---
title: Climate and Nature Impact Investing Terms
excerpt: 
date: 2025-05-21T14:34:09Z
modified: 2025-11-24T18:33:16Z
file_type: md
permalink: clauses/climate-and-nature-impact-investing-terms.html
wpid: 7589
status: publish
type: clause
jurisdiction:
  - England &amp; Wales
maintenance-status:
  - Maintained
practice-area:
  - Banking and finance
  - Private equity and investment management
eleventyComputed:
  clause_child_name: "Matteo's Clause"
  clause_summary: Model environmental terms and conditions that an impact investor (financing private sector projects) can incorporate and adapt for its specific needs into its standard documents.
  clause_last_updated_date: 2025-05-20
layout: layouts/clause.njk
---

# Climate and Nature Impact Investing Terms

## Child’s name

Matteo's Clause

## Summary

Model environmental terms and conditions that an impact investor (financing private sector projects) can incorporate and adapt for its specific needs into its standard documents.

## What this clause does

This clause will assist investors (and their financiers and intermediaries) in financing projects with positive environmental impact, in accordance with the Paris Agreement targets and the United Nations Sustainable Development Goals. This will in turn help the country of investment achieve its nationally determined contributions and transition to a low-carbon economy.

## Clause Content

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

### **Business of the Company** 

1.1 The Parties will each act in good faith to promote the best interests of the Company and ensure that:

1.1.1 its business is conducted and developed responsibly, sustainably, ethically and in accordance with all applicable laws and good business practice; and

1.1.2 any business plan for the Company that is adopted from time to time is in furtherance of (in equal emphasis):

(a) the Business Purpose; and

(b) the Sustainability Goals.

**2. Company Sustainability Goals**

2.1 Within \[30 (thirty)\] Business Days from the date of execution of this Agreement the board of the Company (Board) shall meet and resolve to do all of the following:

2.1.1 appoint an independent environmental advisor with science-based expertise in environmental matters to \[advise the Board on and to assist with the delivery of\] the Project (Environmental Advisor)\* and agree the scope of work to be carried out by the Environmental Advisor (Environmental Advisor Scope of Work) and to

2.1.2 adopt the Company’s Sustainability Goals, including a programme to measure the positive impact of the Project and the progress against the Environmental Targets \[in accordance with \[*indicate any specific performance metrics and/or Environmental KPIs*\]

2.1.3 adopt a sustainability management framework by reference to \[*insert specific standard*\] (the ‘Sustainability Management Standards’) that shall include details of the [Transition Plan](%5C%22https://chancerylaneproject.org/glossary/transition-plan/%5C%22) and set a Net Zero Target Date

2.1.4 appoint a member of the Board to be the Company’s Chief Sustainability Officer (CSO).

Within \[14 (fourteen)\] Business Days following the date of such meeting the Board shall provide a copy of meeting minutes to the Investor detailing the adopted Sustainability Goals together with a copy of the Company’s Sustainability Management Standards.

\**\[Drafting note: parties may consider granting the Investor the right to require the replacement of the Environmental Advisor.\]*

2.2 The impact and effectiveness of the Company’s Sustainability Goals shall be reviewed and evaluated by the Board \[and the Environmental Advisor\] on a quarterly basis (Sustainability Review Meeting), and such review and evaluation shall include an assessment of the following:

2.2.1 the Company’s progress in achieving its current Sustainability Goals, the Project’s Environmental Targets and Transition Plan;

2.2.2 whether any positive modifications should be made to the current Sustainability Goals, Environmental Targets or Transition Plan (for the avoidance of doubt, modifications that reduce the impact of the Sustainability Goals, Environmental Targets or Transition Plan are not permitted);

2.2.3 whether any positive modifications should be made to the Sustainability Management Standards (for the avoidance of doubt, modifications that reduce the impact of the Sustainability Management Standards are not permitted);

2.2.4 the effect of the current Sustainability Goals on the Company’s Business Purpose;

2.2.5 a measurement of the Project’s Carbon Footprint as at the date of each meeting; and

2.2.6 any additional Sustainability Goals that the Company should adopt.

2.3 The Board shall provide copies of the meeting minutes from all Sustainability Review Meetings and the measurement of the Project’s Carbon Footprint as at the date of each meeting to the Investor within \[14 (fourteen)\] Business Days of the meeting date and any material changes to the Sustainability Goals shall be proposed to the Investor with such minutes in accordance with clause \[2.1\].

