Practice Guides for Climate Negotiations
Photo by Markus Spiske on Unsplash
The Chancery Lane Project has been a powerhouse in the development of climate clauses for use in legal documents throughout the world.
Operating out of the UK, it has since its inception in 2019, developed and freely provided clauses for use by lawyers in a range of practice areas. These include clauses for use in property and construction documents.
These clauses were integral to the development of the New Zealand Climate Clause Bank in 2023, a freely available suite of boilerplate clauses, clauses for shareholder agreements, supply agreements and property leases; each addressing or encouraging climate responsibility. The New Zealand clauses were developed for use in common, local precedent documents.
Now The Chancery Lane Project offers a new resource in the form of practice guidelines. Eight different guides support the practitioner in addressing climate in document negotiation. The guides steer the practitioner through everyday typical circumstances where climate considerations might be addressed. They offer direction on how to:
Introduce climate provisions to contracting parties
Align the board with climate goals
Factor climate considerations into board decisions
Measure, manage, reduce and report on emissions
Request climate information in due diligence
Get information on contract emissions
Integrate climate obligations into contracts
Enforce and incentivize decarbonization through contracts
Rather than simply providing the appropriate clauses, the guides help the practitioner to navigate impacts on the uptake of climate clauses. They introduce relevant background considerations, offer up a range of alternative solutions and connect the drafter to suggested template clauses. These will especially help those wondering where to start on the transition to more climate-friendly contract terms.
“Guides give you the best-practice framework for writing your own climate clauses, whatever your specialism and wherever your jurisdiction” says Ben Metz, Executive Director of The Chancery Lane Project.
How the guides will be of use to a property lawyer in New Zealand
Where to start
There’s little in property law itself to give the practitioner guidance on what climate issues might be relevant to their developer, investor or purchaser client. A client wanting to address those issues, or even understand their impact, will have you looking beyond your property law knowledge. As most property practices don’t include experts in climate change law that expertise may feel inaccessible and, as a result, sometimes it is hard to know where to start.
The first of the Chancery Lane guides helps with that dilemma. It sets out ideas, mechanisms and clauses aimed at creating the right negotiating environment for climate issues to be considered. It talks about the importance for example of the issue being part of the negotiations from the outset to set the tone for the drafting to follow. Embedding climate consideration in pre-contract documents such as terms sheets or memoranda of understanding all help the subsequent introduction of climate criteria.
Perhaps, especially initially, the only place climate considerations will make it into a contract is in the preamble. Including climate rationale and intentions there sets a context that whilst not binding is nonetheless influential on the relationship.
The guide introduces these types of ideas for those wanting to introduce “climate considerations [as] part of the commercial rationale”. Example wording is also provided.
Due diligence enquiries
Guidance is given on the questions to ask during due diligence to best assess climate claims. These clauses are aimed at a range of circumstances - takeovers, purchase agreements, mergers and supply agreements - and will be useful both in assessing potential scope 3 emissions, and in determining value and contingent liability on acquisition. The guide sets out a range of example questions.
It gives guidance on how to recognize greenwashing, on what to ask to fully understand the effectiveness of plans to transition to climate targets, and how to identify climate-related risks and opportunities in potential business partners or acquisitions.
Other guidelines
In the absence of guidelines from the New Zealand Law Society, it can be useful to look further afield and to understand what other jurisdictions offer. Although the surrounding legislation may differ between countries, the underlying legal enquiries remain relevant, wherever the lawyer practices. Two other guides provide useful reference material for the New Zealand practitioner.
The Climate Change Practitioner Guidance, published by the Law Society of New South Wales explores how climate change risk is relevant to legal advice. It gives specific examples of relevance across a range of practice areas, including property.
Last year the Law Society of England Wales published a guide for practitioners practicing law in the context of climate change. The guide examines “issues which may be relevant when considering the interplay of legal advice, climate change and solicitors’ professional duties”
It too categorises climate risks in identified practice areas and guides the practitioner in identifying the issues relevant to legal advice.
Whilst none of these guides provides a silver bullet to addressing climate change in property transactions and documents, each of them provides valuable assistance to practitioners in the New Zealand context wanting to incorporate climate issues into their advice – whether that is promulgated by the client or through their own interpretation of what is needed to provide competent legal advice.
New Zealand Green Investment Finance. (2023). New Zealand Climate Clause Bank.
The Chancery Lane Project. (2024). The Chancery Lane Project Guides. Retrieved from https://chancerylaneproject.org/guides/
The Law Society of England and Wales. (2023, April 19). Guidance on the impact of Climate Change on Solicitors.
The Law Society of New South Wales. (2023, February). Climate Change - Practitioner Guidance.
A version of his article first appeared in The Property Lawyer in May 2024 and is published with the consent of the NZ Law Society, Property Law Section.
© Debra Dorrington 2024.