This clause incentivises companies to mitigate climate risk through a reduction in insurance premiums for Policyholders who meet agreed disclosure standards regarding climate-related financial risks.Skip to clause
Why use this?
Archie’s clause encourages Policyholders to achieve a baseline reporting standard. Policyholders will be financially incentivised to take action and improve internal reporting structure and reporting standards. This will lead to a change in the Policyholder's behaviour, including by bringing climate risk analysis and considerations into the C-suite and another rung of pressure will be added to directors and officers of companies to mitigate climate-risks.
The benefit to the Policyholder will be adequate disclosure of climate-related financial risks reducing director liability risk against claims and increasing transparency of climate risks within the Policyholder’s business/business operations.
The benefit to the Insurer includes a corresponding reduction in claims. Receipt of fuller information on a Policyholder’s climate-related risks will allow the Insurer to adequately price climate risks.
How it promotes a net zero future
Creating a resilient legal framework works to protect our climate. The existence of a homogeneous legal and risk framework will allow Policyholders to not only assess their climate risks but also to take active steps to responsibly mitigate them.
Director & Officer (D&O) liability insurance offers cover for claims brought for alleged wrongful acts by Directors and Officers of the Policyholder. Insertion of Archie's clause into D&O liability insurance will mean the clause is widely usable for all businesses, indirectly affecting change across business sectors and projects.
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.
Annual Accounts means the annual accounts prepared from the Policyholder’s financial records at the end of its financial year.
Claim means written demands, civil or criminal proceedings, extradition proceedings, regulatory or administrative proceedings against the Policyholder for actual or alleged wrongful acts [, including negligence, misstatements, default, breach of duty or breach of trust].
Climate Change Mitigation means human intervention or efforts to reduce the sources or enhance the sinks of Greenhouse Gas Emissions.
Declaration means the document at Appendix 1.
Directors and Officers means a natural person holding past, present, or future management or supervisory position or equivalent position under the laws of any jurisdiction, including any member of the supervisory board or management board of the company.
Greenhouse Gas (“GHG” or “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 and which currently include to: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).
Greenhouse Gas Emissions (“GHG Emissions”) means emissions of Greenhouse Gases over a specified area and period of time, each expressed as a total in units of carbon dioxide equivalent (CO2e) [and calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard or such other equivalent and generally recognised greenhouse gas emission calculation methodology].
Insurer means [specify insurer].
Policy Period means the period specified in item [..] of the Schedule of the policy.
Policyholder means the entity specified in item [..] of the Schedule of the policy.
TCFD Recommendations means the recommendations by the Task Force on Climate-related Financial Disclosures to assess, collate and disclose the [material] financial impacts of climate-related risks and opportunities for an organisation, including those related to the global transition to a lower-carbon economy.
1.1 The Insurer and the Policyholder acknowledge that accurate, climate-related financial disclosures in the Policyholder’s Annual Accounts benefit the Policyholder by ensuring greater transparency of its climate-related risks, as well as any Climate Change Mitigation steps, reducing the risk of a Claim being brought against the Policyholder and/or its Directors and Officers.
1.2 [To incentivise the Policyholder to make climate-related financial disclosures in its Annual Accounts,] the Policyholder may avail itself of a pro-rata return of premium of [10%], provided that during the relevant Policy Period:
a. the Policyholder has publicly reported and accurately disclosed to the Insurer all climate-related risks and opportunities relevant to its business in the areas of:
(iii) risk management; and
(iv) metrics and targets,
in line with the TCFD Recommendations, and/or in line with the environmental standards agreed between the Policyholder and Insurer (the “Disclosures”); and
b. the Policyholder has declared to the Insurer that it, and/or its Directors and Officers, have not been involved in any Claim in respect of any breach or alleged breach relating to the Disclosures and have no actual knowledge of any facts or circumstances that may lead to any such Claim.
1.3 The Policyholder shall provide to the Insurer no later than six months after the expiry of the Policy Period:
a. its audited Annual Accounts which show compliance with the Disclosures;
b. the Declaration made by the Policyholder evidencing compliance with the Disclosures and the absence of a Claim (in the form set out at Appendix 1); and
c. any other documentation as agreed between the Policyholder and Insurer.
Declaration of the Policyholder regarding Scope of Disclosure for the purposes of premium adjustment.
The Policyholder confirms that the Annual Accounts for this policy year evidence the following agreed targets have been met:
- Board oversight of climate-related risks and opportunities.
- Management involvement in assessing and managing climate-related risks and opportunities.
- Identification of climate-related risks and opportunities for the Policyholder over the short, medium, and long term.
- Disclosure of the impacts of climate-related risks and opportunities on the Policyholder’s businesses, strategy, and financial planning.
- Disclosure of the resilience of the Policyholder’s business strategy taking into consideration different climate-related scenarios, including a transition to a lower-carbon economy consistent with a 2°C or lower scenario and where relevant, scenarios consistent with increased physical climate-related risks.
- Processes for identifying and assessing climate-related risks have been implemented.
- Processes for managing climate-related risks have been implemented.
- Processes for identifying, assessing, and managing climate-related risks are integrated into the Policyholder’s overall risk management.
Metrics and Targets
- Disclosure of the metrics used by the Policyholder to assess climate-related risks and opportunities in line with its strategy and risk management process.
- Disclosure of greenhouse gas (GHG) emissions for which the Policyholder is responsible, and the related risks.
By signing this document, the Policyholder confirms that it, and/or its Directors and Officers have not been involved in any Claim in respect of any breach or alleged breach relating to the Disclosures and have no actual knowledge of any facts or circumstances that may lead to any such Claim.
I declare the truthfulness of the above.