---
title: Ambitious Carbon Neutral Clause
excerpt: 
date: 2024-03-27T14:15:45Z
modified: 2025-07-23T11:11:20Z
file_type: md
permalink: clauses/ambitious-carbon-neutral-clause.html
wpid: 1999
status: publish
type: clause
jurisdiction:
  - Aotearoa New Zealand
maintenance-status:
  - Not maintained
practice-area:
  - Corporate, mergers and acquisitions (M&amp;A)
eleventyComputed:
  clause_child_name: Marguerite and Annabelle’s Clause
  clause_summary: This clause obliges a company to operate consistently with an emissions reduction target and its shareholders to engage in climate change mitigation or relinquish their benefits.
  clause_last_updated_date: 2023-05-23
layout: layouts/clause.njk
---

# Ambitious Carbon Neutral Clause

## Child’s name

Marguerite and Annabelle’s Clause

## Summary

This clause obliges a company to operate consistently with an emissions reduction target and its shareholders to engage in climate change mitigation or relinquish their benefits.

## What this clause does

Enables shareholders to embed environmental, social and governance matters at the highest level of the company, and prioritise them over short-term fast growth to deliver better performance and long-term value. It can be used in any shareholders’ agreement.

This clause adapts part of \[Lauren’s Clause\] Green Shareholders’ Agreement for use in Aotearoa New Zealand.

## Clause Content

**1. Carbon footprint management**

1.1 The Board will procure that the Business of the Company be conducted in a manner which is at least Carbon Neutral.

\[EITHER\]

1.2A \[Within \[30\] Business Days from the date of this document the Board will meet and resolve to determine the Company’s plan to achieve and at least maintain its Carbon Neutral status (the **Carbon Neutral Plan**), which should include a proposed date by which the Company will be Carbon Neutral (the **Carbon Neutral Date**).\]

\[*Drafting note: this option 1.2A is a less prescriptive formulation of the carbon neutral plan.*\]

\[OR\]

1.2B \[Within \[30\] Business Days from the date of this document the Board will meet and resolve to determine the Company’s plan to achieve and at least maintain its Carbon Neutral status (the **Carbon Neutral Plan**), which should:

1.2B.1 include a proposed date by which the Company will be Carbon Neutral (the **Carbon Neutral Date**);

1.2B.2 include interim Carbon Footprint reduction targets;

1.2B.3 \[include an offset policy for reducing the Company’s residual Carbon Footprint;\] and

1.2B.4 be \[consistent with\]\[informed by\] the emissions budgets and reductions adopted under the [Climate Change Response Act 2002](https://environment.govt.nz/acts-and-regulations/acts/climate-change-response-act-2002/#:~:text=This%20Act%20puts%20in%20place,Protocol%20and%20the%20Paris%20Agreement).\]

\[*Drafting note: this option 1.2B is more prescriptive and includes alignment with the national Emissions Reduction Plan.*\]

1.3 The Board will review and evaluate the Company’s Carbon Neutral status and Carbon Neutral Plan on a quarterly basis (at a **Sustainability Review Meeting**) and minutes of those meetings will be provided to all Shareholders.

1.4 The Board must provide any further information reasonably requested by a Shareholder in respect of the Company’s Carbon Neutral Plan and Carbon Footprint, including any information recommended to be disclosed by a Company under the GHG Protocol or the [Aotearoa New Zealand Climate Standards](https://www.xrb.govt.nz/standards/climate-related-disclosures/aotearoa-new-zealand-climate-standards/) published by the External Reporting Board, provided that any such request is made by a Shareholder within \[30\] Business Days of receipt of the minutes provided under paragraph \[1.3\] above.

1.5 Promptly following the end of each Financial Year, the Board must provide the Shareholders with details of the Company’s total Carbon Footprint for that Financial Year.

\[EITHER\]

OPTION A

1.6A \[During the term of this document, the Company and each Shareholder agrees to undertake annual Carbon Offsetting at the following levels:

1.6A.1 by the end of each Financial Year, each Shareholder must purchase carbon credits from a Carbon Offset Provider to offset an amount of carbon dioxide equivalent units equal to that Shareholder’s share of the total annual Carbon Footprint in the preceding year (as determined in accordance with paragraph \[1.5\] above) determined by reference to that Shareholder’s percentage holding of Shares in the Company, provided that:

(a) where a person has only been a Shareholder for part of a Financial Year, that person’s obligation under this clause applies to the pro rata share of the Carbon Footprint during the time they were a Shareholder;

(b) a Shareholder must not transfer all its Shares (and cease to be bound by this document) unless it has purchased the carbon credits for its share of the Carbon Footprint in the most recently-completed Financial Year; and

1.6A.2 within \[three\] months of the date for compliance with paragraph \[1.6A.1\] above, the Company must purchase carbon credits from a Carbon Offset Provider to offset any residual annual Carbon Footprint as determined in accordance with paragraph \[1.5\] above, taking into account the carbon credits purchased by each Shareholder and any failure by a Shareholder to comply with its obligation under paragraph \[1.6A.1\] above.

1.7A Evidence of each Shareholder’s compliance with paragraph \[1.6A\] above will be provided to the Board by each Shareholder as soon as reasonably possible (but in any event no later than \[one month\]) after the end of each Financial Year. Evidence of the Company’s compliance with paragraph \[1.6A\] above will be provided within \[one month\] of the time for compliance with its obligation under paragraph \[1.6A.2\] above.

