---
title: Green Shareholders’ Agreement
excerpt: 
date: 2024-03-27T14:17:07Z
modified: 2025-10-08T07:33:26Z
file_type: md
permalink: clauses/green-shareholders-agreement.html
wpid: 2161
status: publish
type: clause
jurisdiction:
  - England &amp; Wales
maintenance-status:
  - Maintained
practice-area:
  - Banking and finance
  - Corporate, mergers and acquisitions (M&amp;A)
  - Private equity and investment management
eleventyComputed:
  clause_child_name: "Lauren's Clause"
  clause_summary: "Clauses for a shareholders' agreement which allow investors to hold the company to account on climate issues and incentivise shareholder support for the company's climate transition plan."
  clause_last_updated_date: 2025-03-13
layout: layouts/clause.njk
---

# Green Shareholders’ Agreement

## Child’s name

Lauren's Clause

## Summary

Clauses for a shareholders' agreement which allow investors to hold the company to account on climate issues and incentivise shareholder support for the company's climate transition plan.

## What this clause does

These clauses: mandate climate and sustainability goal setting for a company’s board; shareholder approval of this; a climate-aligned share option scheme and dividend policy; obligations on shareholders to further the sustainability goals of the company; and climate-aligned shareholder pre-emption rights, permitted transfers and drag along.

## Clause Content

**2 Share option scheme**

The Founders undertake to include terms in the Share Option Scheme (which shall include the relevant share award agreement for the purpose of this clause \[●\]) that make the vesting of Shares under the Share Option Scheme conditional upon the Company having achieved its Sustainability Goals that are due on or before the agreed vesting date.

\[*Drafting note: you may want to consider allowing the board, in consultation with the CSO, the power to evaluate the Company’s performance against these ESG targets annually, and allowing the right to adjust the vesting schedule accordingly. Furthermore, a penalty can be added whereby failing to meet these targets may result in the deferral or forfeiture of share options until such time as the targets are met.*\]

**3 Dividend policy**

Where a Shareholder has failed to comply with the obligations under clause \[6.3\], it shall not be permitted to receive any portion of the dividend distributed under clause \[●\]\* and the amount of the dividend paid to Shareholders as a whole shall be reduced proportionate to such Shareholder’s pro-rata allocation of the dividend (a Portion). Such Portion of the dividend will be retained by the Company \[and used to \[achieve the Company’s Sustainability Goals\]\] \[unless the relevant Shareholder complies with clause \[6.3\] within \[●\] Business Days of the dividend being distributed to the other shareholders, in which case it will be distributed to the defaulting Shareholder in accordance with clause \[●\]\*\*\].

\* \[*Drafting note: refer to the dividend distribution clause in the main shareholders’ agreement that Lauren’s Clause is being used in.*\]

\*\* \[*Drafting note: refer to the dividend distribution clause in the main shareholders’ agreement that Lauren’s Clause is being used in.*\]

**4 Business of the company**

The Shareholders will each act in good faith to promote the best interests of the Company and ensure that the Business is conducted and developed in accordance with good business practice and any business plan for the Company that is adopted from time to time to further (in equal emphasis):

(i) the Capital Purpose;

(ii) the [Transition Plan](https://chancerylaneproject.org/glossary/transition-plan/); and

(iii) the Sustainability Goals.

**5 Company sustainability goals**

5.1 Within 30 (thirty) Business Days from the date of \[execution of\] this Agreement the Board shall meet and resolve to:

(i) adopt the Company’s Sustainability Goals and [Transition Plan](https://chancerylaneproject.org/glossary/transition-plan/);

(ii) adopt a framework sustainability management standard by reference to \[*insert specific standard\]* (the Sustainability Management Standards) that shall include details of the Transition Plan; and

(iii) designate a member of the Board to be the CSO.

5.2 As soon as reasonably possible following the date of such meeting the Board shall provide a copy of the meeting minutes to the Shareholders detailing the adopted Sustainability Goals along with a copy of the Company’s Sustainability Management Standards.

5.3 Independent of each formal Board meeting convened in accordance with clause \[●\], the impact of the Company’s Sustainability Goals and Transition Plan shall be reviewed and evaluated by the Board (in collaboration with the CFO) on a quarterly basis (a Sustainability Review Meeting), which evaluation shall include the Board considering, without limitation:

(i) the Carbon Footprint at the date of such meeting;

(ii) the Company’s progress in achieving its current Sustainability Goals and Transition Plan;

(iii) whether any modifications should be made to the current Sustainability Goals or Transition Plan;

(iv) whether any modifications should be made to the Sustainability Management Standards;

(v) the effect of the current Sustainability Goals on the Capital Purpose; and

(vi) any additional Sustainability Goals,

and minutes of such meetings shall be provided to all Shareholders which shall include, without limitation, a measurement of the Carbon Footprint at the date of such meeting.

5.3 The Board shall provide copies of the meeting minutes from all Sustainability Review Meetings to Shareholders within 14 (fourteen) Business Days of the meeting date and any material modifications to the Sustainability Goals shall be proposed to the Shareholders with such minutes.

