Analysing the role of EU’s Clean Trade and Investment Partnerships (CTIP) in Sustainable Investment and its Impact on Corporations in the Global South

The Global South (GS), which produces over 40% of the world’s energy and transition metals, is central to the global green transition yet faces structural inequities. Despite attracting nearly a quarter of Foreign Direct Investment (FDI), GS Corporations (GSC) struggle with: fulfilling complex international ESG compliances  and  access to sustainable financing, restricting participation in global green-value chains. Thus, advanced economies dominate, wherein China produces 80% of solar panels, and the U.S. invests $370 billion in green subsidies, nearly Chile’s GDP, revealing stark disparities. Under pressure to integrate globally, some GSC resort to  greenwashing, for instance, in 2022, several Indian textile exporters falsely marketed their products as “eco-friendly” without credible certification, tarnishing European investors’ trust and reputations, reducing FDI inflows. To ensure sustainable integration, the GS must institutionally adopt transparent Environmental Social Governance (ESG) practices and develop coordinated strategies to balance growth with global responsibility.

Some strategies include: (i)  establishing cross-border energy trading frameworks within the GS to collaboratively boost competitiveness in international markets. Indicatively, the Southern African Development Community FTA, developed strong regional energy supply chains, however it lacked regional coordination to attract investments, establish government-led mandates, and strengthen regulatory frameworks; (ii) engaging with multilateral institutions like the New Development Bank that provide capital and advisory support but fall short on assisting with ESG compliances. These medium-term measures remain inadequate; thus, (iii) the GS must leverage partnerships with advanced economies like Japan and the EU that are diversifying supply chains.  The EU’s pursuit of strategic autonomy; reducing reliance on the US and China and strengthening domestic and allied renewable supply chains, reflects a shift from efficiency-driven to geopolitically informed globalization. In this emerging order, the GS can position itself as a strategic ally, gaining access to capital, technology, and resilient supply networks while supporting the EU’s goal of a more balanced global trading system. 

What are CTIPs?

The EU’s withdrawal from intra-EU BITs and the outdated Energy Charter Treaty (ECT), which conflicted with EU’s climate goals by protecting fossil fuel investments, to support 2019 Green Deal’s climate-neutrality agenda, led to the launch of the EU–South Africa Clean Trade and Investment Partnership (CTIP) in March 2025 (EU-RSA CTIP). This newly-envisaged non-binding agreement, complements EU’s existing trade agreements, diversifies supply chains, boosts economies of EU’s partners and strengthen EU’s competitiveness through a targeted approach which caters to the EU and its partners’ business interests. Backed by a €4.7 billion Global Gateway package leveraging European and South African financial institutions, it aligns with principles of ‘Just Energy Transition Partnership’  signed between multiple counties to decarbonise South Africa’s mineral rich economy; by providing loans, investments, technical know-hows, in line with EU’s Clean Industrial Deal. The CTIP’s adaptability - through tailored investment packages, regulatory cooperation, and targeted trade frameworks, positions it as a strategic pillar within EU’s external policy, channelling FDI into South Africa’s local value chains, ensuring that value addition remains within South Africa while deepening its integration into global green supply chains. Unlike China’s Belt and Road Initiative which seeks to expand China’s geopolitical influence through large-scale infrastructure projects, or the U.S International Development Finance Corporation, which strategically channels capital to counter such influence, the CTIP distinguishes itself by prioritizing sustainable development, clean energy transition, and equitable investment partnerships over geopolitical dominance. Its non-binding nature and exclusion of dispute resolution mechanisms reduce litigation risks and administrative hurdles, making it a pragmatic, future-oriented addition to the EU’s trade policy toolbox.

However, the absence of binding commitments or legal safeguards raises concerns over accountability as if the EU fails to deliver financial aid or green technology transfer, weaker GS partners would have no legal recourse. Critics caution that the CTIP, despite its cooperative framework, risks entrenching existing power asymmetries between the EU and the GS. Without binding obligations or accountability mechanisms, the EU retains control over the pace, terms, and benefits of implementation. This imbalance could evolve into  neo-mercantilism, where the EU uses sustainable investment and green transition narratives to advance its own  competitiveness - securing access to critical raw materials, expanding export markets for European technology, and consolidating its position in global supply chains. Meanwhile, developing nations, constrained by limited resources and institutional capacity, could bear the heavy cost of compliance basis EU-defined standards. This risks dependence on EU finance and technology, perpetuating unequal structures in the global green economy rather than promoting genuine empowerment. CTIPs must be carefully negotiated to become important gamechanger within global sustainable investment governance, and maintain power dynamic with EU’s partners, the GS, which lack finances to develop green technologies or global value chains. 

Impacts on GSC:

CTIPs would channelise sustainable finance positively, driving green investments and reforms. The European Investment Bank (EIB), one of the world’s largest renewable energy lenders, has pledged €800 million to India’s renewable sector, reflecting the EU’s commitment to climate-aligned financing and technology transfer. Through CTIPs, such institutions could scale concessional funding, enhance EU-backed investments, and encourage government participation, catalysing domestic projects in solar energy, EV production, and clean agriculture. Collectively, these initiatives promote market-oriented reform, strengthen corporate accountability, and advance environmental governance across GS economies. Further, the CTIP aims to facilitate a greater transfer of green technologies and know-how by EU companies, through collaboration and investor support within GSC especially in the clean energy sector. Lastly, collaboration through CTIPs will assist GSC in becoming complaint with EU’s standards, qualifying entry into high-value European markets and global green-value chains.

Key limitations of CTIPs include the inability of GSC, especially MSMEs to incur the high costs of meeting EU’s strict ESG and audit requirements, risking exclusion from global markets. The framework could also increase dependence on EU infused FDI, reinforcing existing power asymmetries and neglecting local infrastructure realities, thereby fragmenting the global economy. Scholars caution GS against remaining passive recipients in EU-led supply chains, replicating colonial economic dependencies, and suggest focusing on building self-sustaining industrial capacity and resilience to lead and shape its own green growth trajectory. However, stringent compliance demands along-with lack of legal safeguards, or redressal mechanisms could overwhelm MSMEs or under-resourced GSC further, then amplifying existing power asymmetries, allowing the EU to gain strategic and soft power through “green conditionality” without reciprocal obligations. Critics warn that such aspirational, non-enforceable frameworks risk becoming symbolic window dressing rather than transformative, underscoring the need for GS governments to integrate FDI into domestic economies to prevent enclave-style dependency.

Global watchdogs question the transparency and accountability of CTIP negotiations. Yet, as the EU reconfigures its industrial supply chains, CTIPs offer a chance to confront geoeconomic dependencies and build genuine partnerships, if grounded in an understanding of GS markets. With details still emerging, the CTIP functions as a regulatory sandbox, enabling governments and investors to test innovative models for sustainable investment. CTIPs mark a major shift, offering incentives for green development in the GS while posing challenges of high compliance costs and regulatory burdens that risk excluding smaller GSC. To ensure equity, the EU must enhance GS participation through consultation, align investments with Paris Agreement, and support GSC to fulfil compliances. Critics stress that binding obligations and enforcement mechanisms are essential. While CTIPs could foster inclusive green growth, their success depends on moving beyond symbolic alignment by embedding reciprocity, safeguards, and monitoring systems for equitable, sustainable partnerships.

Devanshi Gupta is an Associate at Cyril Amarchand Mangaldas.