Green Foreign Direct Investment (FDI) Incentives Within International Investment Agreements (IIAS): Effectiveness, Challenges, And Policy Implications

The increasing severity of the climate change and the degradation of the environment have further increased the global endeavors to make the foreign investment more consistent with the sustainable development goals. Here, Green Foreign Direct Investment (FDI) is now a favored tool of advancing environmentally sound economic activities, such as renewable energy, environmentally friendly technology and environmentally friendly infrastructure. Increasingly, the design of International Investment Agreements (IIAs) aimed at protecting investors and enabling the movement of capital includes provisions of sustainability orientation. The effectiveness of these commitments in motivating green FDI is also unclear, however. This paper is a critical look of the role of IIAs in the promotion of green FDI with the focus of the nature, scope and effectiveness of investment incentives within the framework of treaties. Following the method of a qualitative doctrinal research, the paper will examine the texts of the treaties, the policy documents and the scholarly literature to uncover the existing tendencies and shortcomings. The results indicate that even though contemporary IIAs have environmental provisions and corporate social responsibility clauses, and references to sustainable development, these provisions are mostly non-binding and unable to provide enforcement mechanisms, thus curtailing their practical influence on investment behavior (UNCTAD, 2023; OECD, 2022). Moreover, effective implementation of these incentives is compromised by such structural issues as the overwhelming influence of investor protection norms, regulatory limitation of host countries, and the threat of green washing (Sornararajah, 2017). The work posits that IIAs cannot be used to steer investment towards more sustainable results without fortification in law through stronger commitments of binding environmental requirements and enhanced accountability measures.