2.4 The Board shall provide in a timely and accurate manner any further information reasonably requested by the Investor in respect of the Sustainability Goals and the Project’s Environmental Targets including but not limited to both of the following:

2.4.1 any information recommended to be disclosed by a company under the [GHG Protocol](%5C%22https://chancerylaneproject.org/glossary/ghg-protocol/%5C%22), provided that such request is made by the Investor within 30 (thirty) Business Days of receipt of the minutes provided under clause \[2.3\]

2.4.2 any information on matters related to the Investor’s environmental due diligence on the Project.

2.5 Subject to prior approval of the Board and compliance with the Sustainability Management Standards, the Company shall create an Offsetting Strategy. It will review the Offsetting Strategy at least annually and submit the revised version within \[30 (thirty)\] days of the end of each Financial Year.

2.6 Evidence of the Company’s compliance with clause \[2.5\] shall be provided to the Investor together with the minutes of the Board’s first Sustainability Review Meeting by the end of each Financial Year.

2.7 The Company shall ensure that any investment or equivalent activity that it makes using \[funding\] provided by the Investor is on equivalent terms to clauses \[1\] to \[11\]).

**3. Purpose or use of funds or use of guarantee**

3.1 The \[Company OR financial intermediary\] shall apply all amounts \[provided\] \[borrowed by it\] \[guaranteed\] under this \[Agreement\] \[Facility\] \[Deed\] exclusively to Eligible Transactions.

3.2 The Company shall ensure that the legal documentation for any Eligible Transaction \[and any other transaction that the \[Company OR financial intermediary\] is a party to\] shall include equivalent terms to \[the Company’s Sustainability Policies OR \[these clauses \[1\] to \[11\]\].

**4. Investor’s covenants**

4.1 The Investor shall perform comprehensive environmental due diligence with respect to the Project \[in accordance with the Due Diligence Questionnaire set forth in Schedule \[●\]\]\* and, before proceeding with the disbursement of funds, shall assess whether the information provided by the Company is satisfactory for the achievement of the Sustainability Goals and the Environmental Targets.

\**\[Drafting note: for more information about the ESG Due Diligence Questionnaire, see TCLP Clause:* [*Gordon’s DDQ*](%5C%22https://chancerylaneproject.org/clauses/esg-due-diligence-questionnaire-for-ma-and-capital-markets/%5C%22)*.\]*

4.2 The Investor shall not at any time carry on or be employed, engaged, or interested in any business that does any of the following:

4.2.1 has not publicly set a Net Zero Target Date or has not taken demonstrable steps to achieve [Net Zero](%5C%22https://chancerylaneproject.org/glossary/net-zero/%5C%22) and sustainability goals similar to the Company’s Sustainability Goals.

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

4.2.3 does or omits to do anything which could reasonably be expected to cause the Company to not achieve Net Zero, the Sustainability Goals or the Environmental Targets, whether pursuant to this contract or otherwise.

4.3 The Company acknowledges and agrees that its obligations under this Agreement are independent from the Investor’s obligations under this clause \[4\] and the Company’s obligations under this Agreement shall not be affected in any way by reason of any breach by the Investor of its obligations under this clause \[4\].

\[4.4 The Investor shall at all times comply with the United Nations Principles for Responsible Investment (UNPRI) and this Agreement.\]

\[4.5 Subject to agreement between the Parties, the Investor shall reasonably provide the Company with non-financial resources, including but not limited to training, capacity building support, and knowledge sharing platforms, to facilitate the Company’s achievements of the Sustainability Goals and the Environmental Targets.\]

**5. Conditions precedent for first drawdown and representations**

5.1 The Company shall have adopted Sustainability Management Standards, Sustainability Goals and Environmental Targets in form and substance satisfactory to the Investor.

5.2 The Company shall have appointed a member of the Board to be the CSO.

5.3 The Company shall have both agreed the Environmental Advisor Scope of Work and appointed an Environmental Advisor.

5.4 \[*Insert any environmental risk mitigation measures required and not addressed during the Due Diligence phase, for example climate risk insurance.*\]

5.5 The Company represents and warrants that it is not in breach of any applicable Environmental Law.

**6. Conditions precedent for subsequent drawdowns and repeating representations**

6.1 The Company continues to have in place Sustainability Management Standards, Sustainability Goals and Environmental Targets in form and substance satisfactory to the Investor.

6.2 The Company continues to have a CSO \[and an Environmental Advisor\]\*.

\*\[*Drafting note: there should be a clear mechanism for replacing the Environmental Advisor. Resignation or dismissal of the latter should not, of itself, be considered as misrepresentation.*\]

6.3 No Environmental Breach has occurred which:

6.3.1 has not been remedied to the satisfaction of the Investor; or

6.3.2 is not subject to an agreed Corrective Action Plan.