5.4 The Board shall provide any further information reasonably requested by Shareholders in respect of the Sustainability Goals, provided that such request is made by a Shareholder within 30 (thirty) Business Days of receipt of the minutes provided under clause \[5.3\].

**6 Carbon footprint management**

6.1 In addition to adopting the Sustainability Goals and [Transition Plan](https://chancerylaneproject.org/glossary/transition-plan/) pursuant to clause \[5.1\], the Board shall provide any further information reasonably requested by Shareholders in relation to the Company’s Transition Plan and Carbon Footprint, including but not limited to any information recommended to be disclosed by a company under the [GHG Protocol](https://chancerylaneproject.org/glossary/ghg-protocol/), provided that such request is made by a Shareholder within 30 (thirty) Business Days of receiving the minutes provided under clause \[5.2\].

6.2 At the end of the Company’s financial year the Board shall provide the Shareholders with details of the total Carbon Footprint for the year, which information must also be included in the Directors’ Report for that financial year.

\[*Drafting notes:*

*(i) Align any such reporting requirements with any third party or regulatory reporting requirements that the Company is already required to comply with.*

*(ii) Consider adding a requirement for the Carbon Footprint measurement to be externally verified or audited and published on the Company’s website.*\]

6.3 During this Agreement, the Company and each of the Shareholders agree to Offset annually at the following levels:

(i) any Shareholder that is a body corporate\[, partnership or other undertaking\] shall Offset to compensate for not less than \[500 (five hundred)\] metric tonnes of [Carbon Dioxide Equivalent](https://chancerylaneproject.org/glossary/carbon-dioxide-equivalent-co2e-or-co2eq/) (CO2e) units in each of the Company’s financial years;\*

(ii) any Shareholder that is an individual shall Offset not less than \[50 (fifty)\] metric tonnes of [Carbon Dioxide Equivalent](https://chancerylaneproject.org/glossary/carbon-dioxide-equivalent-co2e-or-co2eq/) (CO2e) units in each of the Company’s financial years; and

(iii) the Company shall Offset its [Residual Emissions](https://chancerylaneproject.org/glossary/residual-emissions/)\[ in accordance with the Offsetting Strategy\].

\* \[*Drafting note: consider making this a percentage of that company’s own [Residual Emissions](https://chancerylaneproject.org/glossary/residual-emissions/) instead of a set figure.*\]

\[Alternative clause 6.3:

6.3 During this Agreement, the Company and each of the Shareholders agree to Offset annually at the following levels:

(i) in each the Company’s financial years, each Shareholder shall Offset an amount of Carbon Dioxide Equivalent (CO2e) units equal to a Shareholder’s share of the total annual Carbon Footprint in the preceding year as determined in accordance with clause \[6.2\], where such Shareholder’s share is determined by reference to a Shareholder’s percentage holding of Shares in the Company; and

(ii) the Company shall Offset its [Residual Emissions](https://chancerylaneproject.org/glossary/residual-emissions/) \[in accordance with the Offsetting Strategy\].\]

6.4 Evidence of each Shareholder’s compliance with clause \[6.3\] should be provided to the CSO by each Shareholder as soon as reasonably possible following the completion of each Company financial year, but in any event by no later than one month after the end of such financial year. Evidence of the Company’s compliance with clause \[6.3\] shall be provided with the minutes of the first Sustainability Review Meeting in each financial year.

6.5 Without affecting any other right available to the Company under this Agreement, where a Shareholder fails to submit evidence that it has complied with clause \[6.3\] by the date due and remains in default after having been given 14 (fourteen) Business Days’ notice to comply, the Shareholder shall be considered to be in Material Breach of this Agreement and the provisions of clause \[11\] shall apply.

6.6 Notwithstanding clause \[6.2\], the obligations under clause \[6.3\] shall cease to apply in any financial year where the Company achieves its Sustainability Goals for the preceding financial year. In this event, each Shareholder shall be obliged to Offset in the financial year but the quantum of carbon credits to be purchased by a Shareholder shall be at its own discretion. Each Shareholder shall provide evidence of their Offsetting to its CSO for the financial year and the Board shall be permitted to share such information with all Shareholders.

\[*Drafting note: consider adding a clause with additional requirements here, such as climate risk disclosure, stakeholder just transition analysis, climate policy engagement and lobbying, employee training, use of climate clauses in contracts and choice of pensions scheme. For examples of these, refer to* [*Sebastian’s Clause*](https://chancerylaneproject.org/clauses/entire-business-net-zero-objectives/)*.*\]

**7 Further issue of shares – pre-emption**

Notwithstanding the foregoing,\* clause \[●\]\*\* shall not apply to benefit any Shareholder who has failed to comply with clause \[6.3\] and the Company may disregard any such Shareholder’s Shares when computing the offer to be made under clause \[●\].\*\*\*

\* \[*Drafting note: this refers to the preceding sub-clauses from the main pre-emption clause.*\]

\*\* \[*Drafting note: refer to the clauses containing pre-emption rights on further issues of shares in the main shareholders’ agreement that Lauren’s clause is being used in.*\]

\*\*\* \[*Drafting note: refer to the offer clause in the main shareholders’ agreement that Lauren’s Clause is being used in.*\]

\[*Drafting note: you may want to consider adding a clause that states that notwithstanding the pre-emption rights outlined herein, any Shareholder who has failed to comply with clause \[6.3, 6.4 and 6.5\] (inclusively), shall not be entitled to exercise their pre-emption rights in respect of any further issuance of shares.*\]

**8 Transfer of shares – permitted transfers**

Notwithstanding the foregoing,\* clause \[●\]\*\* shall not apply to benefit any Shareholder that has failed to comply with clause \[6.3\] and the provisions of clause \[●\]\*\*\* shall apply to any purported transfer by such a Shareholder.

