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Editor’s note: how to suspend a sunset clause

If the UK does not manage to suspend the 20-year sunset clause, the government faces the risk of potential claims of up to £11.8bn from foreign investors (Photo: Kin Cheung/AP Photo)
If the UK does not manage to suspend the 20-year sunset clause, the government faces the risk of potential claims of up to £11.8bn from foreign investors (Photo: Kin Cheung/AP Photo)

The latest edition of our Sustainable Views newsletter

Dear reader,

There was much cheering from environmental campaigners when in February the UK announced its intention to leave the controversial Energy Charter Treaty, followed by the EU’s plans to secure its exit ahead of the European parliamentary elections this June. Yet, as Elizabeth Meager reports, the true impact of any of this movement hinges on whether or not countries manage to suspend a 20-year sunset clause.

As Elizabeth writes, if the UK does not successfully neutralise the sunset clause, the government faces the risk of potential claims of up to £11.8bn from foreign investors.

She has spoken to a variety of experts about how the UK and other countries could potentially manage to suspend the sunset clause through an inter-se agreement between a critical mass of exiting or exited countries. However, Matthew Saunders, global head of arbitration at City law firm Ashurst, deems the idea “controversial”.

“An investment is being made on the premise that it had treaty protection,” he says. “You can’t club together after the event and remove that protection. That is an unresolved issue under international law.”

In our second feature today, Natasha Teja examines the plethora of green taxonomies that are springing up in Asia, with the taxonomy developed in November 2021 by the Association of Southeast Asian Nations – a political and economic union of regional states – serving as a common language for them all.

Helena Fung, head of sustainable finance and investment for Asia-Pacific at the London Stock Exchange Group, warns the potential “fragmentation of frameworks” could be “detrimental in terms of the orientation of capital towards some of the activities that these taxonomies are intended to support”.

Elsewhere, in his annual letter to BlackRock investors, the asset manager’s chief executive, Larry Fink, has praised the growing “energy pragmatism” among energy leaders around the world, who recognise both the importance of renewables and the continued need for fossil fuels.

Fink references conversations with prime ministers and grid operators in his visits to 17 countries last year. “The message I heard was completely opposite to what you often hear from activists on the far left and right, who say that countries have to choose between renewables and oil and gas,” he writes. “These leaders believe that the world still needs both.” You can find the letter and our summary in our knowledge hub.

Finally, Climate Impact Partners chief executive Sheri Hickok calls for more support for chief sustainability officers and others working in companies on climate disclosure to ensure action is creating real-life change and that they have the confidence and tools to report on actions their companies are taking.

“Many business leaders are taking climate action, but an uptick in enforcement against corporate greenwashing is stopping them from speaking out,” says Hickok. “This lack of public affirmation about their steps to reduce emissions is slowing the energy transition and also restricts the sharing and understanding of best, and worst, practices that is so vital if all sectors are to decarbonise in line with climate science.”

Until tomorrow,

Philippa

Philippa Nuttall is the editor of Sustainable Views

A service from the Financial Times