Climate Contract Playbook Edition 3
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The proposed template wording can form part of standardised green loan documentation to be disseminated widely by Know-How providers. It can function as a base for commercial and legal negotiations between lenders, borrowers and their respective legal advisors but the relevant clauses should be further tailored to the needs of each commercial situation.
Application
Interpretation:
Listed principles one to four below are in accordance with the Green Loan Principles. Section references are in accordance with an LMA style credit agreement (for ease of reference we have looked to the definitions and numbering under the LMA form of Senior Multi-Currency Term and Revolving Facilities Agreement for Leveraged Acquisition Finance Transactions (Senior/Mezzanine) dated 20 March 2020) (the LMA Form). Other terms used but not defined herein are as defined in the LMA Form. It is not intended for this Green Loan “Starter Pack” to be sector or transaction specific and accordingly the following language should be tailored to account for any industry or transaction specific market standard inclusions or requirements. Any section references and terms taken from the LMA Form and used herein should be replaced throughout, as may be applicable. Drafting Notes: As noted above, this Green Loan “Starter Pack” is intended to provide a framework for negotiation and, in particular, provide guidance for borrowers who are unfamiliar with green loan documentation but the underlying proposed clauses should be amended to reflect the commercial realities of each transaction. For the purposes of this Green Loan “Starter Pack” we have contemplated a term loan facility that will only have one utilisation. In the case of a facility that contemplates multiple utilisations, the proposed drafting should be tailored accordingly. The drafting allows “light green” or “hard green” options for defaults and events of default.
Notes for users
In particular, we would also like to highlight that it is a matter for the relevant parties to determine the following:
1. Repeating Representations (Clause 25.34 and 25.35) and the ability to modify the Green Loan Framework: The extent to which the “green” and “environmental” representations are repeated throughout the life of the loan. The contractual consequences in terms of a default, an event of default, an acceleration or a declassification for any breach, or misrepresentation, of such clauses will be an important topic of discussion between the parties. The parties should also be encouraged to discuss the ability to undertake complementary “green” projects in the same structure and any representation which repeats should not serve to restrict that business development goal provided that is commercially agreed. Similarly, the ability to amend the Green Loan Framework (as defined below) (whether with all lender or majority lender consent) to react to regulatory evolution in this area should be considered and discussed at an early stage;
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