Shifting the mindset of commercial lawyers to rewire contracts,to mitigate climate change more effectively in practice: The Chancery Lane Project

The rapid and far-reaching systems transitions described by the Intergovernmental Panel on Climate Change ¹ (IPCC) Special Report on Global Warming of 1.5°C ² require deep emissions reductions in all sectors, a wide portfolio of mitigation options, a transformation of existing investments and a significant upscaling of new climate-aligned investments in those options. It is clear that such systems transitions are urgently needed, and progress is not being achieved nearly fast enough. ³ The United Nations Environment Programme (UNEP) estimates global emissions would need to fall by 7.6 per cent every year this decade to meet the 1.5°C goal. ⁴ The Global Carbon Budget found that global fossil CO₂ emissions in 2020 declined approximately 7 per cent. ⁵ Companies are under escalating pressure to adopt climate-friendly practices, particularly in 2021, as the global corporate community signs up to the United Nations Framework Convention on Climate Change’s (UNFCCC’s) Race to Zero ⁶ and builds the 26th UN Climate Change Conference of the Parties (COP26) into 2021 strategic plans. Many want to, and are making commitments to, buy better products, produce better goods and services, change the way they operate and manage their supply chains differently. ⁷ The corporate world is listening, engaged and ready to change, but there is a significant disconnect between these ambitions and commercial contracting, which continues to lock us into a high-carbon economy. ⁸

Lawyers advise across every sector of the economy and contractual law governs much of human activity on earth, shaping the economic relationships of our society. Yet contractual law pays little consideration to environmental issues and has not typically been a focus for climate action. Precedent clauses are used repeatedly without thought to their wider environmental or social impact and are the building blocks of contractual law. If you can change the precedent at the right point in the system, you can change contracts that regulate corporate activity and change the world. Businesses wanting to take a lead and transition to a low-carbon way of operating can use contracts to put themselves on a path to net zero without waiting for their greenhouse gas emissions to be regulated by government through legislation. Where laws are enacted, contracts will be required in almost every aspect of transitioning our economy towards net zero emissions. In this way, prior to legislative change, and afterwards, contractual law will be one of the main mechanisms through which net zero and other environmental targets will be realised. How contracts are wired will determine whether climate change and inequality are maintained or remedied.

The Chancery Lane Project (TCLP) ⁹ is an ambitious and groundbreaking collaboration of lawyers working pro bono to create practical legal solutions (mostly in the form of model clauses) to be wired into principally contracts and legal agreements to tackle their climate impacts. Over 150 of the top law firms in the UK and 8 of the top 25 law firms in the USA with offices in the UK are involved.

TCLP’s mission is to enable every contract, law, law firm, legal actor and lawyer to take action to realise its vision of a world where every law and contract enables solutions to the environmental crises facing our planet. A world where all individuals and organisations engaged with the law can use it to have a positive impact on the environment.

TCLP’s clauses are free to use and can be found in the latest edition of the ‘Climate Contract Playbook’. ¹⁰ These clauses embed climate and environmental considerations from the top of the investment and finance chain with investor- and lender-level obligations ¹¹ that set the tone and framework for companies to assess, manage and disclose climate risks, opportunities and impacts. Companies can help amplify positive environmental outcomes by using TCLP’s climate clauses in their board minutes, company objects, heads of terms, non-disclosure agreements, supply chain agreements, insurance agreements, construction projects, property relationships, employment relationships and how they handle disputes. ¹² Each clause is prefaced by its own ‘story’, setting out the climate issue, solution, legal and environmental context, impact, application and drafting notes.

The change required by companies goes beyond simply passing greenhouse gas emission reduction obligations to other parties, in that it needs to be embedded into the very design of their projects, products and business strategies. One of TCLP’s clauses seeks to mandate employee climate education, both through employment contracts and finance and commercial agreements, to support implementation of policy changes and change business culture.

TCLP facilitates collaborative drafting through virtual events or lawyers in firms using its online modules ¹³ of idea generation and development, drafting and peer review. Participants research and reference the context of their clauses and describe how their proposed solution should impact the relevant climate issue under consideration. The step-by-step videos, written guides, glossary of climate terms ¹⁴ and facilitation by TCLP staff and volunteers provide a unique opportunity and suite of tools to engage lawyers across a wide variety of practice areas in learning and doing that is quite different from the systems they are used to. It equips them with skills and experience that can influence their daily practice, in terms of both integrating TCLP clauses into their firm’s precedent banks and identifying opportunities to develop additional climate-conscious drafting in their daily work. As lawyers and their clients become more confident in using TCLP’s clauses, they will adapt them or draft their own climate clauses for other types of agreements that may have not yet been considered. This growing ‘climate literacy’ will contribute to establishing new market norms and challenge existing professional cultures to deal with the climate impact of these agreements. In addition to the above, TCLP also runs weekly online drop-in sessions and maintains an online community using ‘Slack’, ¹⁵ allowing lawyers to seek support, engage and collaborate across organisational boundaries, pooling their knowledge to innovate and accelerate climate solutions. The objective of the project is to facilitate collaboration across the legal sector rather than impose particular solutions. The clauses are drafted by and for the legal community to use: the clauses are not attributed to individual lawyers or firms.

