Climate Contract Playbook Edition 3
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The increased risk of liability will: • Force directors and others to assign greater priority to climate risk-related disclosure, performance and continuous improvement. • Increase knowledge of company’s (and group’s) operations and associated risks including climate change risks. • Increase engagement and understanding at board and senior management levels. • Mean that this becomes, and stays, a prominent item on board meeting agendas. • Minimise the chance that directors, when challenged, can successfully assert that they were unaware. Over time standards will be raised, even for companies not seeking a listing.
Impact
1. Financial Conduct Authority 2. London Stock Exchange 3. Investor/shareholder bodies 4. Sponsors and nominated advisers 5. Law firms 6. Environmental/climate change experts
Stakeholders
The proposed amendments will result in improved transparency and greater prospects of accountability, resulting in improved performance against specified climate risk metrics.
Application
The Specified Metrics could be linked to an established framework – e.g. Task Force on Climate-related Disclosures (TFCD) – but also be capable of alignment to individual company’s/group’s particular position, activities and known issues. Consider independent review, such as audit by third party. Science based 67 or net zero targets may also be useful. One standard that could be also be used for this, potentially in addition to the TFCD, is ISO 14001:2015, which has been updated to reflect the increased importance for organisations of: • Environmental management systems (EMS) in business strategy, boardroom decisions and communications. • Sustainable resource use and climate change mitigation. • Lifecycle thinking for products to maximise supply chain efficiency. For undertakings to improve performance in clause 1(d), consider using the detailed provisions in Jessica’s clause – Contract clauses for carbon performance.
Notes for users
[Note: The following warranties may be added to the warranties schedule in the Placing Agreement.] a) The Company’s [historic/current] environmental [position/performance/record] meets the Specified Metrics; b) The company and [each of the subsidiaries] have at all times operated in
compliance with all Environmental Laws in force from time to time and there are no facts or circumstances that may lead to any breach of or liability under any Environmental Laws or liability in respect of Environmental Matters;
67 https://sciencebasedtargets.org/
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