Unlocking systemic change: The opportunity of uncertainty

Climate law is experiencing a paradox. As some governments retreat from legal frameworks, regulatory rollbacks create conditions for stronger climate action elsewhere. We call this “regulatory divergence”. 

For businesses, this divergence creates uncertainty and requires risk management. For The Chancery Lane Project (TCLP) and the wider climate-law ecosystem – from legal philanthropy to the organisations they support – it provides immediate and scalable opportunities for impact.

At face value, it may seem that climate action through legal intervention is being outpaced by the current political-economic environment. In reality, however, it’s redirecting its role and relevance towards the law of everyday business. In contrast to its legislative counterparts, the increasingly uncertain legal landscape elevates contracts as a more resilient tool in the global transition.

Our hypothesis is simple: more risk means a strong imperative for a bolder, more rapid climate transition led by companies and their contracts. 

Navigating regulatory divergence

How might climate law navigate the paradox of regulatory divergence? A risk lens provides a useful space to explore this. 

Regulatory divergence creates commercial uncertainty. This uncertainty, both directly and indirectly, translates into risk. We know that companies, and the legal professionals who advise them, respond to risk. For example, a potential stranded asset or supply chain disruption because of extreme weather has a financial consequence. At the same time, an energy lawyer who fails to raise flood damage to a substation may be breaching their professional duty of care to act in their clients’ best interests. 

Legal advisers are uniquely placed to manage these risks and enable long-term value. As supported by the Law Society of England and Wales and reflected in our climate risk toolkits, their existing professional duties are a lever to incentivise credible climate action. 

Increasing uncertainty for companies 

Regulatory divergence is increasing uncertainty at multiple levels of governance. At the global level, for example, the United States withdrew from the UNFCCC. International climate leadership is struggling, especially as multilateralism, in a broader context, is in retreat and under pressure.

In the courtroom, the International Court of Justice concluded that states have international legal obligations to protect the climate system from greenhouse gas emissions caused by human activity. The opinion is non-binding and does not directly apply to private companies. However, it may lead to national regulation that will require companies to comply. This could positively influence legal advice given to businesses, although, as regulatory divergence tells us, this is not a guarantee. 

In the EU, efforts to simplify ambitious legal frameworks like the Corporate Sustainability Due Diligence Directive (CSDDD) led to the removal of climate transition plan requirements. On the other hand, the UK’s Prudential Regulation Authority (PRA) has intensified expectations, placing climate risk alongside credit and liquidity risks with strict compliance deadlines for 2026. 

The uncertain nature of global governance and national policies does not help multinational companies. It adds complexity, creates confusion and increases risk exposure. As regulatory divergence continues to manifest, commercial processes become a primary source for managing risk. And to ensure stability, business functions can turn to a familiar tool: contracts. 

Managing uncertainty in contracts 

If we think of international treaties and national laws as “software” that programs government and corporate activity, commercial contracts are the “hardware” of the global economy. Software provides instructions but is prone to glitches, and, continuing with the analogy, regulatory divergence is a system error. Legal hardware, on the other hand, is capable of hard-coding ambition into corporate behaviour. This keeps the system running when software is failing or updating. 

In response to increasingly fragmented frameworks, we can leverage contracts to create certainty and ensure resiliency. They are an accessible tool that ensures direct and legally binding obligations between parties. Crucially, they exist independently of fluctuating law and policy. 

When companies include ambitious carbon-cutting clauses in supply chain agreements, for example, the commercial relationship ensures enforceable action irrespective of legislative change. This makes contracts one of the few solutions to uncertainty. 

There are a range of free resources, from TCLP legal content to government procurement policy, that support companies in building sustainable practices using their legal architecture. 

Creating opportunity from uncertainty

Regulatory divergence is making contracts and lawyers more important than ever for managing climate risk. This gives companies a new sense of agency to take decisive action. 

Climate-law must now collaborate: to build, test and deploy tools that help navigate this uncertainty, and harness the opportunity of coding ambition into the global economy at scale.