Interchamber Climate Champions Collective 2025 - Session 1

By Elizabeth Wu, Lawyer, Environmental Justice and Transactional Governance

Moderated by Malar Odayappan, Director of Environmental, Social and Governance (ESG) Practice, PwC Malaysia; Member of British Malaysian Chamber of Commerce (BMCC) Sustainability Network

Opening Remarks by Dr. Gary Theseira, Chair of Council, Climate Governance Malaysia

Welcoming Remarks by Stefano Clini, Managing Director, Member of Risk Management & Sustainability Committee, Carlsberg Malaysia

Closing Remarks by Karl Godderis, Chief Executive Officer, European Chamber of Commerce and Industry (EUROCHAM) in Malaysia

The Interchamber Climate Champions Collective 2025 is a bold new platform led by Climate Governance Malaysia (CGM) to bring together a network of business chambers, corporate leaders, sustainability stakeholders and diplomats in Malaysia and the region to accelerate climate action through collaboration and shared learning.

The first session, held on 1 July 2025, focused on a timely and complex issue: how climate ambition intersects with international investment law. Titled “ISDS in a Net-Zero World: Supporting Legal System Transformation for Sustainable Development”, the session explored the growing use of Investor-State Dispute Settlement (ISDS) mechanisms in response to sustainability-related government actions, featuring Elizabeth Wu. 

In his opening remarks, Dr. Gary Theseira noted a shift in investor-state disputes (ISDS)—from investors purely seeking profits to expecting sustainable infrastructure like clean energy and fair labour practices. As developing countries introduce environmental regulations, disputes may arise if these affect returns. At the same time, investors are beginning to sue when sustainability expectations aren't met, as seen in a recent Iberian Peninsula blackout. Dr. Gary emphasised the need for collaboration and welcomed partners in working together to reduce these legal risks.

Picking up from Dr. Gary’s opening, Stefano Clini welcomed participants and shared Carlsberg’s commitment to sustainability, including its net zero target by 2040. He highlighted the company’s ESG achievements, such as being listed on the FTSE4Good Bursa Malaysia Index and earning a AA MSCI ESG Rating, and he too, stressed the importance of partnerships in driving climate action.

Following Stefano Clini’s welcome, the session shifted focus to the heart of the discussion with a presentation by Elizabeth Wu. Her talk addressed one of the most urgent legal issues in climate policy today: the growing use of Investor-State Dispute Settlement (ISDS) provisions by foreign investors to challenge government actions aimed at tackling the climate crisis.

Elizabeth began by explaining that a significant proportion of international investment treaties continue to extend investment protection to high carbon investments, contain no reference to sustainable development, and do not impose obligations on foreign investors to adhere to environmental and labor standards (domestic or international). They also continue to allow foreign investors to sue States in private arbitration proceedings known as investor-State dispute settlement (“ISDS”) for a State’s acts that affect an investment, even if such acts are taken to advance a State’s commitments under the Paris Agreement.

Of significant concern, fossil fuel investors have increasingly used ISDS to seek damages when governments introduce policies to phase out coal, oil, and gas. Globally, fossil fuel investors are reported to have secured at least USD 77 billion through ISDS claims. Further, ISDS lawsuits have also challenged domestic State regulation intended to address climate change, biodiversity loss and pollution. These include claims arising out of the termination of mining concessions, the implementation of environmental and social impact assessment processes, restrictions on oil and gas investments due to environmental concerns, and the phaseout of coal-fired power plants.

To illustrate how this plays out in practice, the case of Zeph Investments versus Australia was discussed. Zeph Investments is a Singapore-registered company that owns and controls Australian company Waratah Coal. Zeph is in turn reported to be owned by Australian billionaire Clive Palmer. Zeph is reported to have brought two ISDS claims against the Australian government in relation to the refusal of environmental approval for a coal mine project in Queensland by Waratah Coal. The claims were filed pursuant to the ASEAN-Australia-New Zealand Free Trade Agreement and the Singapore-Australia Free Trade Agreement. Zeph is reported to be seeking over AUD 100 billion in damages, despite the project’s gross revenue reportedly being estimated at AUD 25.5 billion by Waratah Coal’s own expert witness, and a potential net loss of up to AUD 2.9 billion. The case raises questions about whether it is appropriate for ISDS lawsuits to be brought against State measures aimed at environmental protection, and the criteria that investments should fulfil to qualify for investment protection.

