The impacts of climate change are becoming more acutely felt across the world. As a result, climate-related risks are becoming an ever more important investment consideration encompassing a variety of risks including physical (for example from flooding or fires), transitional (resulting from an adjustment towards a low-carbon economy) and liability (arising from losses caused by climate change) risks.
Investors, recognising such risks, are concerned that climate change could have a huge impact on financial returns from increased economic losses arising from natural catastrophes to the uncertainty of the economic impact of a “disorderly” transition to a low-carbon economy.
In light of such concerns, the proper assessment of climate-related risks is an ever more important investment consideration, however, investors are hampered by a lack of data with which to assess clients’ exposures to climate-related risks. Investors must obtain climate-related information at the outset of a transaction through proper climate-related due diligence and disclosures of the investee company.
Introducing the Climate Change Due Diligence Questionnaire asks an investee company to provide information regarding a wide range of climate change-related issues beyond the standard compliance-focused questions. The SPA/Investment Agreement Disclosure of Climate Change Plans which adopts warranty and disclosure requirements in transactions focused on the investee company’s climate actions. The two clauses in combination will allow a client to properly analyse the climate-risks arising out of an investment.
Clyde & Co is proud to be assisting clients interested in adopting these clauses into their contracts. Please reach out to me or one of our climate change experts if these, or similar, clauses are of interest.
This post is part of a series of short updates summarising the precedent clauses drafted in the course of collaborative hackathons organised by The Chancery Lane Project. Clyde & Co held its own hackathon in partnership with The Chancery Lane Project in July 2020, and has taken a leading role in the Big Hack, another hackathon organised centrally by The Chancery Lane Project throughout autumn 2020.