\* \[*Drafting note: this refers to the preceding sub-clauses from the main permitted transfers clause.*\]

\*\* \[*Drafting note: refer to the permitted transfers clause in the main shareholders’ agreement that Lauren’s Clause is being used in.*\]

\*\*\* \[*Drafting note: refer to the clauses relating to how such a transfer should be treated.*\]

**9 Transfer of shares – pre-emption**

Notwithstanding the foregoing,\* any Shareholder that has failed to comply with clause \[6.3\] shall not be considered an Eligible Shareholder for the purpose of clause \[●\]\*\* and the Board shall be under no obligation to offer any Sale Shares to such a Shareholder.

\* \[*Drafting note: this refers to the preceding sub-clauses from the main pre-emption clause.*\]

\*\* \[*Drafting note: this refers to the preceding sub-clauses from the main pre-emption clause.*\]

\[*Drafting note: consider adding wording that the Directors shall refuse to register the transfer of any shares to a prospective shareholder if, in their reasonable opinion, the individual or entity fails to comply with the Company’s Sustainability Goals or is operating in a manner contrary to achieving the Transition Plan. This includes any actions or affiliations that would increase the Carbon Footprint or undermine the Company’s efforts to maintain Sustainability Alignment as described in the Articles of Association and relevant shareholders’ agreements.*\]

**10 Transfer of shares – valuation**

Fair Value shall, in any case, be the price of the relevant Shares determined in writing by the Independent Accountant on the following bases and assumptions:

(a) \[*insert normal valuation provisions*\]; and

(b) reflect a discount proportionate to the Company’s \[consumption of [Natural Capital](https://chancerylaneproject.org/glossary/natural-capital/) in the previous 12 (twelve) months\]\[time left to the Target Date\]\[*insert other alignment to sustainability goals that have not been achieved*\].

\[*Drafting note: when adjusting the fair value in accordance with 10(b)- the discount or premium to be applied to the valuation will need to be based on clear metrics. Once the parties have discussed and agreed what these should be, it would be sensible to input a worked example to show how this would work in practice and schedule it to a shareholders agreement.*\]

**11 Compulsory transfers – material climate breach**

In the event that a Shareholder is (in the opinion of the Board, acting reasonably) in Material Climate Breach of any of the provisions of this Agreement (a Defaulting Shareholder) the Board may, in its absolute discretion, serve a notice on the Defaulting Shareholder notifying them that they have been deemed, with immediate effect, to have served a Transfer Notice in respect of their Shares (together with any Shares held by Permitted Transferees of the Defaulting Shareholder) and the provisions of clause \[10\] shall apply to any such transfer, save as provided by this clause \[●\]. In such event, the Defaulting Shareholder (together with their Permitted Transferees) shall be treated as a Bad Leaver, in accordance with clause \[●\], for the purposes of the valuation and transfer of their Shares\[, provided that the Sale Price shall be at a 50 (fifty) percent discount to Fair Value of the relevant Shares\].

**12 Drag along**

Notwithstanding any other provision of this Agreement, a Shareholder may refuse to be dragged or otherwise sell or transfer any or all their Shares to the Drag Purchaser if acting reasonably and in \[good faith\] it believes that the Drag Purchaser, its group or affiliates are operating in a way that can reasonably considered a Material Climate Breach or otherwise contrary to the Sustainability Goals.

\[*Drafting note: any provision to a minority shareholder not being able to be dragged will be very fundamental to a third party. As such, careful drafting will need to be considered to allow provisions for the Drag Purchaser to rectify the issue.*\]

**13 Restrictions**

In addition to the restrictions set out in clause \[●\], each Shareholder undertakes to the other and separately to the Company that they will not at any time, without the prior consent of the Board, carry on or be employed, engaged, or interested in any business which has not published a climate transition plan or is not otherwise operating with or towards Sustainability Alignment.

**14 Notices**

The parties agree to send notices electronically.

**Schedule \[●\]**

Matters requiring shareholder consent

Company operations

1\. Entering into any contract, transaction or arrangement in relation to the Company that is likely to impede achievement of the Sustainability Goals, the Sustainability Management Plan or [Transition Plan](https://chancerylaneproject.org/glossary/transition-plan/).

2\. Making any material modification to the Sustainability Goals.

3\. Making any change to the Target Date.

## Updates

**March 2025**

This clause has been updated following a routine maintenance review. A number of drafting notes were added to include considerations and guidance on how to use the clause.
