Model clause

Climate Change Aligned Heads of Terms

Hanley's Clause

A dedicated section in heads of terms precedents so that climate change issues become a key issue for any deal team. This will be particularly relevant where parties have public Net Zero Targets.

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Why use this?

The clauses will ensure climate change is considered from the earliest part of a transaction and that carbon saving opportunities will become part of the due diligence exercise alongside the normal legal, financial, commercial and technical due diligence.

It will also allow boards to demonstrate how climate change was considered as part of a transaction and thus potentially help mitigate future liability risk.

How it promotes a net zero future

The clauses will mean that a deal team will have to undertake specific due diligence relating to climate change issues and make known their position on these issues to the counterparty.

This makes the evaluation and allocation of climate change risk a key part of any transaction.

Disclaimer - please read

The clauses on this website (and published in our Climate Contract Playbook) have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.

The clauses on this website (and published in our Climate Contract Playbook) are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.

This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.

At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.

The clause

Key Climate Change Considerations

1.1 The Deal will be structured so as not to increase, or amplify the impact of, climate change or the carbon emissions of the parties.

1.2 [The Deal will provide opportunities to reduce carbon emissions and the respective party’s impact on climate change and the Parties agree to work together to identify carbon saving opportunities as part of the negotiations.]

1.3 The respective directors of the parties will consider the financial risks relating to climate change as part of the Deal due diligence in accordance with the [recommendations of the Task Force on Climate-related Financial Disclosures / Bank of England’s climate risk taxonomy and climate stress tests] including the:

a) physical risks;

b) transition risks; and

c) litigation risks.

1.4 [If having considered the risks summarised in paragraph 1.3 the parties conclude that there are significant climate risks present in the Deal they will, as a Condition Precedent or Condition Subsequent, agree a plan to mitigate the risks identified.]

Glossary references: Climate Change

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