Climate clause

Sustainable and Circular Economy Principles in Leasing Arrangements for Repairs and Alterations

Adam’s Clause

Sustainable and circular economy provisions for the repair, alteration, yielding up and decoration covenants in a lease, which encourage landlords and tenants to re-use goods and materials.

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?

Adam’s Clause allows landlords and tenants to reduce unnecessary waste and purchase of new products (and the associated greenhouse gas emissions) by prompting them to follow circular economy principles in repair and alterations, prioritising the use of reclaimed, re-used or recycled goods or materials or, where that is not possible, to use sustainable goods or materials.

The clause

Additional recitals

(A) The Landlord and Tenant [have signed up to the Race to Zero and] acknowledge their common intention to: 

(i) Achieve their respective organisational net zero or other sustainability targets; and 

(ii) Align with the objectives of the Paris Agreement (in particular, pursuing efforts to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels and achieving net zero or net negative emissions by 2050 or sooner). 

(B) The Landlord and Tenant agree to pursue (A) in a manner that promotes a just transition to a low carbon economy and results in at least a 7%* reduction of greenhouse gas emissions year on year.

* [The ‘Carbon Law’; and  J. Rockström et al., A roadmap for rapid decarbonisation, Science 355.6331, 1269-1271 (2017).]

 

Additional definitions

Adverse Climate Effect means an adverse effect on the climate, including, but not limited to:

(a) An increase in GHG Emissions relating to the [Property][Premises];

(b) Discarding unused materials and thereby wasting Natural Capital;

(c) Wasting materials so that the Embedded Carbon of the [Premises] [Property][and/or Building] is increased; or     

(d) Reduced Air Quality.

Air Quality means the condition of air in and around the [Premises] [Property] [and/or Building], in particular, the extent to which it is clean, clear and free from pollutants including smoke, industrial gasses and dust.

Efficiency Objective(s) means that, in relation to the occupation, operation and use of the [Property][Premises], the parties will work together to [achieve some or all of the following]:

(a) Maximize energy efficiency in the [Property][Premises] [including that the parties shall use proven energy and carbon reduction measures, such as: energy efficient bulbs in task lighting; use of lighting controls; daylighting measures to avoid overlighting interior spaces; closing shades to avoid overheating the space; and turning off lights and equipment at the end of the work day];

(b) Achieve the sustainability performance targets of the [Landlord’s][Tenant’s] sustainability linked loan;

(c) Reduce the GHG Emissions associated with the [Property][Premises] to help the parties achieve their Net Zero Targets;

(d) [Offset any Residual Emissions related to the [Property][Premises];]

(e) Use sustainable materials and avoid the use of materials that increase the Embedded Carbon;

(f) Reuse and recycle materials to ensure that they are salvaged or otherwise saved from landfill;

(g) Adopt environmentally friendly working methods, including minimising energy use through plant and site services;

(h) Protect and enhance existing ecological features on site;

(i) Minimise air (dust and fumes) and noise pollution [including, without limitation, the use of low or no-VOC paints, solvents, and adhesives];

(j) Minimise water use [, including with respect to any new equipment for the Premises, that the parties purchase ENERGY STAR® qualified equipment including, but not limited to, commercial and residential quality kitchen equipment, and vending and ice machines; and/or that Tenant purchases products certified by the U.S. EPA’s WaterSense® program];

(k) Use local suppliers; [and]

(l) Promote green travel to and from the site (including walking, cycling or using public transport).

Efficiency Standard means that design, supply, construction, installation, commissioning and repair practices are carried out:

(a) Responsibly, sustainably, ethically and in accordance with all applicable laws and good business practice;

(b) [Using best efforts to ensure that the materials and goods are sourced from manufacturers and suppliers located as close to the [Property][Premises] as reasonably practicable;] and

(c) In a manner which maximises the prospects of achieving the Efficiency Objective. 

Embedded Carbon means:
(a) In relation to building materials, the GHG Emissions that occur through their extraction, manufacture and transportation.

(b) In relation to the [Property][Premises], the GHG Emissions that occur when it is built, repaired, renovated, deconstructed and disposed of.

Environmental Performance means all or any of the following in relation to the Premises][Property][and/or Building]]:

(a) Energy consumption;

(b) Water consumption and discharge;

(c) Waste generation and management;

(d) Generation and/or emission of Greenhouse Gasses; and/or

(e) Other adverse environmental impacts.  

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].

Greenhouse Gasses (GHGs) means the gasses that trap thermal radiation in the Earth’s atmosphere. They are specified by the United Nations Framework Convention on Climate Change (UNFCCC) in Annex A to the Kyoto Protocol and may be updated periodically.

Green Building Standards means one or more of the following: the U.S. EPA’s Energy Star® Portfolio Manager, the Green Building Initiative’s Green Globes™ building rating system, the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED®) building rating system, the ASHRAE Building Energy Quotient (BEQ), the Global Real Estate Sustainability Benchmark (GRESB), or other standard for high performance buildings adopted by Landlord with respect to the Building or the Project, as the same may be revised from time to time.

