Zealand Free Trade Agreement (2023), the WTO IFD Agreement (2023) and the EU-Angola SIFA (2023). The analysis finds that sustainable investment provisions in the IIA sample address most FDIQR principles and that, in most cases, the two have similar scope.

The report identifies areas where IIA provisions on sustainable investment have a narrower scope compared to the FDIQR principles. Such areas relate to: (i) policy coherence between investment and specific sustainable development-related objectives, especially in connection with gender equality; (ii) the assessment and periodic review of the impacts of investment on sustainable development; (iii) raising awareness on the role that stakeholders can play in supporting sustainable investment; (iv) establishing a closer link between investment promotion activities and sustainable investment; (v) establishing a closer link between investment facilitation activities and sustainable investment; and (vi) ensuring improved consideration of sustainability factors in investment decision making. In all these areas, the report provides examples of domestic practices from selected jurisdictions that can contribute to sustainable investment, clarifying both how states can implement their treaty commitments and address additional sustainable investment-related elements through their treaty-making practice, contributing to the future evolution of their IIAs.

Based on such a review, the report identifies two modalities, emerging from the IIA sample, on which states can rely to address sustainable investment considerations in IIAs. A first option relies on the incorporation of substantive language on sustainable investment, potentially resulting in the strengthening of existing treaty commitments on sustainable investment as emerging from the sample of reviewed IIAs. The second option relies on parties’ co-operation under the relevant IIAs. The choice of the relevant approach will depend on several elements, including the broader negotiating context, the choice of IIA to be negotiated, and the specific implementation needs of each party. The options discussed are neither prescriptive nor exhaustive. They are only meant to provide an opportunity of reflection to better integrate sustainable investment objectives in IIAs, recognising that there might be alternative and more appropriate options that can still contribute to the strengthening of sustainable investment considerations in IIAs, based on the specific negotiating context.

The report also introduces an implementation framework to support treaty parties in complying with relevant treaty commitments on sustainable investment. While treaty parties bear the primary responsibility for the domestic implementation of their international commitments on sustainable investment, their efforts alone might not be enough. The report analyses three mechanisms that can support domestic implementation efforts, and in particular: (i) treaty-based co-operation mechanisms (e.g., joint committees; (ii) partnerships with international organisations; and (iii) development co-operation and international partnerships.