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Climate Contract Playbook Edition 3

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Climate Contract Playbook Edition 3 Climate Contract Playbook Edition 3 September 2020 [www.chancerylaneproject.org] 2 Hogan Lovells Climate Contract Playbook Edition 3 3 Contents Introduction 5 The Journey Updated 7 Legal Philanthropy 8 Disclaimer 9 Precedent Clauses 10 Commercial Contracts: General [Hanley’s Clause] Climate Change Aligned Heads of Terms 11 [Kaia’s Clause] Climate Purposed NDA Terms 13 Commercial Contracts: Supply Agreements [Agatha’s Clause] Termination for Greener Supplier 17 [Annie’s Clause] Carbon Termination (short form) 20 [Teddy’s Clause] Environmental Threshold Obligations 22 [Jessica’s Clause] Carbon Performance Clauses 24 [Owen’s Clause] Net Zero Supply Chain Cascade 29 [Zoë and Bea’s Clause] Green Supply Agreement Clauses 33 [Iris’ Clause] Climate Risk Sharing Provisions 37 [Alex’s Clause] Circular Economy product design obligation NEW 42 [Zain’s Clause] Carbon Change Rights NEW 48 [Alice’s Clause] Reduction of CO2 from Single Use Plastic NEW 51 [Austen’s Clause] Sustainability Clauses in Supply Chain Contracts NEW 55 [Maria’s Scorecard] Supply chain emissions scorecard NEW 61 Corporate: General [Arlo’s Clause] Paris Compliant Company Objects 67 [Chloe’s Clause] Environmental Business Charter 69 [Darcy’s Minutes] Climate Change Aligned Board Minutes 71 Corporate: Investment / M&A [Frank’s Clause] Green Investment Obligations 74 [Bella’s Clause] Climate Equity Ratchet 77 [Lauren’s Clause] Green Shareholders Agreement] 82 [Lola & Harry’s DDQ] Climate and Net Zero Due Diligence 89 [Nozomi’s Clause] Net Zero Convertible Loan Note 95 [Zack’s Clause] SPA/Investment Agreement Disclosure of Climate Change Plans NEW 98 [Sienna’s Clause] Green Acquisition Obligations NEW 101 Corporate: Project Finance [Callum & Theo’s Clause] Climate Standard Transaction Terms NEW 106 Finance & Capital Markets: Loans [Harrison’s Clauses] Green Loan Starter Pack 117 [Casper’s Clause] Sustainability-Linked Loans NEW 126 Finance & Capital Markets: Capital Markets [Dottie’s Clause] Climate Underwriting Sponsor Warranties 136 [Gordon’s Clause] Capital Markets ESG Due Diligence Questionnaire NEW 139 Insurance [Connor’s Clause] Exclusions from insurance coverage for Climate Obligations NEW 146 [Archie’s Clause] Premium adjustment for D&O Climate-related financial disclosures NEW 149 Climate Contract Playbook Edition 3 4 Contents continued Planning [Rory’s Clause] Net Zero Land Promotion 154 [Evelyn & Ezra’s Clause] Securing Net Zero in development through planning NEW 163 Real Estate [Marni’s Clause] Report on Title Climate Change Clauses 170 [Emma’s Clause] Residential Green Lease 172 [Toryn’s Clause] Green Assured Shorthold Tenancy] 177 [Rosie’s Clause] Alteration/improvement provisions within leases NEW 180 Construction [Mary’s Clause] Build Contract Energy Efficiency Clauses 184 [Luna’s Clause] Green Construction Modifications 187 [Estelle’s Clause] Net Zero Construction Standards 191 [Edgar’s Clause] Climate Resilient landscape design contracts NEW 194 [Tristan’s Clause] Construction Materials: Procurement NEW 197 [Francis’ Clause] Climate Aligned Construction Waste Management NEW 201 Employment [Eric’s Clause] Climate Gardening Leave 205 [Elliot’s Handbook] Net Zero Employment Handbook 207 Energy & Transport [Sava’s Clause] Sustainable Connectivity in Rail Franchise Agreements NEW 216 Litigation & Arbitration [Emilia’s Clause] Green litigation and arbitration protocols NEW 221 [Mia’s Clause] Low Carbon arbitration hearings clause NEW 231 [Toby’s Clause] Carbon Efficient Dispute Resolution NEW 234 Public Procurement [Phillipe’s Clause] Invitation to Tender Green Obligations 238 Contributing, Participating or Supporting Firms and Organisations 241 Copyright Licence 243 Index 244 Climate Contract Playbook Edition 3 5 Introduction Despite the continued uncertainty and restrictions imposed as a result of the COVID-19 pandemic, we are delighted to publish this, the 3rd Edition of the Climate Contract Playbook. For ‘we’, read every lawyer and other participant who gave minutes, hours, days, weeks or months of time and energy to collaborate, coordinate and innovate, expertly and relentlessly. ‘We’ are not an organisation, but a collaboration. ‘We’ are the sum of our participants. Embracing the shift to remote working, TCLP has created new ways of online collaboration, with our legal hackathons taking place completely virtually and building a Slack community to convene the legal profession and innovate on a daily basis. This pivot online has not just allowed our work to continue but also to accelerate, publishing the 3rd Edition only 6 months after the first. Since publication of the 1st Edition in February, there has been a surge of interest in our work. Our clauses are being incorporated into law firm precedents and commercial agreements across the world. We also have plans to translate the drafting to meet the conventions and legal requirements of other jurisdictions. However, the clock is ticking. Whilst we remain optimistic of making a difference, we must keep up the momentum and increase our impact. We