Extension of director and major shareholder warranties and issuer/director undertakings in underwriting, sponsor and similar agreements in respect of environmental position and climate risk.
Parties to underwriting, purchase and sponsor agreements can use this clause to incorporate climate warranties and undertakings from directors with a view to continuous improvement. This allows companies to address their progress to achieve net zero targets, resulting in improved transparency, accountability and performance against climate risk and impact metrics.
Additional Warranties
1. [Note: The following warranties may be added to the warranties schedule in the Placing Agreement, Underwriting Agreement, Purchase Agreement or other similar agreement.]
1.1 The Company’s [historic/current] environmental [position/performance/record] meets the Specified Metrics;
1.2 The Company and [each of the subsidiaries] have at all times complied with all Environmental Laws in force from time to time and there are no facts or circumstances that may lead to any breach of or liability under any Environmental Laws or liability in respect of Environmental Matters;
1.3 There have been no claims, investigations, prosecutions or other proceedings against or threatened against the Company [or any of its subsidiaries] or any of [its]/[their] respective directors, officers or employees in respect of any breach or alleged breach of any Environmental Laws, and there are no facts or circumstances that may lead to any such claims, investigations, prosecutions or other proceedings;
1.4 At no time has the Company [or any of its subsidiaries] received any notice, communication or information alleging any liability in relation to any Environmental Matters or that any works are required;
1.5 The Company has implemented in full the recommendations of the International Financial Reporting Standards Foundation (IFRS) in relation to the governance, strategy, risk management and disclosure of climate risks and opportunities;
1.6 The Company has carried out an [independently verified] assessment of its Carbon Footprint in accordance with international carbon reporting practice, being the accepted practice from time to time in relation to reporting for the purposes of the protocols to the United Nations Framework Convention on Climate Change and such assessment is accurate in all material respects;
1.7 The Company has set a Net Zero Target [validated by the Science Based Targets Initiative] [[and] a Carbon Budget] [and has signed up to Race to Zero];
1.8 The Company has a plan to deliver the Net Zero Target and remain Net Negative thereafter, including an Offsetting Strategy, interim targets split into scope 1, 2 and 3 emissions (as defined by the GHG Protocol) reduction targets, continuous measured reduction and identifying a year on year percentage decarbonisation aligned with Paris Agreement Goals and an evaluation of how the Net Zero Target can be delivered in a way that promotes a just transition to a low carbon economy;
1.9 The Company has an environmental or sustainability policy which sets out its commitments and targets to improve its sustainability standards [such policy includes how the Company would need to adapt in the event global temperature rise to 2°C above pre-industrial levels; includes a procurement policy that prioritises sustainable and local sourcing, implementation of circular economy principles and reducing food, plastic, water and other waste; [INCLUDE OTHER SPECIFIC POLICIES]];
1.10 The Company has a board member or an executive committee who/which is primarily accountable for measurement, management and reporting on climate risks, and the Company’s Net Zero Target and Carbon Budget (if any) and which is advised by (or has one or more members that are) an appropriately qualified climate, sustainability or environmental consultant who has the fundamental skills and experience to diligently, competently and professionally advise on improving sustainability and mitigating carbon footprint;
1.11 The Company links executive or employee remuneration to the achievement of the interim targets and/or its Net Zero Target;
1.12 The Company’s employee pension scheme is invested in an ESG/green investment fund;
1.13 The Company provides climate and environmental training to its employees, personnel and contractors [and business partners], including details of the Company’s public and contractual commitments, targets and governance in relation to climate change and sustainability, the economic and social (e.g. health) benefits to the Company in reducing the workplace’s environmental impact and sustainable lifestyle changes and issues relating to the workplace;
1.14 The Company [regularly][INSERT TIME PERIOD] assesses how its local and global stakeholders (including employees, clients, end customers and supply chain partners and their stakeholders) may be affected by climate change and a just transition to a low carbon economy and includes this [and corresponding mitigation actions] in its risk assessment and adaptation and risk mitigation plans;
1.15 The Company includes clauses within [all of] its contracts with other parties that enable its achievement of the Net Zero Target;
1.16 [The Company has a strategy to engage in climate policy leadership and to enable others (including clients, suppliers and others in its sector and business network) to contribute to the global transition toward net zero through engagement, information sharing, access to finance, and capacity building;]
1.17 The Company complies with all [local minimum/living wage standards in all jurisdictions it has employees] [the applicable requirements in respect of wages, working hours, gender equality, labour contracts and occupational health and safety issues, set out in the International Labour Organisation of the United Nations];
1.18 There are no regulatory or employee claims, breaches, investigations, enforcement, litigation action (pending or threatened) relating to unfair labour practices or human rights abuses;
1.19 The Company evaluates its lobbying activities, public policy positions and the activities and policies of [affiliates or relevant trade associations] to ensure alignment with Paris Agreement Goals[.][; and]
1.20 [The Company includes fiduciary duties that consider the environment and/or alignment with Paris Agreement Goals in its articles of association][.][; and]
1.21 [INSERT any bespoke warranties concerning the Company’s historic/current environmental position/performance/record][.][; and]
1.22 [INSERT any bespoke undertakings to address/monitor environmental/climate change risk relevant to the business on a continuing basis thereafter, including rectifying/ameliorating any identified problems or deficiencies].
