By Leonie Brabant and Jenni Ramos
Postponing transformational climate action is not an option. Contracts govern much of human activity across every sector of the economy and are the swiftest mechanism to binding rules, both pre-empting and implementing legislative change. Lawyers write the contracts and laws that influence every decision made by businesses, communities and individuals. Therefore, they have the power to either lock the parties into high-carbon business as usual or rewire business to tackle climate change.
The Chancery Lane Project (TCLP) aims to shift the dial and make climate-conscious drafting, which seems ambitious now, the norm as quickly as possible. As a global pro bono collaboration of professionals rewiring contracts to combat the climate crisis, TCLP’s vision is a world where all lawyers and their clients can use the law to deliver their climate targets.
The legal sector has valuable skills, tools, and levers to deliver the action necessary for a green transformation. To ensure that these can be mobilised against climate change, TCLP (i) publishes free and accessible contract clauses that help organisations address their climate risks and impacts, and achieve their net zero ambitions, (ii) convenes and supports legal, business and sustainability professionals as well as key stakeholders to create, peer review and use its climate clauses, and (iii) supports clause use with a toolkit of materials, regular workshops and collaborative opportunities to share experiences, provide case studies and accelerate use of the clauses.
How did TCLP begin?
Born out of conversations during London Climate Action Week 2019, the founders recognised that the legal profession is in a unique position to address the climate crisis. Lawyers write the contracts which influence decisions made by individuals and businesses. If lawyers changed how they drafted contracts, each of those contracts could take into account environmental concerns, mitigate climate risks and provide for a just transition to net zero emissions.
Central to TCLP’s ethos is collaboration, allowing participants to pool knowledge, innovate and accelerate climate solutions in a safe environment. The project now has a community of over 2500 participants and 300 organisations worldwide, including all of the top 25 UK law firms and many of the top 25 US law firms with UK offices. Together, lawyers from all sectors and jurisdictions draft clauses that meet emissions targets, reduce waste and suggest innovative ways to reduce environmental impact in contracts.
In the three years since its inception, TCLP has taken off globally. The first clauses were published after a ‘hackathon’ in November 2019. They were followed by a succession of drafting workshops to produce the extensive bank of 100+ climate clauses available on the website now.
Case studies show how TCLP clauses are already being implemented by market leaders across business, governments, knowledge providers and jurisdictions. With the help of the Net Zero Toolkit and TCLP’s workshops, participants develop their understanding of key climate concepts, which helps them to tailor climate clauses to suit client requirements across a variety of legal agreements.
The Clause Collection
When a company sets a net zero target, this is just the first step. To move from aspirational to achievable targets, a company needs measurable interim targets and a clear pipeline of actions embedded throughout the entire organisation. This is exactly where contracts can play their part. TCLP’s Net Zero Transition Map demonstrates how climate clauses can be used in every area of an organisation’s contractual relationships to put a net zero target into practical operation.
TCLP’s bank of climate clauses spans all sectors and practice areas, with key focal points on the built environment, finance, corporate governance and supply chains and procurement. Each clause is accompanied by drafting notes, which explain the climate issue, the solution the clause provides and how to overcome potential barriers to use.
The clauses are all given a child’s name to remind users of the next generation who will be most affected by the climate crisis.
Putting net zero targets into action starts with the tone from the top, the messages the board gives, what metrics their remuneration is tied to and how climate is factored into every board decision. TCLP clauses can incorporate climate concerns into the corporate governance schemes. For example:
- Lila’s Clause is a board paper for building net zero objectives into an SME’s corporate strategy. This can be used to upskill your board of directors or a counterparty’s board to help deliver your targets; or
- Griff’s Clause is another board paper template for consideration of the climate impacts of a significant transaction and the associated climate risks to the business.
Decisions recorded in those board minutes need to flow into transaction documentation to keep the footprint of the transaction to board-approved limits.
