1. Investing in Adaptation: Questions of Equity in Financing Climate Change Adaptation in Developing States IUCN Academy of Environmental Law September 2008 Kate Miles

2. Equity in Climate Change Adaptation  Developed state responsibility for anthropogenic climate change;  Provision of assistance to those developing states most vulnerable to climate change effects;  Shift away from concentrated focus on mitigation to encompass adaptation.

3. Equity in Financing Adaptation  Donor-based mechanisms  Private sector What does equity in climate change adaptation require of the private sector and its regulation? And what role is there for international environmental law?

4. Adaptation vs Mitigation Discourse  Adaptation only recently become a priority for the international community;  Division of adaptation and mitigation into two separate streams;  As climate change impacts become visible, political dynamics changing and more emphasis on adaptation – Adaptation Fund Board

5. Vulnerability & Equity  Developing states are the most vulnerable to climate change impacts; Physical exposure; Climate sensitive livelihoods; Reduced technical and financial capacity; Generic determinants of vulnerability (I. Feldman & J. Kahan)  Within developing states.

6. Role of the Private Sector  Identified as an important element in realising adaptation programmes and can increase the adaptive capacities of communities in developing states;  Investment in transport, water, flood protection, infrastructure;  Investment in decentralised renewable energy projects (H. Venema & I. Rehman)

7. Private Capital: Additional Issues  A need to harness private sector financing for sustainable development objectives;  No requirements for transnational financing to be supportive of SD  Equity in the climate finance discourse?  Market-driven finance can perpetuate inequities – so it needs to be channeled in the right direction;  Could a different approach assist with more equitable financing for adaptation?

8. Environmental Regulation as Treaty Violation  Indirect expropriation;  Discriminatory treatment;  Fair and equitable treatment. Azurix; Tecmed.

9. Investor-State Disputes  Investor protections given an expansive interpretation;  Tecmed no principle stating that regulatory administrative actions are per se excluded from the scope of the treaty, even if they are beneficial to society as a whole – such as environmental protection …

10. Fair and Equitable Treatment  Legitimate expectations of the investor;  Stable legal and business environment;  Tecmed Not affect the basic expectations in entering the investment; Consistency; Free from ambiguity; Transparency; Know all regulations that will govern the investment for the life of the investment.  Endorsed by Azurix.

11. Preconditions for Adaptation  Ensure promotion of FDI in climate adaptation via prerequisites; Extension of national treatment to pre-establishment phase;  Incentives for adaptation, advantageous measures for CDM projects, exclusion of carbon-intensive operations; ‘Like Circumstances’ Discriminatory Parkerings Award

12. Equitable Financing and Investment in Climate Change Adaptation?  Reorient approach of the financial sector;  Shift in approach to international regulation of the private sector;  Accountability of financiers and investors;  International environmental law – principles that could form the basis of international regulatory framework for transnational financing and investment;  Further innovative financing mechanisms;  Post-Kyoto instrument re adaptation

13. Conclusions and Immediate Steps  Progress towards realisation of equitable financing for climate change adaptation: Insertion of socially and environmentally responsible principles into BITs; Re-framing ‘fair and equitable treatment’; Domestic incentives to finance socially and environmentally beneficial projects; Support micro-finance; Equator Principles as basis for regulation; Domestic application of precaution and sustainability