As the world races to meet climate targets, international investment in clean energy technology and the transfer of knowledge and skills have become urgent priorities. A new UNCTAD policy brief examines how international investment agreements (IIAs) can be redesigned to better support this goal and where the current treaty regime falls short.

Annual investment needs for renewable power generation alone exceed $1 trillion by 2030, with over 80% expected to come from private sources. For developing economies in particular, attracting foreign direct investment (FDI) is not optional; domestic capital is simply insufficient to fund the energy transition at the scale required.

The Problem with Old-Generation Treaties

Most of the 2,600+ in-force IIAs were negotiated in the 1980s, 1990s, or early 2000s, long before climate action became a shared global imperative. These older treaties present two key problems.

First, broadly drafted performance requirement clauses can block governments from requiring foreign investors to transfer technology, hire and train local staff, or source inputs domestically, the very tools that help host countries absorb the benefits of FDI.

Second, broadly worded investment protection standards have exposed governments to costly arbitration when they adjust energy policies. Spain, for example, faced over 51 arbitration claims totalling more than $9 billion following changes to its renewable energy incentive scheme.

What Modern Treaties Are Getting Right

New-generation IIAs are beginning to address these gaps in meaningful ways, including by:

• Explicitly recognising technology transfer as a treaty objective, in both preambles and binding clauses
• Including cooperation chapters on clean energy, sustainable technology, and human capital development, covering skills, training, and knowledge transfer
• Facilitating the movement of key technical personnel, such as engineers and trainers, enabling on-the-ground capability building
• Linking investment promotion to energy transition priorities, including through political risk insurance, fiscal incentives, and joint investment missions
• Establishing investor obligations requiring the diffusion of technology and compliance with environmental standards
• Creating institutional frameworks, joint committees, work programmes, and monitoring mechanisms, to ensure treaty commitments translate into real action

Four Action Areas for Treaty Reform

UNCTAD proposes that new-generation IIAs focus modernisation efforts on four areas:

1. Safeguarding policy space — through carefully crafted exceptions that allow governments to use performance requirements, maintain IP flexibilities, and adjust incentive regimes without triggering investor claims
2. Enhancing investment flows — by incorporating outward investment support tools (political risk insurance, home-State incentives), host-State measures (PPPs, supplier linkages, local content incentives), and joint promotion activities
3. Building absorptive capacity — through development cooperation chapters, human capital development provisions, and technical assistance commitments tailored to developing countries
4. Ensuring implementation — via institutional frameworks, joint work programmes, reporting obligations, and cooperative (rather than adversarial) dispute prevention

Implications for Developing Countries

The report is particularly relevant for developing economies, including those in Africa. The AfCFTA Protocol on Investment is highlighted as a leading example of a modern, forward-looking agreement, one that requires State Parties to facilitate intra-regional and international technology transfer, mandates investor compliance with local human resource development policies, and establishes institutional structures to support implementation.

For developing countries, the key challenge is not just attracting investment but building the domestic absorptive capacity needed to benefit from it — through skilled workforces, supplier ecosystems, and R&D capabilities. IIAs, the report argues, can help — but only if they are deliberately designed to do so.

Conclusion

IIAs are not a silver bullet. Barriers to energy transition investment, such as cost of capital, infrastructure gaps, and skills shortages, are often non-legal in nature. But thoughtfully designed investment treaties can serve as a meaningful complement to domestic policy, creating the conditions for technology investment to generate lasting economic benefit.

The report calls for international investment governance to move beyond traditional protection disciplines toward a broader cooperative model, one that aligns investment, trade, climate, and development policy in the service of a just and sustainable global energy transition.

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