New clause for loan agreements

Laith & Irsa’s Clause

We’re delighted to announce the publication of Laith & Irsa’s Clause, an interest ratchet mechanism that incentivises borrowers to reduce or avoid greenhouse gas emissions. The clause offers reduced loan interest rates proportional to the emissions saved.

Applicable to any borrower and lender, this clause is already being used in a loan agreement between a renewable energy provider and its lender. Through this clause, their agreement incentivises a consistent supply of renewable electricity on the grid, avoiding the need to revert to carbon-intensive sources like gas.

The renewable energy provider has shared an anonymised, open source version of the clause with TCLP’s community. We look forward to the interest ratchet in Laith & Irsa’s Clause becoming widespread and to setting a new market norm for loan agreements where incentives to reduce emissions are standard.

See the full press release for further details.