Elizabeth stressed that this is not an isolated case. Countries such as Italy and the Netherlands have also faced ISDS claims from fossil fuel companies following domestic climate legislation. These developments reflect a growing disconnect between international investment treaties—many of which were signed decades ago—and the urgent need for climate action in line international climate and environmental goals, or even domestic rule of law.

In response to growing concerns over ISDS, international institutions including UNCITRAL, UNCTAD, and the OECD are undertaking efforts to modernise the ISDS regime and international investment law. These include expanding the space for governments to regulate in the public interest, introducing sustainability-linked treaty provisions, and proposing to remove protections for fossil fuel investments in modernised treaties. Countries such as Italy, France, Germany, and Poland have withdrawn from the Energy Charter Treaty, a multilateral investment treaty that has been heavily criticised as being a key driver of fossil fuel-related ISDS cases. Meanwhile, the Regional Comprehensive Economic Partnership (RCEP), signed by 15 Asia-Pacific nations, has initially omitted ISDS, with its inclusion for future negotiation —signalling a growing awareness that the current model is no longer tenable.

The implications for the private sector are significant. Elizabeth emphasised that this is not just a legal or policy issue—it also has practical business consequences. Defending ISDS claims consumes public resources that could otherwise support the corporate sector in meeting net-zero targets. Companies making genuine efforts to comply with climate regulations may still find themselves affected when those same laws are challenged by other investors under ISDS mechanisms. In this way, the current system can create uncertainty even for those acting in good faith toward sustainability goals.

Elizabeth also outlined how modern treaties are beginning to include innovative clauses to address shortcomings in the IIA and ISDS regime and facilitate green investment - such as clauses that promote sustainable energy investment, limit the amount of damages that can be awarded in ISDS cases, and support green technology transfer and cooperation. Importantly, she noted growing efforts to embed binding corporate social responsibility obligations into treaty frameworks, and to refine standards of investment protection to preserve the State’s right to regulate in the public interest.

She encouraged companies to stay on top of these developments and engage more actively in the international investment law reform process—starting with practical steps such as exploring alternatives to ISDS, including political risk insurance, co-investing with local partners, or using project-specific protections instead of relying on broad treaty coverage. Elizabeth also urged corporate leaders to think beyond short-term legal risk and start supporting broader legal system changes that enable sustainable investment. This includes endorsing treaty provisions that facilitate clean energy transitions, support corporate social responsibility, and enhance legal coherence between domestic and international climate laws.

Lawyers could play a more strategic role in shaping treaty frameworks—helping companies navigate and influence the evolving legal landscape in ways that align with long-term climate and environmental governance goals. Reforming the legal foundations of investment is essential, not only for governments, but also for companies to ensure that future investments are both protected and sustainable for a climate-resilient future. 

Elizabeth’s presentation was followed by an engaging Q&A session with the audience, moderated by Malar Odayappan. Drawing on her corporate experience, Malar encouraged companies to take a proactive approach by assessing internal gaps in areas such as infrastructure, people, and resources, and to begin making changes to stay ahead of the curve rather than waiting for regulatory pressure. She reminded the audience that change is inevitable—and when companies delay action, it often leads to more constrained, reactive, and potentially costly decisions down the line.

The session concluded with closing remarks by Karl Godderis, CEO of EuroCham Malaysia, who urged participants to reflect on what a world that works for everyone could look like. He shared how EuroCham is moving beyond traditional advocacy to collaborative, solution-focused action through working groups on issues like solar energy, water, EPR, rail cargo, and palm oil—demonstrating that real change comes from shared effort and leadership.

Together, the insights shared throughout the session revealed that sustainability is as much a legal and governance challenge as it is an environmental one. Reforming outdated ISDS systems, supporting regulatory coherence, and building trust between investors, governments, and civil society are all critical to accelerating the net-zero transition.