Climate Contract Playbook Edition 3
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A user could specify that specific climate change or sustainability due diligence could be undertaken by one of the parties, or that they will ask a third party to undertake a joint carbon audit as a result of the deal. A simple clause to add to heads of terms of a commercial or corporate deal as an aide memoire to the boards to be considering climate change issues as part of any transaction. A user that has already committed to emissions reductions (including the emissions from its supply chain and commercial partners) may impose the expectation of climate action from a new commercial partner by summarising its requirements in the heads of terms / MoU. This will save time as unwilling new partners will quickly be exposed when face-to-face discussions commence. It assumes ‘Deal’ (or equivalent ‘Transaction’ or ‘Project’) is defined elsewhere.
Notes for users
Key Climate Change Considerations
1.1
The Deal will be structured so as not to increase, or amplify the impact of, climate change or the carbon emissions of the parties. [The Deal will provide opportunities to reduce carbon emissions and the respective party’s impact on climate change and the Parties agree to work together to identify carbon saving opportunities as part of the negotiations.] The respective directors of the parties will consider the financial risks relating to climate change as part of the Deal due diligence in accordance with the [recommendations of the Task Force on Climate-related Financial Disclosures 4 / Bank of England’s climate risk taxonomy and climate stress tests 5 ] including the: a) physical risks; b) transition risks; and c) litigation risks. [If having considered the risks summarised in paragraph 1.3 the parties conclude that there are significant climate risks present in the Deal they will, as a Condition Precedent or Condition Subsequent, agree a plan to mitigate the risks identified.]
1.2
1.3
1.4
4
https://www.fsb-tcfd.org/.
5 https://www.bankofengland.co.uk/climate-change.
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