Climate Contract Playbook Edition 3
136
[Dottie’s clause]
The Origin Story
Child’s name
Dottie’s clause
Extended warranties and undertakings in respect of environmental position and climate change risk in underwriting and sponsor agreements
Full name
Practice Area / Sector
Corporate, Finance, Capital Markets
Warranties and undertakings in underwriting and sponsor agreements are not required to go into significant and granular detail as regards an applicant/issuer’s environmental position and climate change risk, in particular so as to require: • full disclosure of the company’s position/performance/record; and • disclosure on a continuing basis thereafter as to how any identified deficiencies are being/to be addressed with a view to continuous improvement and achievement by reference to Specified Metrics. It is necessary to increase transparency in this area and create at least the prospect of real accountability for non-compliance (or material non-compliance). The above may require prescribed contents requirements in relevant public documents to effectively be mandated by investor/shareholder bodies, or in default, mandated by regulators. Proposed extension of director (and possibly major shareholder) warranties and issuer/director undertakings in underwriting, sponsor and similar agreements in respect of environmental position and climate change risk. Underwriting and sponsor agreements etc to require/impose: • full and specific disclosure of the applicant/company’s position and performance by reference to Specified Metrics; and • disclosure thereafter on a continuing basis as to how any deficiencies that have been identified are being/to be addressed, with a view to continuous improvement by reference to Specified Metrics. It is standard practice for sponsors and nominated advisers to require the directors of an applicant for listing (and possibly also its major shareholders) to enter into an underwriting, sponsor or similar agreement, including warranties and undertakings as regards a range of accounting, trading and other operational matters. In the event of non-compliance, the institution can take enforcement action, effectively on behalf of the market. If warranties are breached for example, warrantors risk potentially very material liability (though subject to caps on liability). Another approach would be to for banks to require companies to make full climate change disclosure in the listing particulars, prospectus or other documentation, and require the company/directors to warrant their veracity.
Issue
Solution
Context
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