1.7A.1 Without affecting any other right available to the Company under this document, where a Shareholder fails to submit evidence of compliance with paragraph \[1.6A\] above by the date due and remains in default after having been given \[15\] Business Days’ notice to comply:

(a) the Company will be entitled to recover from the Shareholder the amount incurred by the Company under paragraph \[1.6A.2\] above in order to remedy the Shareholder’s default, together with interest on that amount calculated on a daily basis \[at the rate charged by the Company’s bank for overdraft facilities\]. To avoid doubt, payment to the Company of the amount calculated under this clause will remedy the Shareholder’s default under this clause;

(b) while the Shareholder remains in default, it will not be permitted to exercise \[any voting rights in respect of its Shares,\*\] any pre-emptive rights available to it under clause \[●\], any drag-along rights under clause \[●\], or any tag-along rights under clause \[●\]; and

(c) without limiting paragraph \[1.6A.1(b)\] above, while the Shareholder remains in default and wants, or is required, to transfer Shares pursuant to any tag-along or drag-along rights, the price payable by the other Shareholders for those shares on acceptance of a \[Sale Notice\] (as defined in clause \[●\]) will be discounted by the amount required to remedy the default.\]

\[*Drafting note: this option A should be used where the shareholders should primarily be responsible for offsetting (rather than the company) but the shareholders’ agreement does not include all shareholders in the company (because it requires the company to offset residual emissions). Obligations to offset emissions are placed on the shareholders and there are consequences to the shareholders for failing to comply, making it more impactful and onerous. If using this option, consideration needs to be given as to whether it works with the nature of the shares on issue (for example, this structure may not work with preference shares).*\]

\* \[*Drafting note: this option can be included to significantly increase the effectiveness of the clause because failure to undertake the required offsetting will prevent a shareholder voting their shares.*\]

\[OR\]

OPTION B

1.6B \[During the term of this document, the Company and each Shareholder agrees to ensure that the Company undertakes annual Carbon Offsetting by the Company purchasing carbon credits from a Carbon Offset Provider to offset its total annual Carbon Footprint as determined in accordance with paragraph \[1.5\] above. The Company must undertake the Carbon Offsetting under this clause by the end of each Financial Year in respect of the total annual Carbon Footprint in the preceding year.

1.7B Evidence of the Company’s compliance with paragraph \[1.6B\] above must be provided no later than \[one month\]) after the end of each Financial Year.\]

\[*Drafting note: this option B should be used where the company should be responsible for offsetting (rather than the shareholders). It is the simplest option so is generally preferable.*\]

\[OR\]

OPTION C

1.6C \[During the term of this document, each Shareholder agrees to undertake annual Carbon Offsetting by purchasing carbon credits from a Carbon Offset Provider by the end of each Financial Year to offset an amount of carbon dioxide equivalent units equal to that Shareholder’s share of the total annual Carbon Footprint in the preceding year (as determined in accordance with paragraph \[1.5\] above) determined by reference to that Shareholder’s percentage holding of Shares in the Company, provided that:

1.6C.1 where a person has only been a Shareholder for part of a Financial Year, that person’s obligation under this clause applies to the pro rata share of the Carbon Footprint during the time they were a Shareholder; and

1.6C.2 a Shareholder must not transfer all its Shares (and cease to be bound by this document) unless it has purchased the carbon credits for its share of the Carbon Footprint in the most recently-completed Financial Year.

1.7C Evidence of each Shareholder’s compliance with paragraph \[1.6C\] above will be provided to the Board by each Shareholder as soon as reasonably possible (but in any event no later than \[one month\]) after the end of each Financial Year.

1.8C Without affecting any other right available to the Company under this document, where a Shareholder fails to submit evidence of compliance with paragraph \[1.6C\] above by the date due and remains in default after having been given \[15\] Business Days’ notice to comply:

1.8C.1 while the Shareholder remains in default it will not be permitted to exercise \[any voting rights in respect of its Shares,\*\] any pre-emptive rights available to it under clause \[●\], any drag-along rights under clause \[●\], or any tag-along rights under clause \[●\], until the default has been remedied; and

1.8C.2 without limiting paragraph \[1.6C\]\[1.6C.2\] above, while the Shareholder remains in default and wants, or is required, to transfer Shares pursuant to any tag-along or drag-along rights, the price payable by the other Shareholders for those shares on acceptance of a \[Sale Notice\] (as defined in clause \[●\]) will be discounted by the amount required to remedy the default.\]

\[*Drafting note: this option C should be used where the company should be responsible for offsetting (rather than the shareholders).*\]

\* \[*Drafting note: this option should be used where the shareholders should be responsible for offsetting (rather than the company) and the shareholders’ agreement includes all shareholders in the company. Obligations to offset emissions are placed on the shareholders and there are consequences for the shareholders for failing to comply, making it more impactful and onerous. If using this option, consideration needs to be given as to whether it works with the nature of the shares on issue (for example, this structure may not work with preference shares).*\]

\[1.8\]\[1.9\]\* Despite paragraph \[1.5\] above, the obligations under paragraph \[1.6A\] above will not apply in any Financial Year where the Company achieves Carbon Neutral status for the preceding Financial Year. \[In this event, each Shareholder will be obliged to undertake Carbon Offsetting in the Financial Year but the quantum of carbon credits to be purchased by a Shareholder will be at its own discretion. Each Shareholder must provide evidence of its Carbon Offsetting to the Board for the Financial Year and the Board will be permitted to share that information with all Shareholders.\]

\[*Drafting note: including this wording increases the impact of this clause by ensuring that there is additional offsetting of emissions undertaken by shareholders even when the company is carbon neutral itself.*\]

\* \[*Drafting note: if option C is used, this will be numbered clause 1.9.*\]

**Schedule 1 – Matters requiring shareholder consent**

**Company operations**

1\. Making any change to the target Carbon Neutral Date (as defined in clause \[●\]).
