---
title: Green Investment Obligations
excerpt: 
date: 2024-03-27T14:16:55Z
modified: 2025-07-23T11:21:19Z
file_type: md
permalink: clauses/green-investment-obligations.html
wpid: 2141
status: publish
type: clause
jurisdiction:
  - England &amp; Wales
maintenance-status:
  - Not maintained
practice-area:
  - Banking and finance
  - Corporate, mergers and acquisitions (M&amp;A)
  - Private equity and investment management
eleventyComputed:
  clause_child_name: "Frank's Clause"
  clause_summary: Amendments to standard non-leveraged investment documents to focus the founders and investee company on climate change and environmental issues with their products, services, and operations.
  clause_last_updated_date: 2023-06-22
layout: layouts/clause.njk
---

# Green Investment Obligations

## Child’s name

Frank's Clause

## Summary

Amendments to standard non-leveraged investment documents to focus the founders and investee company on climate change and environmental issues with their products, services, and operations.

## What this clause does

This clause imposes climate risk and sustainability obligations on a company and its founder. It raises the prominence of climate in an investment and the development of the investee company’s business.

## Clause Content

\[*Drafting note: capitalised terms relate to a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into*.\]

**1. Sustainable promotion of the company’s business**

1.1 The Founders and the Company shall promote the best interests of the Company and ensure that its Business is conducted responsibly, sustainably, ethically and in accordance with all applicable laws and good business practice.

1.2 The Founders and the Company shall run and manage the business:

1.2.1 primarily to advance the Social Purpose and deliver the Net Zero Transition Plan;

1.2.2 secondly to achieve the Capital Purpose; and

1.2.3 thirdly to achieve the Commercial Purpose.

1.3 The Founders and the Company undertake to procure, in so far as it is in their respective powers to do so, that the Company shall:

1.3.1 \[publicly\] set a Net Zero Target\[ approved by the [Science Based Targets initiative](https://sciencebasedtargets.org/)\]\[, sign up to [Race to Zero](https://racetozero.unfccc.int/system/race-to-zero/?_gl=1*y79oti*_ga*MjA2NDczMzIzMC4xNjk5MzY5NDIz*_ga_7ZZWT14N79*MTcwOTU2NzQxMy45LjEuMTcwOTU3MTExOC4wLjAuMA)\] and within 6 (six) months of Completion provide the Investors with the Net Zero Transition Plan;

1.3.2 as soon as reasonably practical and no later than 12 (twelve) months after Completion:

1.3.2.1 purchase electricity for its offices \[and factory\] on a green tariff that uses a 100 (one hundred) percent renewable energy;

1.3.2.2 use web hosts and cloud service providers which run their servers on 100 (one hundred) percent renewable energy or have a net-zero target;

1.3.2.3 source all consumables used by the Company from sustainable and ethical sources and include emissions reduction requirements in the Company’s procurement strategy and supply chain contracts;

1.3.2.4 create KPIs to measure the Company’s impact of its operations and goods and services it provides;

1.3.2.5 \[ensure the \[casing OR packaging\] for the Company’s products are sourced from as much recycled material as possible and are themselves designed to reduce the amount of product or material that becomes waste;

1.3.2.6 \[For online businesses\]\[provide the Company’s customers the option to offset the carbon footprint of delivering the Company’s products at the point of sale on the Company’s website through a project that has been verified in accordance with \[*insert name of voluntary standard*\] \[*Drafting note: to raise net-zero ambition, consider building the mitigation into the pricing plan as an alternative to the customer’s option to offset*\];

1.3.2.7 establish a sustainability committee as a committee of the board chaired by a non-executive director with experience of improving sustainability and mitigating carbon footprint;

1.3.2.8 establish the Company’s pension scheme with an ESG or green investment fund as the default;

1.3.2.9 become a certified B Corporation \[achieving the Planet Mark\];

1.3.2.10 develop and implement an Environmental and Sustainability Training Programme; and

1.3.2.11 set targets to support the achievement on one or more United Nations Sustainable Development Goals that are relevant to the Business;

1.3.3 report \[annually\] \[quarterly\] \[monthly\] to the Investors;

\[*Drafting note: to select reporting aligned with needs and goals of Investors.*\]

\[*Drafting note: to raise net-zero ambition, consider adding CDP disclosure here:* [*CDP: Home*](https://www.cdp.net/en/)*.*\]

1.3.3.1 the climate risks and opportunities to the Company and the Business in accordance with the recommendations of the [International Financial Reporting Standards Foundation (IFRS)](https://www.ifrs.org/sustainability/tcfd/);

1.3.3.2 sustainability information in accordance with the standards set out by the Sustainability Accounting Standards Board (SASB);

1.3.3.3. an analysis of how wider local and global stakeholders (including employees, clients, end customers and supply chain partners) are affected by both climate risk and the transition to a low-carbon economy and how the Company can help to improve their resilience;

1.3.3.4 on all climate policy engagement, climate leadership, lobbying activities, trade association memberships and public policy positions that may support or undermine the goals of the UNFCCC’s Paris Agreement; and

1.3.3.5 other environmental, social and governance factors that are requested by the Investors from time to time.

1.3.3.6 Provide Resource Efficiency Information of the Company’s goods to demonstrate the impact of the goods on natural resources at any stage of their lifecycle. This includes information relating to the product’s expected life, durability, reparability, upgradeability and the ways in which it can be disposed of at the end of its life, whether the materials used in the products are recyclable, and the materials and techniques used in its manufacture.

1.3.4 prepare and provide to Investors an annual sustainability report which, without limitation, demonstrates the activities undertaken by the Company in furtherance of this clause; and

1.3.5 once profitable, donate 1 (one) percent \[or more, depending on revenue\] of its net profits to environmental causes that are mitigating the impact of climate change.

**2. Green decisions requiring the consent of an investor majority**

2.1 Each party shall use all the voting rights and powers of control deriving from their holding of Shares in order to procure that the Company shall not take any of the actions listed in clause 2.2 without first obtaining the approval of an Investor Majority.

2.2 The actions requiring the approval of a Investor Majority are:

2.2.1 the amendment or revocation of the Net Zero Target; and

2.2.2 the entry into any contract or arrangement that conflicts with its Net Zero Target.

**3. Founder green covenants**

3.1 To assure the Investors that the Founders are aligned with the Investor’s environmental aims and to enable the Investors to achieve the full benefit of the impact of their investment in the Company, each Founder hereby undertakes and covenants with the Investors and the Company that they shall not:

3.1.1 while they are a director or employee of, or a consultant to, the Company carry on or be directly concerned, engaged or interested in any trade or business that is:

3.1.1.1 not taking demonstrable steps to set and implement a net-zero target equivalent to the Net Zero Target; or

3.1.1.2 operates in the following sectors \[*insert sectors or industries that the Investor does not want the Founders to be involved in or conflict with their ESG aims*\];

3.1.2 do or omit to do anything which could reasonably be expected to cause the Company to not achieve the Net Zero Target, whether pursuant to this contract or otherwise.
