Climate Contract Playbook Edition 3
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Pandemic : an incidence of an infectious disease that spreads through multiple countries and is declared a ‘pandemic’ by the World Health Organisation. Period of Disruption: the period during which one or both parties is prevented from performing obligations under the agreement due to a Climate Change Event or Pandemic. Epi-terra : a Climate Change Impact that affects a large number of people within a community, population, or region. Pan-terra: a Climate Change Impact that affects multiple countries or continents.
Climate Risk Sharing 1.
Climate Risk Co-operation
1.1
The parties agree and acknowledge that this Agreement is of significant commercial value to each of the parties and that neither party should bear the entire risk of a Climate Change Event or Pandemic occurring. If a party is prevented from performing its obligations under this Agreement due to a Climate Change Event or Pandemic, the party shall as soon as reasonably practicable after the start of the Period of Disruption [or earlier date], notify the other party and provide a reasonably detailed summary of: (a) Its understanding of the existence, location and nature of the Climate Change Event or Pandemic; and (b) how the Climate Change Event or Pandemic has prevented and will continue to prevent it from performing its obligations under the agreement. If a party gives notice under clause 1.2, the parties will work together, in good faith, [using reasonable efforts] to [promptly]: (a) prevent the occurrence, or minimise the impacts, of any related ACO or ASO; (b) ensure that each party’s Disruption Liquidity Ratio is maintained in accordance with clause 2; (c) mitigate wasted Embedded Carbon in accordance with clause 3; and (d) mitigate the effects of the Climate Change Event or Pandemic on performance of this Agreement and reduce the Period of Disruption, in each case to the extent it is safe to do so and will not cause an ACO or ASO.
1.2
1.3
2.
Maintaining Climate Liquidity Ratios to avoid ASO
2.1
During the Period of Disruption, the parties will prepare weekly Disruption Liquidity Ratios [on an open book basis OR supported by reports of independent accountants] (in the format set out in this Agreement or otherwise agreed by the parties in writing) and share these with the other party. [no later than the last business day of the applicable week.] If a party’s Disruption Liquidity Ratio is less that [X], the parties’ Finance Directors shall discuss in good faith an amendment to the payment terms under this agreement by a reasonable additional period (up to a maximum of [NUMBER] days) to assist each party to maintain an Operating Cash Flow sufficient to meet its Current Liabilities and therefore avoid any ASO that could be caused by cash flow problems.
2.2
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