Carbon Budget means the cumulative volume of emissions of GHGs permitted at the national level for the period of [YEAR to YEAR], expressed as a net quantity of Carbon Dioxide Equivalent and determined by decree of [NATIONAL LEGISLATION].
Carbon Dioxide Equivalent (CO2e or CO2eq) means the standard metric measure used by [the UN’s Intergovernmental Panel on Climate Change (IPCC)] to compare the emissions from various GHGs on the basis of their global warming potential over a specified timescale to express a carbon footprint that consists of different GHGs as a single number.
Carbon Footprint means the total annual GHG Emissions.
Environmental Laws means all applicable laws, statutes, regulations, subordinate legislation, bye-laws, common law and other national, international, federal, European Union, state and local laws, judgments, decisions and injunctions of any court or tribunal, and [legally binding] codes of practice and guidance notes to the extent that they relate to or apply to the environment, energy efficiency or climate change.
Environmental Matters means all matters relating to:
a) pollution or contamination of the environment;
b) the presence, disposal, release, spillage, deposit, escape, discharge, leak, migration or emission of hazardous substances or waste;
c) the creation or existence of any noise, vibration, odour, radiation, common law or statutory nuisance or other adverse impact on the environment; or
d) the condition, protection, maintenance, remediation, reinstatement, restoration or replacement of the environment or any part of it.
Greenhouse Gases (GHGs) means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere and are specified in Annex A to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) [or otherwise specified by the UNFCCC at the date of this agreement], as may be amended from time to time[, which include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3),] each expressed as a total in units of Carbon Dioxide Equivalent (CO2e).
GHG Emissions means [the Company’s [and its subsidiaries’]] emissions of GHGs from all sources categorised as scope 1, 2 and 3 emissions by the GHG Protocol.
GHG Protocol means The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition 2015 as updated from time to time [Drafting note: Scope 1, 2 and 3 emissions are defined on page 27 of the GHG Protocol].
Net Negative means that the aggregate of [the [Company’s] [and its subsidiaries’] actions to reduce [its/their] GHG Emissions and remove them from the atmosphere exceeds [its/ their] unabated GHG Emissions.*
* [Drafting Note: On a global scale, removals of Greenhouse Gases should be consistent with the mitigation pathways that would limit global warming to 1.5°C, with little to no overshoot. See IPCC Special Report on Global Warming of 1.5 ºC, Summary for Policymakers, Part C Emission Pathways and System Transitions Consistent with 1.5°C Global Warming.]
Net Zero Target means both a reduction of GHG Emissions overall and a removal of GHG Emissions associated with Offsets acquired to address Residual Emissions by [INSERT DATE/ 2050 or sooner] to achieve a balance between the [Company’s] sources and sinks of GHG Emissions in a calendar year and for each subsequent year thereafter and to achieve Paris Agreement Goals.
Offset or Offsetting means the purchase of carbon credits from a project:
(i) that has been verified in accordance with [insert name of voluntary standard] or under the United Nations Framework Convention on Climate Change (UNFCCC) clean development mechanism (CDM) [or [successor/ equivalent] UNFCCC mechanism];
(ii) where the emissions of GHG avoided, reduced or removed by the project are additional;
(iii) that, in relation to GHG removals, employs long-lived storage methods that have a low risk of reversal over millennia;
(iv) that prioritises the removal of GHG from the atmosphere rather than avoids or reduces third party emissions of GHG; and
(v) that takes account of a just transition and addresses wider social and ecological goals.
Offsetting Strategy means a plan [as agreed by the Parties] specifying:
(i) the verified credits from a recognised offset provider that may be used by the [Company] [and its subsidiaries] to offset its Residual Emissions;
(ii) how the [Company] [and its subsidiaries] will transition from using credits resulting from offsetting projects that avoid or reduce emissions of GHG to those from projects that remove emissions of GHG and involve long-term storage methods that have a low risk of reversal; [and]
(iii) how the [Company] will [use best endeavours to] reduce its use of credits by reducing its Residual Emissions [to zero/ by [x] %] by 2050[;] [and][.]
[(iv) the impact of the relevant offsetting projects on a just transition and wider social and ecological goals.]
Paris Agreement Goals means the three goals set out in Articles 2.1 and 4.1 of the UNFCCC’s Paris Agreement[./, in particular pursuing efforts to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels].
Residual Emissions means GHG Emissions that are emitted after all reasonable efforts have been made by the [Company] [and its subsidiaries] to reduce GHG Emissions.
Specified Metrics means [insert schedule reference].
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