TCLP’s built environment project aims to address the construction sector’s large contribution to global greenhouse gas emissions. Given the highly technical nature of the construction sector as well as the significant commercial and procedural barriers to climate action, solutions must be flexible, adept and enforceable. An example that provides this is Tristan’s Clause, which can be used in Joint Contracts Tribunal (JCT) template contracts to provide a carbon budget for construction projects. Episode 2 of TCLP’s Contracts for the Climate podcast digs into the clause and how it provides a solution to current construction challenges.
Supply and Procurement
The use of climate clauses in supply agreements has appealed to a wide variety of organisations, and they have used them to negotiate binding commitments with their supply chains. Contract terms that encourage the reduction of scope 3 emissionsprovide an immediate opportunity to reduce emissions, with long-term solutions. As the clauses specify legally enforceable procedures and quantifiable metrics to track climate commitments, their inclusion in supply contracts is a compelling way to take decisive action on climate change. Further, supply chains often cross jurisdictional boundaries, with varying environmental laws. Climate clauses offer a tailored approach to address specific goals, industries and geographic locations, creating ambitious and culturally sensitive solutions. Vodafone, Charles Russell Speechlys, NatWest, and Salesforce are examples of organisations implementing climate clauses in their supply chain agreements. For example, Salesforce has cascaded climate obligations through supply contracts to ensure that suppliers representing 60% of its scope 3 emissions will set science-based targets of their own by 2024.
The financial sector has one of the most powerful roles to play in shaping the economy’s net zero transition. Appropriate investment and allocation of funding enable the necessary reduction of global emissions. TCLP has a wide variety of clauses for use in loan agreements, prospectuses and more specialist finance documentation. By way of example, Gordon’s Due Diligence Questionnaire focuses on capital markets and requires a company to provide information on its impact on and considerations of climate change. Tilly’s Climate Checklist enables issuers of debt securities to assess and disclose the financial impacts of climate risks. TCLP’s London Climate Action Week event on Friday 1 July 2022 will explore how to mitigate climate risks in the financial sector.
When using climate clauses, it is essential to be mindful of potential negative or unintended consequences and wider social implications that may be incompatible with a just transition. This is particularly relevant in global supply chains. TCLP has included wording within some of its ‘best in class’ net zero clauses to address this, and is working on incorporating these considerations further. This will help parties to ensure that climate risks and obligations are shared in a way that takes account of issues such as the ability to pay for the transition.
Engaging the Legal Community
As the climate crisis becomes increasingly more urgent, TCLP continues to galvanise the legal community to take action today.
Every lawyer must be climate literate and must be confident to advise their organisation and clients on how to mitigate climate risks.
In addition to using the clauses and participating in workshops and case studies, there are many ways to get involved with TCLP. Volunteering for discrete pro bono tasks might include climate clause drafting, editorial work, peer review, transposing clauses to other sectors and jurisdictions, helping to maintain the clauses to keep them up to date, sector-specific projects and pro bono legal advice for TCLP’s management functions.
If you and your colleagues would like to find out more about TCLP, they are running a series of workshops and talks during London Climate Action Week, 27 June – 1 July 2022. Please watch ‘Introducing Climate Clauses’ to find out more about the project and familiarise yourself with the resources available.
In the spirit of the Pledge, we will from now on ask all blog authors the same question aimed at identifying the exact points where their field of law could contribute to fighting climate change:
Leonie Brabant is a project associate at The Chancery Lane Project and a member of the next generation of lawyers taking action on climate change.
Jenni Ramos joined The Chancery Lane Project as the first project associate in June 2020 and has been privileged to help shape the rapid expansion of the project, as increasingly more lawyers seek to consider climate within their work. Having qualified at Allen & Overy in London, Jenni practised corporate and commercial law in Cambridge before a career break and a variety of non-practising positions, including negotiating university medical research contracts and heading up the compliance function of an international disability NGO. Jenni’s areas of interest are biodiversity, just transition and the role of corporate governance and directors in tackling the climate and nature crises.