Lawyers versus climate change - the Climate Contract Playbook

The 2015 Paris Agreement committed governments to reduce their greenhouse gas emissions to keep global warming below 2°C, and drive efforts to limit the rise to 1.5°C. The UK Government has since revised the Climate Change Act 2008 to implement a target to reach net zero emissions by 2050.

Growing regulatory and consumer pressure has made reducing climate impact a commercial goal. However, despite the increasing demand on companies to reduce their climate impact, there is little in the way of practical guidance to assist them.

The Chancery Lane Project aims to offer some practical tools. The Project is a collective of legal professionals set up to provide real legal solutions that can help business in reaching these challenging targets.

The Climate Contract Playbook

The Chancery Lane Project's Climate Contract Playbook sets out 16 model clauses drafted by legal professionals during a climate hackathon in November 2019. The Climate Contract Playbook provides a blueprint that can be tailored and used by lawyers to assist companies in meeting their environmental goals.

Each clause has been given a child's name, chosen by the drafting team, to emphasise the impact a failure to address global warming will have on the next generation.

• Frank's clause places climate risk and sustainability obligations on companies seeking investment. The clause is intended to be used in standard non-leveraged investment documentation to enable investors to understand and manage the environmental impact of their investment.
• Agatha's clause enables a company to terminate its agreement with a supplier without an exit fee if it is unable to match the environmental improvements offered by a greener alternative supplier. Annie's clause is a short form version of Agatha's Clause.
• Teddy's clause is for use in supply contracts, particularly government procurement contracts. It enables the government to use its procurement levers to decarbonise the economy by requiring suppliers to comply with at purchase warranties for environmental performance and continuous improvement obligations.
• Jessica's clause inserts warranties requiring climate and environmental impact targets to be met. Failure to meet the specified targets requires the party in breach to pay a fee to an environmental charity.
•  Owen's clause imposes back-to-back net zero emission obligations throughout the supply chain and enables a customer to terminate its agreement with the supplier or to offset the carbon emissions at the supplier's expense if those obligations are not complied with.
• Zoe and Bea's clause introduces a “Green Compliance Checklist” setting out obligations to measure, reduce and report on greenhouse gas and carbon emissions.
• Phillippe's clause inserts an obligation into public tender invitations requiring contractors to offer volunteering opportunities to work on environmental projects to the unemployed. Public bodies will prioritise companies that comply with the obligations.
• Eric's clause enables employees to volunteer at an environmental organisation during garden leave and during paid sabbatical.
• Arlo's clause restricts a company's Articles of Association by inserting an objects clause that the company will act in an environmentally conscious or Paris Agreement compliant way.
• Dottie's clause inserts director warranties and undertakings requiring full disclosure of the company's environmental performance and its strategy for addressing deficiencies into underwriting and sponsorship agreements.
• Chloe's clause introduces an Environmental Business Charter containing a set of environmental best practice rules that can be developed between a law firm and its clients. Deviations from the charter should be justified in order to ensure that environmental thinking is at the forefront of best business practice.
• Darcy's board minutes are to be used as a precedent to encourage directors to consider environmental factors including the company's net zero target and any climate change risks as a routine part of decision-making.
• Mani's clause introduces climate change issues as a standalone section of a report on title for the acquisition of UK based property.
• Mary's clause prevents contractors from achieving practical completion where they have not achieved energy efficiency obligations that would be set out under the Joint Contracts Tribunal suite of design and build contracts.

Looking forward

The model clauses in the Climate Contract Playbook are untested, but provide a practical starting point for companies looking to reduce their environmental impact.

The Chancery Lane Project has requested case study feedback from lawyers who have used the model clauses. It plans to hold a second climate hackathon in November 2020.