Materials means: 

(a) Reused Materials or Reclaimed Materials, but where these are not available or appropriate then;

(b) Sustainable Materials, but where these are not available or appropriate then; 

(c) Recycled Materials, but where these are not available or appropriate then; 

(d) Recyclable Materials, but where these are not available or appropriate then;

(e) Materials or products.

Natural Capital means those elements of the natural environment which provide valuable goods and services to people, such as stock of forests, water, land, minerals and oceans. 

Net Zero Target means a target to reduce and remove GHG Emissions, including by offsetting Residual Emissions, to achieve a balance between the [Landlord] [and Tenant]’s sources and sinks of GHGs. The target must be achieved by [2050/ Insert earlier date] [and align with the goals of the Paris Agreement].

Offset means buying carbon credits from a project:

(a) That has been verified by [insert name of voluntary standard] or the UNFCCC clean development mechanism (CDM) [or successor UNFCCC mechanism];*

(b) Where the emissions of GHGs avoided, reduced or removed by the project are additional;

(c) [That prioritises removing GHGs from the atmosphere rather than avoiding or reducing third party emissions of GHGs;] ** 

(d) That, for GHGs removals, uses storage methods with a low risk of reversal over millennia; and

(e) That takes account of a just transition and addresses wider social and environmental goals. 

* [Drafting note: Article 6.4 of the Paris Agreement replaces the CDM by 2026. New rules implementing this were agreed at COP26. More detailed guidance will be released.]

** [Drafting note: The Oxford Principles for Net Zero Aligned Carbon Offsetting 2020 state that ‘an immediate transition to 100% carbon removals is not necessary, nor is it currently feasible, but organisations must commit to gradually increase the percentage of carbon removal offsets they procure with a view to exclusively sourcing carbon removals by mid-century. Most offsets available today are emission reductions, which are necessary but not sufficient to maintain net zero in the long run. Carbon removals scrub carbon directly from the atmosphere. This counteracts ongoing emissions after net zero is achieved and creates the possibility of net removal for actors choosing to remove more carbon than they emit.’

[Rating Obligation means [the highest rating achievable under the applicable Green Building Standard selected by Landlord].]

Reclaimed Materials means materials that have been removed from another building or site, which can be reused in the [Premises][Property][and/or Building] without substantial modification. 

Recyclable Materials means materials which can go through a recovery operation by which waste materials are reprocessed into products, materials or substances whether for the original or other purposes.*

Recycled Materials means materials which, through a recovery operation, have been reprocessed into products, materials or substances whether for the original or other purposes.*

[Residual Emissions means the GHG Emissions that are emitted after all reasonable efforts have been made by the [Landlord] [and Tenant] to reduce GHG Emissions.]

Reused Materials means materials, products or components that are not waste and are used again for the same purpose for which they were conceived.*

* [Definition has been partially taken from the Waste Framework Directive 2008.]

Sustainable Materials means products or materials:

(a) Which are extracted, produced and made in a way that minimises the Embedded Carbon;

(b) Which are extracted, produced and made without depleting non-renewable resources and without disrupting the established steady-state equilibrium of the environment and key natural resource systems; and

(c) Which are recyclable or reusable.

Waste means spoil, waste, rubbish, debris, materials or goods or surplus materials generated by or used in undertaking the Tenant Improvements which are not incorporated into the  Tenant Improvements at practical completion. [Drafting note: From Francis’ Clause (Climate Aligned Construction Waste Management).] 

Waste Management Plan means [an up to date][the] site waste management plan [attached at Schedule [] and] produced by the Tenant or the Contractor following consultation with the Landlord, which seeks to ensure materials are managed efficiently and to reduce Waste. [Drafting note: For examples, look to the Site Waste Management Plans Regulations 2008, which are now revoked.

[Drafting note: Capitalized terms relate to either a defined term in this clause or a defined term in the main agreement/ Lease/ Work Letter that this clause is designed to be inserted into.]

 

Lease

Additional clauses

1. Tenant and Landlord Covenants 

The Parties acknowledge and agree that in complying with their obligations under this Lease, each will use [best/ [all] reasonable] efforts to act at all times in a manner which maximizes the prospect of achieving the Efficiency Objective(s).

2. Tenant Covenants – Maintenance and Repair

Tenant shall keep the [Premises][Property] in good and substantial repair and condition and when necessary to replace and renew [any Landlord’s fixtures and equipment] with Materials of an equivalent quality [and value] [to the reasonable satisfaction of the Landlord]. All maintenance and repairs performed by Tenant shall maximise the prospect of achieving the Efficiency Objective(s) and comply with the Efficiency Standards. Tenant shall cause all contractors engaged by Tenant to comply with Landlord’s rules and regulations for the Project or the Building, including without limitation, the Efficiency Standards.