6.4 The Company shall comply with the \[Company’s Sustainability Policies\] set out in Schedule \[●\] as amended from time to time; and shall implement such policies, procedures and systems as may be required to monitor compliance with the \[Company’s Sustainability Policies\] and to prevent liability under any applicable law.

6.5 The Company is in compliance with its climate reporting obligations under clause \[2\] and clause \[8\].

6.6 The Company represents and warrants that it is not in breach of any applicable Environmental Law.

**7. Inspections**

7.1 The Company shall, if deemed necessary by the Investor (acting reasonably), permit representatives of the Investor \[or a third party appointed by the Investor\], their accountants and their other advisors, at all reasonable times and on reasonable notice, free access to the Project and the Company’s premises, persons, documents and other information.

7.2 Investor’s rights under clause \[7.1\] may be exercised for the purpose of carrying out monitoring visits or audits and/or investigations into any failure or potential failure by the Company to comply with the Sustainability Management Standards, the Sustainability Goals, the Environmental Targets, or any Corrective Action Plan.

7.3 All costs associated with such visits or investigations under clauses \[7.1\] and \[7.2\] shall be borne by the Company, unless (other than in respect of or in connection with any Corrective Action Plan) they do not reveal any material non-compliance by the Company.

7.4 The Company shall:

7.4.1 cooperate in good faith with the representatives of the Investor \[or a third party appointed by the Investor\], its accountants and its other advisors to assist any such representatives in preparing reports for the Investor on \[environmental matters\] in connection with the Project

7.4.2 implement the recommendations of such representatives in order to address any non-compliance with \[environmental matters\] by the Company.

**8. Reporting**

8.1 The Company commits to supporting the recommendations of the \[International Sustainability Standards Board (ISSB) or Task Force on Nature-Related Financial Disclosures (TNFD)\] and to include environmental-related disclosures in its financial reporting from \[*insert date*\].

8.2 The Company will include an assessment of risks in both the Environmental Monitoring Report, and its business continuity plan, as required by the Investor, including but not limited to:

8.2.1 environmental risk, including:

(a) physical risks associated with climate change and biodiversity loss, and

(b) transition risks associated with the change to a net zero emissions economy (for example, as a result of amendments to NDCs); and

8.2.2 nature-based risks, including:

(a) risks required to be assessed by law, and

(b) risks arising from the application of \[the TNFD ‘LEAP’ approach\] or \[*insert other frameworks used by the Investor, for example, the Network for Greening the Financial System*\].

8.3 The Company’s assessment under clause \[8.2\] shall also address climate resilience and determine whether the Company and its activities are ‘climate proof’.

8.4 A copy of the Company’s business continuity plan will be updated and provided to the Investor within \[30 (thirty)\] days of the end of each Financial Year.

8.5 The Company shall, as soon as it is available, but in any event no later than \[90 (ninety)\] days after the end of each \[quarter for Construction Period\] or \[financial year for Operating Period\], deliver to the Investor the Environmental Monitoring Report.

8.6 By the end of each Financial Year the Board shall provide the Investor with details of the Project’s total Carbon Footprint for the Financial Year. This information must also be included in the Directors’ Report for each Financial Year.

**9. Ongoing covenants**

The Company shall do all of the following:

9.1 continue to have adopted Sustainability Management Standards, Environmental Targets and Sustainability Goals satisfactory to the Investor

9.2 have a CSO and an Environmental Advisor

9.3 \[have in place insurance for its material environmental risks (where insurable) at a level acceptable to the Investor and shall have provided a copy of the certificate of insurance to the Investor within \[30 (thirty)\] days of \[*insert event*\]\]

9.4 comply with the Company’s Sustainability Policies as amended from time to time; and shall implement such policies, procedures and systems as may be required to monitor compliance with the Company’s Sustainability Policies and to prevent any breach of, or liability under, any applicable law (including, without limitation, any Environmental Breach)

9.5 be in compliance with its reporting obligations under clause \[2\] and clause \[8\].

**10. Breach**

10.1 A breach of any of clauses \[1\] to \[11\] or any Environmental Law will be an environmental breach (Environmental Breach) and the following shall apply:

10.1.1 The Company shall notify the Investor of any Environmental Breach (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

10.1.2 Upon becoming aware of or suspecting an Environmental Breach, the Investor shall have the right to investigate the breach (or suspected breach) using its own staff or such third parties as it may consider necessary.

10.1.3 Within \[30 (thirty)\] days of the Investor informing the Company that it considers that an Environmental Breach has (or may have) occurred, the Investor and the Company shall meet to discuss possible remedies for the Environmental Breach.

10.1.4 In respect of any suspected breach, if the investigation by the Investor finds that there has been an Environmental Breach, the costs of such investigation will be borne by the Company.

