Climate clause

Late Payment – Green Interest Remedies

Matthew's Clause

Creative interest rate remedies by which payments are made either to a “green” cause or an off-setter.

This is a climate clause

This clause brings climate considerations to your drafting. It is not yet net zero aligned. To align this clause with net zero, use our toolkit or join one of our events.

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Why use this?

To focus the parties on considering the climate emergency in their wider commercial conversations and to ensure that climate positive behaviours are cascaded throughout their contractual documents, from recitals to execution.

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The clauses on this website 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.

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The clause

Additional Definitions

Appointed Beneficiary means the beneficiary of the Interest, to be chosen from the Beneficiary List by [Party 1/ the non-defaulting party] and nominated in writing by [Party 1/ the non-defaulting party].

Beneficiary List means the [ideal position – a list of reputable NGOs supporting environmental improvement in the UK and globally, managed by a reputable independent third party; in the absence of such a list, the parties may wish to choose a shortlist of their preferred charitable partners/ NGO beneficiaries]. [Consider: Raising new money for nature; ShareAction | Harness the power of investment and others.]

Carbon Offset Provider means a provider of a quantity of carbon credits or voluntary emission reduction credits (otherwise known as verified emission reductions) through a project that has been verified in accordance with [insert name of voluntary standard] or from a United Nations Framework Convention on Climate Change (UNFCCC) clean development mechanism (CDM) [or [successor/ equivalent] UNFCCC mechanism], nominated by [Party 1/ the non-defaulting party] [Consider: Climate Care; Carbon Neutral; CO2balance and others.].


Additional Clause

1. If [Party 2] fails to make a payment due to [Party 1] OR a party fails to make a payment due to [the OR any] other party] under this agreement by the due date, then[, without limiting [[Party 1] OR the other party]’s remedies under clause [NUMBER] (Termination),] [[Party 2] OR the defaulting party] shall [at the direction of Party 1/the non-defaulting party]:

1.1 pay interest at a rate of [  ]% [(per annum)]  to [Party 1/ the non-defaulting party] on the overdue sum from the due date until payment of the overdue sum, whether before or after judgment (Interest); or

1.2 pay a sum equal to the Interest to:

(i) an Appointed Beneficiary; or
(ii) a Carbon Offset Provider,

one or any of (1.1) and (1.2) above, in such proportions as [Party 1/the non-defaulting party] shall specify.

2. Interest under this clause will accrue each day at [ ]% a year above the rate of [green bank*] from time to time, but at [ ]% a year for any period when that rate is below 0%.

* [Insert name of green bank (from, for example, the following resources). A bank that:

  • has used the Green Bond Principles (as amended from time to time by the International Capital Market Association and as evidenced at Sustainable bonds database) in the issue of green bonds/other as agreed by the parties; or
  • is a certified B Corporation credit provider (as evidenced at Directory | Certified B Corporation) with values that prioritise the reduction of carbon footprint; or
  • other as appropriate.]

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