---
title: Focus Investment Documents on Climate Issues
excerpt: 
date: 2024-08-22T09:06:34Z
modified: 2025-07-23T11:29:08Z
file_type: md
permalink: clauses/focus-investment-documents-on-climate-issues.html
wpid: 5801
status: publish
type: clause
jurisdiction:
  - Australia
maintenance-status:
  - Not maintained
practice-area:
  - Private equity and investment management
eleventyComputed:
  clause_child_name: "Hugo's Clause"
  clause_summary: This clause imposes obligations concerning climate risk and sustainability on a company and its founders. 
  clause_last_updated_date: 2024-09-10
layout: layouts/clause.njk
---

# Focus Investment Documents on Climate Issues

## Child’s name

Hugo's Clause

## Summary

This clause imposes obligations concerning climate risk and sustainability on a company and its founders.

## What this clause does

This clause puts environmental and climate change issues front and centre of the investment and the development of the investee company’s business.

## Clause Content

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

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

1.1 The Founders and the Managers must 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 Manager must 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.

\[*Drafting note: The priority hierarchy is optional as some investors will not be willing to prioritise net zero goals before commercial purpose and profit. However, excluding the priority while retaining the three key objectives will make it explicit that the business is to be run with a green focus while enabling flexibility to prioritise the balance of the three objectives.*\]

1.3 The Founders and the Managers must use \[their best OR \[all reasonable endeavors\] to ensure that the Company:

1.3.1 sets a \[public\] Net Zero Target\[ in accordance with the Science Based Targets initiative (SBTi) criteria\]\[, signs up to Race to Zero\] and provides the Investors with the Net Zero Transition Plan no later than \[6 (six)\] OR \[●\] months after \[Completion\] OR \[*insert relevant point in time*\] ;

1.3.2 as soon as reasonably practical and no later than \[12 (twelve)\] or \[●\] months after \[Completion\] or \[*insert relevant point in time*\]:

(a) \[uses OR has contracted to purchase\] Renewable Energy for \[100 (one hundred) percent\] or \[at least \[●\] percent\] of all electricity consumed by the Company;

(b) uses web hosts and cloud service providers which run their servers using 100 (one hundred) percent Renewable Energy or have a net zero target \[that, at a minimum, aligns with the Paris Agreement Goals\];

(c) sources all consumables used by the Company from sustainable and ethical sources and includes emissions reduction requirements in the Company’s procurement strategy and supply chain contracts;

(d) creates KPIs to measure the impact on the climate of the Company’s operations and goods and services it provides;

(e) \[ensures the \[casing OR packaging\] for the Company’s products are sourced from as much recycled material as possible and are themselves designed to have the smallest environmental impact\];

(f) \[provides 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 \[*insert name of voluntary standard;*\] \[*Drafting note: This clause is optional and may be appropriate if the Company operates an online businesses. To raise net zero ambition, consider building the mitigation into the pricing plan as an alternative to the customer’s option to offset.*\]

(g) establishes a sustainability committee as a committee of the board chaired by \[an independent OR a non-executive\] director \[with experience of improving sustainability and mitigating carbon footprint\];

(h) utilises a nominated (default) superannuation fund that follows environmental, social and governance principles;

(i) \[becomes a certified B Corporation \[and achieves certification from Planet Mark\]\];

(j) develops and implements an Environmental and Sustainability Training Program; and

(k) sets targets to support the achievement on one or more United Nations Sustainable Development Goals;

1.3.3 provides an \[annual\] or \[quarterly\] or \[monthly\] report to the Investors setting out:

\[*Drafting note: To select reporting aligned with needs and goals of Investors. To raise net zero ambition, consider adding CDP disclosure here.*\]

(a) the climate risks and opportunities relevant to the Company and its business in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD);

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

(c) an analysis of how wider local and global stakeholders (including employees, clients, 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 to such risks;

(d) a report on all climate policy engagement, climate leadership, lobbying activities, trade association memberships and public policy positions that may support or undermine the Paris Agreement Goals; and

(e) other environmental, social and governance factors that are requested by the Investors from time to time;

1.3.4 prepares and provides an annual sustainability report to Investors which sets out the Company’s compliance with this clause and provides details of any non-compliance;

1.3.5 publishes on a publicly-accessible page of its website (updated at least \[annually\] OR \[other period\]:

(a) its approach to energy and GHG emission reduction;

(b) \[its energy and GHG emission baselines;\]

(c) its Net Zero Target and Net Zero Transition Plan and its progress towards achieving its Net Zero Target and implementing the Net Zero Transition Plan; and

(d) its learnings from the above, including (where relevant) case studies;

1.3.6 shares generic and non-commercial data relating to the implementation of its Net Zero Transition Plan and its progress towards its Net Zero Target with relevant industry bodies to assist other entities implement similar targets and plans;

1.3.7 make Founders and/or senior executives available to attend and/or speak at relevant conferences such as \[GBCA Transform, PCA and GRESB\] in relation to the initiatives implemented to achieve the Net Zero Target or as part of the Net Zero Transition Plan; and

1.3.8 once profitable, donates at least \[1 (one)\] or \[●\] percent of its net profits to environmental causes that are mitigating the impact of climate change \[and are 'charities' as defined in the Charities Act 2013 (Cth), registered with the Australian Charities and Not-for-profits Commission \[and endorsed by the Australian Taxation Office as deductible gift recipients\]\].

2\. Green decisions requiring the Consent of an Investor majority

2.1 Each party must use all its voting rights and other powers in relation to the Company to ensure that:

2.1.1 the Company is authorised and empowered to take the actions in clause \[1\];

2.1.2 the Company does not take any of the actions in clause \[2.2\] without first obtaining \[Investor Consent OR \[●\]\] \[*Drafting note: Consider whether an alternate threshold is commercially relevant in this context*\].

2.2 The actions requiring Investor Consent are:

2.2.1 revocation of the Net Zero Target or the Net Zero Transition Plan;

2.2.2 any amendment of the Net Zero Target or the Net Zero Transition Plan which makes either less ambitious or is reasonably likely to delay the Company’s completion of the Net Zero Transition Plan or its achievement of its Net Zero Target;

2.2.3 the entry into any contract or arrangement that conflicts with the Net Zero Target or the Net Zero Transition Plan; and

2.2.4 any amendment of this clause \[2\].

3\. Founder green covenants

3.1 Each Founder must not:

3.1.1 \[at any time 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:

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

(b) operating in the following sectors \[*insert sectors or industries that the Investor does not want the Founders to be involved in or conflict with their ESG aims*\]; or\] \[*Drafting note: This sub-clause is optional. However, the parties may agree to its inclusion if Founders wish to have a consistent approach to ESG issues in all business dealings.*\]

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.
