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Money makes the world go round, as we’ve all heard too many times. Money is also making the planet warmer — via fossil fuel subsidies, payouts to politicians, funding of misinformation campaigns, and fueling our fossil addiction. And money will be a major part of the solution to climate change. The Columbia Center on Sustainable Investment (CCSI) realizes this and is working on promoting investment practices and governance that help the planet and its people, rather than harming it.
Martin Dietrich Brauch is senior legal and economics researcher at CCSI, where he helps to advance policies and practices that shape investments toward sustainable development — development projects that improve human wellbeing, reduce inequalities, realize human rights, and protect the planet.
Hailing from Brazil, Brauch carries a dizzying array of degrees and specialties, including international law, investment law, environmental law, contracts, economics, and climate change. At CCSI, he focuses on investments in mining and energy in the context of climate action and other Sustainable Development Goals. He has also been instrumental in authoring several recent reports that outline ways for developing countries to transition away from fossil fuels and invest in the zero-carbon future.
In the interview below, he tells us more about his work, shares how coming from a developing country shapes his perspective, and explains how investment treaties significantly undermine climate action.
How did you find your way into the field of sustainable investment?
I joke that I could have been a Greta Thunberg back in my teenage years. As a high school student, I was selected by the Brazilian government to be a youth delegate to COP6, one of the first UN climate conferences that had a youth element. And that’s where I initially started to become passionate about climate and sustainable development issues. It helped to gear my career towards what I ended up doing: environmental law, economics, and international law.
Also, coming from a developing country and seeing the inequality around me helped me see the complexity of all the issues that have to be dealt with. We need to reduce our emissions but we also need to equalize development to allow other regions of the world to have a good quality of life, a healthy environment, decent jobs, decent pay, and public services. Even if climate change doesn’t discriminate between the rich and the poor, they have very different resilience and different capacity to respond.
Having that early exposure and starting to think about the economic and social complexity motivated me to see how I could contribute.
Do those complexities excite you, or is it more that you feel obligated to try to help?
Can I say it depends on the day sometimes? [Laughs.] Sometimes it’s very overwhelming, of course, and you’re counting each small victory and each report that you put out and you think, ‘This may have helped move a fraction of an inch towards the goal that we’re trying to achieve.’ And sometimes it can be frustrating when you see interests that are working against the goal that we’re fighting for.
We have to acknowledge that besides the complexity, solving climate change is a long-term project. It’s not like we can just switch off all fossil fuel power plants and switch on the renewable ones. That’s why we talk about an energy transition.
I try to keep in mind that we are going somewhere here. The progress may be slow and frustrating at times, but so long as you have the goal in sight and keep working towards that goal, we will see the progress — and we are seeing the progress.
What does sustainable investment mean?
Most people, when they hear “sustainable investment,” may be thinking of personal investments — Wall Street and ESG funds, for example. Part of the work we do at CCSI focuses on that aspect, thinking about the role of finance in fostering investment in sustainable development and climate action. There is quite a bit of greenwashing that happens as a result of labels such as ESG [which stands for environmental, social and corporate governance], and the extent to which they lead to meaningful impact is still up for discussion.
Investor practices and products are just one piece of CCSI’s comprehensive understanding of and approach to sustainable investment. For us, sustainable investment requires thinking holistically about the various actors — governments, financial institutions, corporations, and communities — who shape or are affected by investment, and the specific aspects and practices of investment that either contribute to — or undermine — our global goals.
At a project level, we also think about each investment holistically. For example, if a company is producing solar panels but has gross labor violations or is polluting local water, it’s not sustainable. At CCSI, we try to bridge it all together and design policies and practices for countries and companies in order to advance the right types of investments in mining, energy, food and agriculture systems, among other areas — investments that will maximize benefits and minimize harms.
What are some ways that countries and companies can encourage the right kinds of investments?
We support governments and companies to develop economic and legal approaches to sustainability. What does it look like for company practices to align with sustainable development goals, and what rules and policies incentivize or require those practices?
Without legal frameworks that are conducive to sustainable investments, it’s very unlikely that the market will just sort it out by itself. It hasn’t, if you look at it. There have been clear warnings from the science community since the 90s at least about the warming impacts of burning fossil fuels, and we’re still building up fossil fuel infrastructure. The market is not solving the climate crisis, and we are losing time. So regulation is needed to drive change. We are supporting governments at all levels and companies that are trying to be drivers of change.
In your writings, you have criticized investment treaties — such as the Energy Charter Treaty — for failing to advance sustainable investments. Could you explain how such treaties undermine climate action?
The main characteristic of investment treaties is that they grant protections to foreign investors and allow them to sue governments for damages if a government policy threatens their interests. There have already been cases initiated by emissions-intensive companies against states for taking climate-related measures, and as climate policy ambition ramps up, there will be more.