While the majority of TCLP’s work is focused on contractual clauses, TCLP also supports the drafting of new model laws and has produced, for example, an amendment to the 1954 Landlord and Tenant Act to include green lease obligations in business leases, a change to the 2006 Companies Act to strengthen members’ requirements to consider the environment and a requirement in the 1990 Town and Country Planning Act, for developers to demonstrate how their developments will be carbon-efficient and support biodiversity. Ideas in development include an amendment to inheritance tax legislation to allow land designated for rewilding to benefit from inheritance tax reliefs and a law that mandates climate education across schools and workplaces. This is not an exhaustive list, and there are many more ideas that have been proposed. As a professionally and politically neutral organisation, TCLP does not engage in lobbying. However, it supports participants to network and engage with relevant organisations to promote adoption of their drafting.

To have an impact on the climate crisis, the climate solutions drafted by TCLP participants must be used in contracts. This process is iterative. The clauses evolve as they are adapted and negotiated by the legal community. As of January 2021, there had been more than 45,000 downloads of TCLP’s ‘Climate Contract Playbook’ and glossary publications (with 50 clauses and 46 standardised definitions, respectively) across 73 countries. TCLP’s online toolkit includes a ‘Using Model Clauses’ module to aid lawyers to evaluate, adapt and deploy TCLP drafting across their contracts and precedent banks, and this in turn allows TCLP to learn and develop its tools to get more clauses into use so as to accelerate the impact of them in practice. ‘Using Model Clauses’ can also be used for ‘translation’ of clauses into other jurisdictions. TCLP’s ‘Big Hack’ event in November 2020 saw lawyers in Ireland, Australia, Asia and the USA evaluating and translating existing clauses and creating their own clauses to the legal requirements of their jurisdictions. This knock-on effect in behaviour, which has been entirely fluid, is key to implementing change on the ground.

TCLP’s growth could be described as exponential. The project has grown rapidly from an idea in July 2019 by Matthew Gingell, General Counsel at Oxygen House, to publishing three editions of its ‘Climate Contract Playbook’ by September 2020. ‘The Big Hack’, ¹⁶ which is an event that took place over 2 days, involved live participatory events across Asia-Pacific, Europe and the Americas and was sponsored by Thomson Reuters, generated 100 new content ideas and 25 fully developed ideas. The drafting ideas that resulted from this event will be published by TCLP in 2021.

Notwithstanding this success, everyone must keep up the momentum to increase the project’s impact so as to instil change into the mindset of lawyers: to adapt contracts to take account of climate change so that it is mitigated in every situation possible on the ground more rapidly. Over 600 solicitors, barristers and academics from more than 120 organisations across the world are currently involved in the project, but TCLP’s aim is to grow a global movement of lawyers and enable lawyers in other jurisdictions to pick up the pen and adapt these model clauses to their needs.

In 2021, TCLP will be hosting more events such as a series of themed ‘hackathons’ that align with the ‘Climate Action Pathways’ ¹⁷ adopted by the COP26 ‘High Level Champions’ ¹⁸ and the Marrakech Partnership for Global Climate Action. ¹⁹ In addition to this, law firms and corporates will be hosting their own internal events. TCLP’s drafting can support the aims of the 1,000 plus corporations who have already aligned themselves to UNFCCC’s Race to Zero ²⁰ and committed to achieve corporate net zero targets. In addition to this, TCLP is also collaborating with Thomson Reuters’ Practical Law ²¹ and LexisNexis, ²² both of which have staff contributing significant pro bono time to the project. As TCLP’s clauses become ‘standard market’ clauses, it is hoped they will be provided and integrated into the maintained online content of these know-how providers. In this way, lawyers will have access to the draft clauses produced by TCLP and they will be available to an even wider audience.

Collaboration is critical to the success of the project. The small staff team at TCLP aims to support participants to find climate solutions themselves. We aim to capitalise on any pro bono time that lawyers can donate; there are a range of volunteer opportunities to suit a variety of levels of commitment and expertise. One such opportunity is peer review. The project relies on high-quality contributions from legally qualified participants who are expert in their field, whether environmental law or another area such as banking, insurance or infrastructure, to quality assure the drafting prior to publication.

The vast majority of TCLP’s participants (i.e. 95 per cent at the time of TCLP’s first year impact report) ²³ are not environmental specialists. TCLP is therefore successfully reaching, engaging and inspiring lawyers who might otherwise have never thought about their own role as being significant in assisting with reducing the impact of climate change. A key aspect of TCLP’s role is therefore to continue to provide all lawyers with the necessary tools to think about the content of their contract clauses in climate terms and to ground their drafting in a realistic environmental context that will assist with mitigating climate change in practice. In our experience, guidance and expertise is required from the early stage of idea development through to drafting and publication to ensure that clauses are appropriately targeted and researched, sufficiently ambitious to drive the necessary level of change, avoid the risk of greenwashing and link drafting to materiality through frameworks such as Science-based Targets Initiative ²⁴ and Task Force on Climate-related Financial Disclosures. ²⁵ This is where those with environmental expertise in different areas can contribute. And so with that in mind, it is suggested there could not be a more critical and opportune moment for those with and without environmental and climate knowledge to deploy their skills, alongside lawyers, to bring environmental and climate considerations firmly into the commercial sphere.