Over the past two decades, increasing foreign investment has been linked to economic growth and development in many countries, sparking international competition to attract further foreign direct investment. In this endeavor, a serious challenge is to preserve the interests of foreign investors in addition to protecting the host state's environment. Foreign direct investment (FDI) plays a key role in providing capital and transferring knowledge and technology required for economic development, especially in developing countries. However, economic growth resulting from increasing foreign investment and industrialisation may cause adverse environmental impacts on the host country. This study aims to analyse effective environmental stipulations and clauses in FDI treaties intended to promote environmental sustainability and maximise FDI as a means of economic development, thereby enhancing overall welfare in the host countries, while mitigating the negative repercussions of foreign capital. This paper employs an analytical-descriptive method and relies on bibliographical data collection. As per the findings, although bilateral investment treaties in Iran aim to promote and secure foreign investments, they frequently disregard adequate provisions for environmental protection. This shortcoming could potentially transform Iran into a "pollution haven" for environmentally detrimental industries and technologies of foreign investors in the long run. To avert this adverse outcome, it is advisable to incorporate specific clauses in bilateral investment treaties that promote and encourage investments in low-carbon industries. Such clauses should support the adoption and development of technologies and innovations that are both globally compatible and environmentally friendly. Furthermore, the necessity of using clean energy through appropriate means, e.g., imposing charges and green taxes, should be implemented in bilateral investment treaties to facilitate sustainable development.