Scope 3 Climate Capital and Linklaters pioneer a first-of-its-kind Sector Transition Acceleration Contract
Linklaters has worked with Scope 3 Climate Capital (S3CC) on a pro bono basis to devise the Sector Transition Acceleration Contract (STAC) – a new contract and legal framework to attract financeable upfront direct investment to accelerate the transition of higher carbon sectors towards a low carbon economy.
The contractual framework enables utilisation of climate action and offsetting budgets to create financeable direct investment instruments between users of carbon-intensive products (e.g. concrete or steel) and their suppliers, enabling suppliers to invest in decarbonisation of their operations. The contract provides optionality though alternatives, such as a financeable committed advance order option. The mechanism, trademarked as the Scope 3 Market Mechanism, is designed also to accommodate a blended finance sidecar for matched funding by governments/multilaterals.
Together, S3CC and Linklaters designed the legal mechanism with a number of objectives in mind:
- Standardisation to drive adoption and marketplace growth
- A third-party goal-setting and monitoring body to drive confidence in the framework and ensure claims oversight
- A design that facilitates financeability
- A framework to enable participation from governmental and multilateral co-investors, bringing blended finance themes into Scope 3 efforts
- An ecosystem of linked instruments, which can reinforce each other and improve the opportunity for sector breakthroughs and value chain tipping points
S3CC was set up in 2023 as a UK Community Interest Company to address the challenges of decarbonisation, nature-positive solutions and climate resilience, with its initial work focused on how to enable supply chains to work together to tackle Scope 3 emissions and, by connecting them, unlocking the potential of investment (which can be leveraged) from within such supply chains. In 2024, in partnership with Impact Delta, a US-based consulting firm, S3CC has amplified its market presence to accelerate adoption of the Scope 3 Market Mechanism among off-takers and suppliers of transition-aligned solutions.
As the sole legal counsel to this initiative, Linklaters led the development of the legal framework for this project. Alex Shopov, Head of ESG Structured Finance, and Imogen Ormerod, Energy & Infrastructure Managing Associate, have spearheaded the initiative, designing the legal framework and developing the bespoke contracts. They have been supported by Rachel Barrett, Head of the ESG practice, and Leanne Banfield, Structured Finance Partner, who has market-leading experience in the carbon credit market.
Alex Shopov commented:
“To reach net-zero, businesses must address “Scope 3” supply chain emissions which, for so many of them, account for the majority of their GHG emissions. This groundbreaking approach, aligning incentives in a robust, transparent, contract-based way, will bring together supply chains and unlock private capital and blended finance opportunities to facilitate the transition to a low-carbon economy. Working with S3CC and their advisory council on this project has been an invaluable experience, and we look forward to seeing the STAC take off and help lead us to a net-zero future.”
Chris Perceval, Steering Committee Member, Scope 3 Impact Delta, commented:
“S3CC was formed to bring together ideas and perspectives of experts from across industry, finance, NGOs, academia, and government, around a shared vision and plan for driving a faster transition by leveraging the power and potential of value chains and a market-based approach. It’s been an exciting journey working with Linklaters over the last six months to get to this launch point. The engagement from market players has already been incredibly positive with the pipeline of activity growing. The transition goes beyond energy and emissions. It encompasses resilience, nature-positive solutions, and changes across entire economies.”
Find out more about the project and the STAC here.
