Climate Contract Playbook Edition 3
106
[Callum & Theo’s clause] NEW
The Origin Story
Child’s name
Callum & Theo’s clause
Full name
Climate Standard Transaction Terms
Practice Area / Sector
Project Finance, Infrastructure, Corporate, International Development
Impact investors have financial leverage to accelerate climate solutions and encourage the building of climate-resilient infrastructure when financing private sector infrastructure in countries in Africa and Asia. Yet it is not clear where they can have the best effect and what the key climate issues are that they should be seeking to change through their transaction documents (taking into account geographical investment mandate and potential market constraints). Developing model climate terms and conditions (using TCLP’s work to date as a starting point) that an impact investor financing private sector infrastructure in countries in Africa and Asia can incorporate into its standard documents. Model clauses that seek to support positive climate behaviour in the countries in which such investors operate that can be adopted as a market standard and which will change behaviour of markets, investors, clients and help ensure that impact investments are as aligned with the Paris Agreement as possible. The solution leverages the impact investment mandate (with development finance institutions, international finance institutions and the private sector) to incorporate climate terms into model contracts used for project finance, other infrastructure investments (e.g. investments in financial intermediaries) and other investments in general. It seeks to develop model clauses and climate sections for documents used at each stage of the life cycle of an infrastructure investment to deliver maximum climate impact but which are practical and realistic - e.g. due diligence, term sheet, loan/guarantee and other transaction documents. The model clauses: incorporate the climate positive behaviour expected of clients and their contractors (e.g. engineering, procurement and construction contractors); commit clients to supply data to be able to measure the climate impact of an investment; require projects to be designed in such a way that they are in line with climate change approaches, government climate change strategies and plans of the country(ies) where projects are located, helping achieve Nationally Determined Contributions; set out the remedies and sanctions appropriate for a breach of such clauses; and promote consideration of the resources required to implement, monitor and ensure compliance with climate obligations.
Issue
Solution
Context
These model clauses will provide support for the countries in which investments are made to transition to climate resilient and low carbon infrastructure in line with Paris Agreement commitments and help the country of investment achieve its Nationally Determined Contributions.
Impact
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