Climate Contract Playbook Edition 3
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Various clauses to (a) place obligations and restrictions on the company and the management to ensure the company is run in the “greenest” possible manner and (b) place obligations upon the investors to engage in climate change mitigation or relinquish benefits from the investment.
Application
This clause should be read and used in conjunction with Frank’s clause in the 1st Edition of the Contract Playbook. Frank’s clause is made for an Investment Agreement and is therefore drafted with the investors holding the company and the founders to account. Lauren’s Clause is drafted for a shareholders’ agreement – so is more balanced and has reciprocal obligations on all shareholders. This shareholders’ agreement is aimed to be slightly broader in scope. Any clauses that place obligations upon investors will likely be firmly resisted by investor solicitors initially but where there is high competition for an investment and companies are oversubscribed for their rounds, it should be insisted upon by company solicitors, albeit perhaps in amended form to something more commercially reasonable for the investor and company in question. The clauses can be used in the context of a founders only shareholders agreement or where there are external investors from the outset. The drafting envisages standard definitions throughout other than the additional definitions. In relation to the Sustainability Management Standards, the ISO has a whole section of their website devoted to SDG compliance, and therefore if the company has the budget, it should work with the ISO in devising a bespoke set of standards for its specific Sustainability Goals. An alternative (free) tool is the B Lab’s SDG Action Tracker. The obligations on the Company to reach Carbon Neutral status can be replaced by the specific actions for achieving Net Zero in Frank’s clause, if investors wish to be more prescriptive. Qualifying “drag” provisions may be important for impact investors who do not wish to sell to a “non-green” buyer.
Notes for users
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