Climate clause

Exclusions from Insurance Coverage for Climate Harms

Connor's Clause

An explicit exclusion from cover for climate liability, costs and losses where the Insured fails to meet its GHG emissions reduction targets.

This is a net zero clause

This clause aligns with Paris Agreement goals, Race to Zero requirements and the Oxford Principles for Net Zero Aligned Carbon Offsetting. For tools and support to use this clause, use our toolkit or join one of our events.

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Why use this?

Connor’s Clause allocates the risk relating to climate change impacts caused by a policyholder’s failure to meet its emissions reduction targets to the policyholder, incentivising that policyholder to meet climate targets that it has set itself. This will avoid reliance on insurance, whilst assisting the insurer to mitigate climate-related risk.

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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

Additional Definitions 

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. 

Claim means written demands, civil or criminal proceedings, extradition proceedings, regulatory or administrative proceedings against the Policyholder for actual or alleged negligence, misstatements, default, breach of duty or breach of trust.

Climate Change means a change in the state of the climate that can be identified and that persists for [an extended period of time/ decades] and where the change is caused directly or indirectly by (i) human activity that alters the composition of the global atmosphere and (ii) natural processes, including volcanic eruptions and changes of solar cycles.

[Climate Event has the meaning given to it in clause 1.1.]

Emissions Reductions Targets means the short, medium and long term interim reduction targets for the Insured’s GHG Emissions set out in the Net Zero Transition Plan.

GHG Emissions means emissions of GHGs from all sources, categorised as scope 1, 2 and 3 emissions by 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.]

Greenhouse Gases (GHGs) means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere and as 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 Policy, 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 or CO2eq). [Drafting note: See TCLP Glossary: Greenhouse Gases (GHGs) for definition options and explanatory notes.]

Net Zero Transition Plan means a plan to achieve by [2050/ insert other date] a balance between the Insured’s GHG Emissions and removals of GHGs that:

(i) includes an Offsetting Strategy;

(ii) sets interim reduction targets for the Insured’s GHG Emissions that are aligned with Paris Agreement Goals; [and]

(iii) is reviewed and approved annually by the Board[; and

(iv) promotes a just transition to a low carbon economy].

Offset Provider means a provider of carbon credits or voluntary emission reduction credits that relate to: 

(i) a project that has been verified in accordance with [insert name of voluntary standard]; or

(ii) a United Nations Framework Convention on Climate Change (UNFCCC) clean development mechanism (CDM) [or [successor/ equivalent] UNFCCC mechanism] project.

Offsetting Strategy means a plan specifying:

(i) the verified credits from a recognised Offset Provider that may be used by the Insured to offset its Residual Emissions;

(ii) how the Insured 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 Insured will [use best endeavours to] reduce its use of credits by reducing its Residual Emissions [to zero/ by []%] 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 the Insured’s GHG Emissions that are emitted after all reasonable efforts have been made by the Insured to reduce its GHG Emissions.

 

Additional Clauses*

1.1 [Option A: This Policy does not cover liability in respect of any actual or potential effects of Climate Change if the Insured fails to meet the Emissions Reduction Targets.] 

[OR]

1.1 [Option B: Where the Insured makes a claim under this Policy for an event which is due in whole or in part, directly or indirectly to the effects of Climate Change (a Climate Event), the parties will agree on the likelihood or proportional part of the Climate Event being due to Climate Change expressed as a percentage figure. If the parties cannot agree on the percentage figure then they will agree to use the percentage figure provided by [insert independent organisation here]. Where the Insured has failed to meet the Emissions Reduction Targets the Policy will not cover liability in respect of that percentage of the Climate Event which is regarded as being due in whole or in part, directly or indirectly to Climate Change. 

For the avoidance of doubt, Climate Events may include but not be limited to a disruptive weather event that causes loss or damage.] 

1.2 The following liabilities are also excluded, being liability relating to:

1.2.1 an actual or alleged failure by the Insured to reduce or limit GHG Emissions in line with its Emissions Reduction Targets; and/ or

1.2.2 any of the Insured’s lobbying activities, public policy positions or trade association memberships which [in the opinion of the Insurer could be reasonably considered to] undermine Paris Agreement Goals; and/ or

1.2.3 an actual or alleged failure by the Insured to have in place [and comply with] a Net Zero Transition Plan.

1.3 This Policy does not cover any Claims[, defence costs or any other costs, fees or expenses] of any kind whatsoever directly or indirectly relating to, arising out of or in consequence of:

1.3.1 GHG Emissions by the Insured or for which the Insured is responsible;

1.3.2 any actual or alleged failure by the Insured to reduce or limit GHG Emissions in line with its Emissions Reduction Targets; or

1.3.3 any of the Insured’s lobbying activities, public policy positions or trade association memberships which [in the opinion of the Insurer could be reasonably considered to] undermine Paris Agreement Goals; and/ or

1.3.4 any actual or alleged failure by the Insured to have in place [and comply with] a Net Zero Transition Plan.

* [Drafting note: Feedback on this clause from TCLP’s community of specialist lawyers and insurance practitioners suggested that the purpose of the clause and the obligations on the parties could be improved and made more clear in the drafting. Accordingly, the Additional Clauses have been amended with a new clause 1.1, under which two drafting options are provided. Option A sets out in clear terms that the Policy does not cover liability in respect of any actual or potential effects of Climate Change if the Insured fails to meet its Emissions Reduction Targets (as defined). Anticipating resistance to the hard stance in Option A and potential counter-arguments relating to remoteness, Option B proposes a percentage based approach to quantifying the policy exclusion.]

[Drafting note: Consider combining this clause with other TCLP climate clauses that require ambitious organisational net zero target setting, emissions reductions, responsible offsetting, climate related disclosures and climate governance.]

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