Tackling climate change is central to NatWest’s purpose-led strategy. The bank’s net zero strategy covers its financed emissions (from loans and investment activities), assets under management and its own operational value chain.
NatWest’s use of TCLP’s climate clauses sits alongside other climate action it has taken. This includes committing £100 billion to a sustainable finance fund and only working with companies with credible decarbonisation plans.
The legal team, which supports the bank’s outsourcing and technology work, has explored ways to support the bank’s ambition to be net zero by 2050. It is working with suppliers to drive change and satisfy its commitment to tackle its value chain emissions.
TCLP clauses and the Bank’s approach
The NatWest legal team manages and evolves the bank’s extensive suite of template supply contracts. Working closely with the bank’s procurement function, they updated these templates to reflect the bank’s climate ambitions.
Using Zoë & Bea’s Clause as a jumping-off point and adapting it to reflect the role of the bank’s sustainability ratings partner, NatWest has introduced sustainability clauses across their template supply contracts. The clauses support and incentivise reductions in Scope 3 emissions and promote positive sustainability behaviour.
The new clauses act as a benchmarking tool. They require suppliers to take steps to improve their sustainability score following the production of a scorecard by NatWest’s ratings partner. A failure to improve that score over a period of time will allow NatWest to terminate the contract.
The legal team debated several issues. These included how they might strike a balance between a clause with teeth (free from any sense of greenwashing), and the need to recognise and acknowledge they were introducing new provisions (including termination rights) into a market where climate-transition clauses are not common. The team recognised the need to drive change in the supply chain while treating suppliers fairly and avoiding remedies such as hair-trigger termination rights. These remedies could dis-incentivise suppliers that were already high sustainability performers.
The team sought to reach a reasonable position on each of these points by:
- Building in flexibility to improve scores over time.
- Requiring the bank to collaborate with suppliers and their ratings partner to identify and support reasonable improvements.
NatWest is in the early stages of this project but has not seen any significant negative reaction from suppliers. The bank’s sustainability ratings partner has already engaged with their supply base on behalf of other clients, which has made the process seem less alien for suppliers. NatWest is also aware that, following COP26, it has been a process that many suppliers have been trying to get to grips with. Going forward, the bank will track supplier responses and look to streamline the clauses where possible, sharing these learnings with TCLP.
The legal team has received genuine support from within the bank on the introduction of the clauses. They see this as an example of the way in which the bank’s purpose has been successfully integrated into decision making. The team worked closely with the bank’s procurement team, which provided insight and support.
The project was also fun. Kenny Robertson, Head of Outsourcing, Technology & IP legal team confirms: “This project has been a fantastic learning opportunity and energising to feel we are genuinely doing our bit to make a difference. We are really proud to be an early adopter in this space.”