Investment treaties make it more difficult for states to act on climate change because there’s this risk that a company will sue, and awards have been large — many millions or billions of dollars. So the government might be less ambitious or reverse a policy, or fail to enact a policy, because they don’t want to be sued. And when the claims are successful, the treaties shift the cost of the energy transition onto citizens, and indemnify companies who made reckless investment decisions.
My argument is the orientation of international investment governance should be not toward compensating companies whose interests are not necessarily in line with global goals, but on meeting the needs of people and the planet.
Is there any hope that international investment priorities will change?
It kind of blows my mind but we’re finally talking about climate in the investment law reform context, despite it having been a concern for years. The OECD, for example, just recently held a consultation on investment treaties and climate, and CCSI submitted a response. We recently participated in a webinar on the topic organized by the United Nations Conference on Trade and Development. So it seems like the issue is slowly being mainstreamed. Even so, reform proposals on the table are still very far from the overhaul that is needed — moving away from investment protection and arbitration, and towards a sustainable investment governance regime — for investment law to contribute to climate and other global goals.
And the truth is, it’s not only the investment regime that has to turn its eyes to the climate issue. It’s the entirety of international law. Other areas of international law need to be activated and engaged – including international law regimes on trade, intellectual property, labor, and human rights. We’re developing a project at CCSI, including students from the Columbia Climate School and the Columbia Law School, to think of ways to bridge the climate gaps between areas of international law.
If we remove the barriers — and right now, the existing international investment law regime is a major one of them — it will automatically facilitate international cooperation around climate goals. We already have a climate regime with near universal membership: the United Nations Framework Convention on Climate Change and the Paris Agreement. So long as obstacles are removed, I think the world can design a pathway for international law to actually contribute, to regulate investment in a way that that will help achieve the goal.
You and your colleagues recently helped to lay how some potential decarbonization pathways for the continent of Africa as well as for the country of Paraguay. Can you talk about some of the main takeaways from this research?
The Africa report was commissioned by the African Development Bank to support African states in their planning around the use of natural resources for energy purposes.
Africa has been responsible for only about two or three percent of cumulative greenhouse gas emissions from energy and industrial sources, and Africans are interested in exploiting their fossil resources. Their argument is, ‘Others had the chance to do it, so why should we be denied the opportunity to do the same?’ Our answer is: You are not and should not be denied the opportunity to exploit your fossil fuels…. but it doesn’t make sense to do so, including economically. Renewable energy sources are competitive with fossil fuels, and they don’t come with the health and environmental impacts that fossil fuels have had on workers and communities.
The world is going to decarbonize. By the time they have that fossil fuel infrastructure in place and it’s paid off, then they’re going to have to start phasing it out and stranding it anyway, either because of the climate imperative or because global markets are no longer there as the world has shifted away from fossil fuels. Our argument is for Africa to use the global energy transition as an opportunity for zero-carbon development, providing affordable access to renewables-based electricity to all Africans.
The Paraguay report was commissioned by CAF – Development Bank of Latin America to identify pathways for Paraguay to secure energy supply while reducing its greenhouse gas emissions and meeting its commitments under the Paris Agreement.
Paraguay has a very different energy matrix from Africa because most of it comes from renewable electricity already. Ninety nine percent of Paraguay’s electricity comes from hydropower plants. Part of our recommendation was around electrifying as much as they can in their economy to avoid using fossil fuels for heating, industry, etc. Transportation is a major source of emissions in Paraguay, so investing in electrification of mass transit, electric vehicles and infrastructure for electric vehicles will be will be key to helping Paraguay reduce its emissions. They should also invest in energy efficiency in appliances, such as air conditioners, and buildings.
I understand that you’ll be looking at decarbonization at an even finer level in upcoming projects. Could you tell us about what you’re working on now?
We’re currently talking with the governor’s office in my home state of Rio Grande do Sul in Brazil about producing a roadmap similar to what we did for Paraguay. It’s not a national government, so there is only so much they can do. Energy generation is a federal competence in Brazil, for example. But there is quite a bit that they can do at the state level in terms of urban development policies and transportation. For example, there could be public investment in power generation that belongs to the state. And of course, regulation of investment processes within the state, including through environmental permitting processes, is one of the things that they can focus on.
For another project, we are planning to host a one-week workshop for city-level government officials on decarbonization pathways for cities in Brazil. It will especially focus on mass transit, electrification of transportation, building standards, waste management, and other areas that are more within the realm of the municipalities.
After the workshop, we will have looked at decarbonization at the continental, national, state, and city levels. The considerations are different at each of these levels of government, but each has a role to play in decarbonization.
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