10.2 Upon the Investor being notified of the occurrence of an Environmental Breach or determining that an Environmental Breach has occurred, in consultation with the Company, it may:

10.2.1 require the Company to produce a Corrective Action Plan, in which case the Company shall, as soon as practicable following such request but in any event within \[15 (fifteen)\] Business Days of such request, provide a draft Corrective Action Plan for that Environmental Breach to the Investor (for its acceptance);

10.2.2 agree with the Company any other course of action to remedy the Environmental Breach; or

10.2.3 declare that such Environmental Breach is incapable of remedy.

10.3 An Environmental Breach will be deemed incapable of remedy to the extent that the Investor notifies the Company that:

10.3.1 the Environmental Breach is incapable of remedy in accordance with clause 10.2.3 above; or

10.3.2 the draft Corrective Action Plan has not been accepted within \[6 (six) months\] of the request in accordance with clause \[10.2.1\] above.

10.4 Following a request by the Investor to provide a draft Corrective Action Plan in accordance with clause \[10.2.1\] above and pending acceptance by the Investor of any draft Corrective Action Plan, the Company shall take or procure the taking of all such actions and measures to immediately address the adverse impacts of the relevant Environmental Breach, including such actions or measures as are required by any draft Corrective Action Plan in accordance with the timescales set out in that draft Corrective Action Plan.

10.5 If the Investor does not accept the draft Corrective Action Plan pursuant to clause \[10.2.1\] above:

10.5.1 the Investor shall indicate to the Company the areas in which the draft plan is deficient and the time period within which a revised draft Corrective Action Plan shall be resubmitted to the Investor for its acceptance; and

10.5.2 the Company shall submit a revised draft Corrective Action Plan after consulting with the Investor and taking any views of the Investor fully into account.

10.6 If the Investor does not accept the revised draft Corrective Action Plan submitted by the Company, the Investor and the Company shall repeat the process set out above until such time as either:

10.6.1 a revised draft Corrective Action Plan is accepted by the Investor; or

10.6.2 the Investor declares that the Environmental Breach is incapable of remedy.

10.7 A draft Corrective Action Plan shall be deemed to have been accepted by \[the Investor\] \[30 (thirty)\] Business Days after its submission unless the Investor advises the Company otherwise.

10.8 After acceptance of the Corrective Action Plan, the Company shall take or procure the taking of all such actions and measures as are required by the Corrective Action Plan in accordance with the timescales set out therein.

10.9 Every \[3 (three) months\] from the date on which a Corrective Action Plan is accepted, the Company shall provide the Investor with a report on the implementation of that Corrective Action Plan, and shall provide a final report to the Investor on completion of the Corrective Action Plan. Each report is to be in a form and substance acceptable to the Investor.

10.10 To the extent that an Environmental Breach is not remedied within the timescales set out in the relevant Corrective Action Plan, the Investor may:

10.10.1 require the Company to produce a new Corrective Action Plan or take any other corrective measure in accordance with the procedures set out above; or

10.10.2 declare that the Environmental Breach is incapable of remedy.

\[10.11 The Company shall have a defined period (as agreed by the Investor and not to exceed a maximum period of 6 (six) months) in which to remedy the Environmental Breach in the manner agreed by the Investor.\]

\[10.12 If the Environmental Breach is remedied to the Investor’s satisfaction within the defined time period or the same is waived by the Investor, then the Environmental Breach shall be considered remedied.\]

\[10.13 If the Environmental Breach is not so remedied or declared to be incapable of remedy, then this shall be an Event of Default\]\*

\**\[Drafting note: the Investor shall consider whether an Environmental Breach that cannot be remedied should constitute an Event of Default, and what consequences the latter will trigger, especially if other lenders or investors are involved in the Project. The consequences of an unremedied breach should be assessed on a case-by-case basis, depending on its nature.\]*

**11. Notices**

The Company shall:

11.1 use recycled paper and non-solvent based ink when printing a notice;

11.2 if the notice is being delivered by hand, use a courier service which operates [zero or ultra-low emission vehicles](%5C%22https://chancerylaneproject.org/glossary/ultra-low-emission-vehicle-ulev-zero-and-low-emission-vehicle-zlev-electric-vehicle-ev/%5C%22) only; and

11.3 allow notices to be given electronically.

**Schedule \[●\]**

**Matters requiring the Investor’s consent**

**Company operations**

1\. Enter into any contract, transaction or arrangement in relation to the Company and the Project that is likely to impede the achievement of the Sustainability Goals, the Sustainability Management Plan and the Environmental Targets.

2\. Make any material change to the Sustainability Goals or the Environmental Targets.

3\. Make any change to the Net Zero Target Date.
