Battery storage company Field and its investor Triple Point Energy Infrastructure have released details of an innovative clause included in their financing agreement aimed at providing access to cheaper credit for companies taking action to reduce their operational emissions.
An interest rate ratchet mechanism included in the contract gives Field the option to pay less interest on Triple Point’s $47 million secured credit facility.
Field and Triple Point said they are open-sourcing the clause they had used so that other investors and companies can replicate it and create more effective incentives to make positive environmental impacts through new financing arrangements.
The “Carbon Saving Ratchet Clause” was developed by The Chancery Lane Project (TCLP), an NGO that is developing a library of peer-reviewed clauses to embed sustainability considerations in business contracts.
It is believed to be the first known open-source renewable energy rate ratcheting mechanism associated with measurable, objective carbon savings.
“This clause is an interest rate ratcheting tool to lower the cost of borrowing for companies looking to reduce carbon emissions from their operations,” said Becky Clissman, executive director of the Chancery Lane Project. “It represents a shift towards data-driven ESG mechanisms that encourage private companies to decarbonize.”
A user-friendly template of the clause was added to the TCLP clause library late last week, which is now accessible to any person or company.
Field Councilor Elspeth Vincent said the companies wanted to incentivize organizations to reduce their greenhouse gas emissions in financing arrangements. “By making this clause open source, we hope to have a significant impact on how fundraising is conducted,” she said. “At Field, we’ve always talked about the importance of aligning capital with the planet – and this is our next step forward in demonstrating that it’s possible.”
Clissman welcomed Triple Point Energy Infrastructure’s decision to share its clause with the broader business and investment community. “TENT has offered this clause to the climate contracting community for free use, which is a milestone in how advocates are working together to enable the net-zero transition,” she said. “More open, sustainable contracting like this will enable a world where every contract enables solutions to the climate crisis.”
The move comes amid growing concerns that higher interest rates could make it harder for companies to mobilize investment in capital-intensive low-carbon infrastructure and clean technology — a trend that could make lending that promises lower interest rates to help meet environmental goals all the more attractive.
In related news, the Greener Litigation scheme, set up in 2021 to encourage legal professionals to commit to reducing the environmental impact of dispute resolution and court proceedings in England and Wales, announced its expansion to Italy this week.
The development means legal organizations can commit to making changes specific to practice in the jurisdiction of Italy, with Pavio e Ansaldo Law Firm being the first company to sign up.
Up to 77 law firms, bar associations and other dispute resolution professionals have now signed the Greener Litigation Pledge, in which companies have taken a number of actions to reduce the impact of their operations on emissions, such as reducing paper documents and international travel.
“We are pleased to announce the launch of the Greener Litigation Pledge for Italy,” said Olivia Wybraniec, Managing Associate Barrister at Mischcon de Reya and a member of Greener Litigation’s Steering Committee. “Climate change is a borderless issue, so we are naturally pleased that Pavia & Ansaldo has decided to make this important commitment and become its first signatory, leading the way in engaging Italian legal professionals to address the carbon impact of the to reduce dispute resolution.”