Climate Contract Playbook Edition 3
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It is often said that “people buy people”, so management’s response to being issued with an extensive questionnaire regarding climate change could indicate how they will fit into the buyer’s culture post-acquisition. If they are dismissive of the request or do not have any awareness of climate change issues, perhaps they will not be a good fit either at a strategic or personal level. If they admit that they have not previously done enough to address climate change risks, their honesty and apparent willingness to change may encourage a buyer to give them the opportunity to develop the business in this regard. The questionnaire may also help the buyer understand if the target company has been ‘greenwashing’, which might present a reputational issue in the future. Buyers can choose to issue this questionnaire, whether in whole or in part, at their discretion. Practitioners should seek to understand buyers’ climate change strategy as part of their wider business relationship with their clients, and this should inform the advice they give about the types of questions they should be asking target companies as part of the due diligence process. The following stakeholders could be consulted for example to encourage their members to consider climate change factors when seeking to conduct corporate transactions (whether as buyers or sellers, investors or investees): 1. Department for Business, Energy and Industrial Strategy (BEIS) 2. Confederation of British Industry 3. Federation of Small Businesses 4. British Private Equity & Venture Capital Association 5. Corporate financiers 6. Global Impact Investing Network 7. Precedent and know how providers 8. Professional support lawyers 9. Private practice firms 10. Company directors and in-house lawyers Whilst this questionnaire has been drafted to be issued as a stand-alone information request, it could also be incorporated into other due diligence questionnaires (for example, Section 16 of PLC’s Legal due diligence information request: long form: share purchases (Environment)). Depending on the context of the acquisition, it may be appropriate to ask a limited amount of initial questions and go into more detail in additional information requests. Answers to this questionnaire should inform the type of warranties and indemnities that the buyer may wish to seek from the target company and/or investment requirements it may wish to impose in its investment agreement. Example green investment obligations are contained in Frank’s Clause in the First Edition of the Climate Contract Playbook (February 2020) 49 . A number of the questions also link to other clauses from the Playbook (see footnotes 6-8 (inclusive)). This questionnaire has been drafted to be issued for use in a corporate transaction where the buyer is acquiring the entire issued share capital of a single company. However, it can easily be adapted for other corporate transactions (for example, a share acquisition of a group of companies, an angel or private equity investment or an asset purchase of a going concern business) and can be used on corporate transactions in any jurisdiction. Questions 3-9 (inclusive) are sourced from or inspired by Principles for Responsible Investment: A guide on climate change for private equity investors (31 May 2016) 50 .
Impact continued
Stakeholders
Application
Notes for users
49 https://static1.squarespace.com/static/5d2f4d738d48be0001dee7c4/t/5e5587696eb9ca67a2b1040d/1582663542063/TCLP+- +Climate+Contract+Playbook+-+1st+Edition.pdf 50 https://www.unpri.org/private-equity/a-guide-on-climate-change-for-private-equity-investors/122.article
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