are asking all lawyers to amplify our work and heed the International Bar Association’s call for lawyers to integrate climate considerations in their day-to-day legal practice. Climate change no longer lives in an ‘environmental box’ but is becoming a central element of commercial decision making. This will become even more pronounced as the global corporate community sign up to the UNFCC Race to Zero and build COP26 into their 2021 strategic plans. This is clearly an opportunity for impact and one we will work together to seize. As described in our Year [11] Impact Report1, we made great progress towards our shared goals of bringing together the legal profession to co-create and publish precedent clauses and model laws. This work continues with drafting for further publications already underway. However, we need your help to disseminate, promote and use the clauses to amplify their impact. The work we create must take on a life outside the pages of our publications, evolving and growing with each use, to achieve our shared goals in a way that is aligned to clients, climate and the business of law. In doing so we create new market norms. We cannot do this without you. Please get in touch with us and share your ideas and actions to ‘change the precedent, change the world’. The rest of 2020 is just as exciting as we look towards our annual ‘Big Hack’ taking place across multiple jurisdictions during November. Thank you The year [10] Steering Group, The Chancery Lane Project 1 https://chancerylaneproject.org/s/TCLP-Year-11-Impact-Report-July-2020.pdf Climate Contract Playbook Edition 3 6 Climate Contract Playbook Edition 3 7 The Journey Updated Our journey so far in numbers: > participants 120 450 different organisations > 6000pro bono hours model7 laws new 46 50 climate precedents change definitions 20,000 > downloads 75countries reached Changes since Edition 2 This edition of the Playbook is re-ordered to group clauses from all editions by subject matter to help users find clauses relevant to their practice area or sector more easily. There have been no substantive changes to the clauses published in the first two editions. We encourage feedback to improve them and will update drafting in subsequent versions. Glossary Our glossary of uniform definitions for drafting climate solutions has been updated with refined and additional content. This has been published as a second edition alongside this playbook. The glossary continues to add significant value to the Project by helping participants accelerate and harmonise their drafting activity. Climate Contract Playbook Edition 3 8 Legal Philanthropy Introducing: “Legal Philanthropy” – Beyond Pro Bono and Responsible Business? The Chancery Lane Project is unique in many ways: positive, solution focused and collaborative. Not to mention the genesis of a new legal doctrine of commercial contracts driving global environmental outcomes. But this uniqueness makes it difficult to describe the Project and what the participants generously contribute. Our problem is that we struggle to do justice to their efforts. The Project has always been termed ‘Pro Bono’ and certainly the drafting has all been undertaken for free. But there is no legal advice or representation being provided and the beneficiary is the world rather than an identifiable client. As such the Project does not sit within the normal definitions of ‘Pro Bono’ . The Project transcends ‘Pro Bono’. Perhaps ‘Knowledge Philanthropy’ is a better term? This relatively new concept describes a person who shares their knowledge for the benefit of humanity . Certainly, our lawyers use their expert knowledge and skills to co-create legal solutions for the benefit of the world, but we are not sharing that knowledge per se and the Project is not a knowledge manager. The solutions we publish cannot be used in isolation. They still require the expertise, judgement, and negotiation skill of the legal community to deploy the solutions and create real world impact. Only a fraction of the knowledge developed during our legal hackathons and drafting process is put out into the world, for free, as model clauses and laws and their origin stories – the rest is retained by the contributors. Alternatively, the Project could simply be part of a participating firm’s ‘Responsible Business’ or ‘Corporate Social Responsibility’. Certainly, the elements of these concepts that relate to benefiting society and environment as a whole strike a chord, particularly when the business of law supports the project so generously. But the project also goes beyond a single business acting responsibly and we would not achieve our aims or create real world impact if only one firm were to participate. We are, as a profession, addressing a systemic issue in a way that is aligned to our businesses and clients. In truth the Project is probably a mixture of all these concepts. Lawyers engage because we can use our transactional legal skills and experience to help address one of the urgent and important issues of the day – the climate crisis – in a way that is aligned to our businesses, benefiting the communities we live and work in.
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