How Corporates are Tackling Climate Change, One Contract Clause at a Time

As the dust settles on the UN Climate Change Conference (COP26) in Glasgow, the global need to address climate change has never been more important. But how can lawyers help in the push towards achieving net zero?

Thanks to the creative thinking of The Chancery Lane Project, model climate clauses are now available for incorporation into legal documents, enabling contracts to play their part in reducing the parties’ carbon footprint and helping them to achieve their environmental, social and governance (ESG) targets.

The Chancery Lane Project

The Chancery Lane Project (TCLP) is a collaboration of more than 700 lawyers, each working pro bono, to create climate-focused model clauses for inclusion in commercial documents. Each clause is designed to help companies address a particular climate change related issue to help organisations focus on, and move closer towards, net zero.

TCLP was launched in London, United Kingdom in 2019 and has quickly expanded to other jurisdictions including Australia, parts of Asia Pacific, China and the United States of America. TCLP’s focus is to develop climate clauses and supporting resources that provide a practical means for organisations to achieve their climate targets. Adoption of the climate clauses embeds climate issues and achievement of climate change reduction targets into everyday legal contracts. This focuses minds on the steps that can be taken to reduce and reverse climate impacts in daily operations.

Model clauses

TCLP has adopted a novel collaborative approach to the development of its model climate clauses. Lawyers initially participate in collaborative drafting events, brainstorming climate issues that can be addressed by using contractual law solutions, with those concepts developed collaboratively into draft clauses. Each draft clause is then peer reviewed by industry specialists and the TCLP team before it is made freely available on the TCLP website.

TCLP uses this development model on a small and large scale, including running global legal hackathons, the most recent of which was The Big Hack, which ran activities throughout October, November and December 2020. Thomson Reuters proudly sponsored this event and continues to support its lawyers’ involvement in the ongoing development of the model clauses.

Each of the TCLP model clauses aims to address a specific climate change issue that can be mitigated or addressed by adopting contractual obligations to change the behaviour of the parties. While most model clauses are designed for use in commercial agreements, some model clauses take the form of licences, scorecards, due diligence questionnaires, charters and directors’ meeting minutes.

Model clauses are available across a wide range of practice areas including banking and finance, company law, supply and manufacturing, dispute resolution, insurance and private equity.

To showcase this important initiative and encourage the use of these clauses, Practical Law has developed a complimentary Toolkit, The Chancery Lane Project: model climate clauses, which provides a summary of, and a link to, each of the current 89 model clauses. And as the race to achieve net zero picks up speed, so does the TCLP, with resources continually being developed to address the evolving needs of the market. Practical Law will keep pace with these developments, updating the toolkit to help support TCLP and ensure that these important resources are adopted as widely as possible.

Using contracts to help tackle climate change

To help lawyers amend their contracts to meet net zero goals, TCLP has published its Net zero toolkit, which contains all the resources needed to help organisations join the fight against climate change. In particular, the toolkit includes:

Climate clauses, including high ambition clauses aligned with the Paris Agreement goals of limiting global temperature increase to 1.5 degrees Celsius above pre-industrial levels by 2050.

Net zero implementation tools to help lawyers understand the concept of net zero, accurately define climate terms and identify key issues when including net zero commitments in contracts.

Other tools including a clause timeline and net zero transition map to help lawyers choose the right climate clauses for their agreements.

Practical Law’s complimentary Toolkit, The Chancery Lane Project: model climate clauses and TCLP’s Net zero toolkit are a great starting point in the search for climate-focused clauses and related resources. Together, these toolkits will assist organisations, individuals and their advisers in their efforts to incorporate climate-related concepts into everyday contracts.

So, take a look and see how contract law can become a key part of the way we realise net zero.

Want to know more?

If you are keen to learn more about how ESG obligations may be impacting your clients, Practical Law Corporate and In-house subscribers may also be interested in:

  • Practice note, Climate change and shareholder activism.
  • Practice note, Climate risk, net zero and corporate governance.
  • Checklist, Key considerations for in-house lawyers in addressing climate change.
  • Checklist, Examples of shareholder-requisitioned climate change and human rights resolutions affecting ASX 200 listed entities in 2020.

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