3. Tenant Covenants – Decoration

Tenant shall carry out all decoration in a good and workmanlike manner using good quality Materials [to the reasonable satisfaction of the Landlord]. All decorations performed by Tenant shall maximise the prospect of achieving the Efficiency Objective(s) and comply with the Efficiency Standards. 

4. Tenant Covenants – End of Term 

4.1 Tenant shall not be required to remove or restore any Alterations carried out in accordance with Section [●] of this Lease, or to restore the Premises to their condition as of the commencement of the Term (collectively, ‘Reinstatement’) where each of the following applies at the expiration or earlier termination of the Lease:

4.1.1 Any such Reinstatement is not reasonably required by the Landlord having regard to the Landlord’s intention in respect of the use or re-letting of the [Premises][Property][and/or Building] and the Landlord has notified the Tenant to that effect [no later than [three] months] prior to the expiration or earlier termination of the Lease; and

4.1.2 Any such Reinstatement would [materially] adversely affect the [Environmental Performance] of the [Premises][Property][and/or Building] [and/or the Rating Obligation of the [Premises][Property][and/or Building]].

4.2 [To the extent any equipment, furnishings, improvements, or other items required to be removed from the Premises by Tenant at the end of the term or any earlier termination of the Lease are to be recycled or disposed of, Tenant shall conduct such recycling or disposal in an environmentally sustainable manner and in accordance with applicable Laws and in such manner as to maximise the prospect of achieving the Efficiency Objective(s).]

5. Building Operations and Operating Costs

In operating the Building [and the Project], Landlord shall use [best/ [all] reasonable] efforts to use Materials of an equivalent quality [and value].  

 

Tenant Improvements/ Work Letter

Additional recitals

(A) The Parties acknowledge that a priority for the design, construction and restoration of the Tenant Improvements is to ensure, as far as reasonably practicable, that the materials used in the Tenant Improvements can, at the end of their life, be:

(i) Reused and/or recycled in whole or, where this is not possible, in part; and/or

(ii) Salvaged or otherwise saved from landfill in whole or, where this is not possible, in part.

(B) The Parties acknowledge that in complying with their obligations under this Work Letter, each will use [best/ [all] reasonable] efforts to act at all times in a manner which maximizes the prospect of achieving the Efficiency Objective(s) and minimizes any Adverse Climate Effect. 

 

Additional Clauses

1. Carrying out and Completing the Tenant Improvements 

1.1 The Tenant must carry out and complete the Tenant Improvements (and ensure that the Tenant Improvements are carried out and completed):

1.1.1 Using (to the extent reasonably practicable) good quality Materials that are fit for the purpose for which they will be used and to the reasonable satisfaction of the Landlord;

1.1.2 In accordance with a Waste Management Plan and using [best/ [all] reasonable] efforts to minimize Waste [Drafting note: When using this clause, the drafter may consider the obligation in Francis’ Clause (Climate Aligned Construction Waste Management) that repair or renovation triggers the requirement for a Waste Management Plan, regardless of size or complexity of the project];

1.1.3 In accordance with Efficiency Standards to mitigate against any Adverse Climate Effect; and

1.1.4 At all times in a manner which maximises the prospect of achieving the Efficiency Objective on Substantial Completion [and during the operating life] of the Tenant Improvements [Drafting note: When using this clause, the drafter may consider whether the contracts for the Tenant Improvements with building contractors incorporate provisions that support the Work Letter obligations suggested by this clause. (See, for example, Estelle’s Clause (Climate Standard of Care (Construction)).)].

1.2 For the purpose of assessing whether Substantial Completion of the Tenant Improvements has been achieved, the [Landlord/ Landlord’s Agent/ Architect/ Contract Administrator] shall not issue any certificate to that effect until such time as the Rating Obligation has been met.

1.3 The failure of the Tenant to comply or procure compliance with the provisions of clause [1.1] will constitute a [substantial] breach of this Work Letter [and of the Lease]. [Drafting note: There should be a standard default provision linking back to the lease in the Work Letter. A breach of the Work Letter terms is a breach of the lease covenants. ]

2. Reinstatement

2.1 The Tenant shall not be required to remove or restore any Tenant Improvements performed in accordance with this Work Letter (collectively, ‘Reinstatement’) where each of the following apply at the expiration or earlier termination of the Lease:

2.1.1 Any such Reinstatement is not reasonably required by the Landlord having regard to the Landlord’s intention in respect of the use or re-letting of the [Premises][Property][and/or Building] and the Landlord has notified the Tenant to that effect [not less than three months prior to the end of the Term having regard to the Landlord’s intention in respect of the use or re-letting of the [Premises][Property][and/or Building]]; and

2.1.2 Any such Reinstatement would [materially] adversely affect the [Environmental Performance] of the [Premises][Property][and/or Building] [and/or the Rating Obligation of the [Premises][Property][and/or Building]].

 

[Schedule []: Waste Management Plan]

[Drafting note: Insert Schedule [​​●] if using, pursuant to the definition of Waste Management Plan.]

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