By: Chad Eggerman, Glenn Wright, Craig Zawada, K.C., Janelle Anderson, Kelsey Sonntag
Climate change risk is no longer theoretical—it is operational. Projects in Saskatchewan and across Canada already face regulatory, reputational, and physical risks associated with climate events and policies. If your contracts do not reflect this reality, your project may be vulnerable to delay, cost escalation, or dispute. At Procido LLP, we recommend parties involved in project development take a proactive approach to climate risk management through detailed, forward-looking contract drafting. This article outlines 10 essential clauses that should be reviewed, amended, or added to your project development agreements to help safeguard timelines, budgets, and legal compliance—while demonstrating sustainability leadership.
1. Climate Change Risk Allocation Clause
- The purpose of this clause is to expressly and specifically allocate liability and cost for climate change-related risks (e.g., extreme weather, flooding, wildfire, or whatever potential event is determined to be a climate change-related risk for a specific project). It is essential to avoid ambiguous or silent risk provisions.
- Simplified example clause:
“The Parties acknowledge that climate change-related risks, including but not limited to increased frequency or intensity of extreme weather events such as flooding, drought, wildfire, or heat waves, may adversely affect project timelines, costs, and performance. The Parties agree to share such risks in accordance with the provisions of this Agreement. Where specific risks are not allocated herein, each Party shall bear its own risk unless otherwise mutually agreed in writing.”
2. Force Majeure Clause
- Explicitly list climate change-related events and require notice and mitigation efforts.
- Delete blanket exclusions for foreseeability or regulatory change that could exclude climate events that are now foreseeable due to science and planning standards.
- Include events like wildfire smoke, unseasonal drought or flooding, regulatory delays due to climate policy changes, and any other project-specific events.
- Simplified example clause:
“Force Majeure” means any event or circumstance beyond the reasonable control of the affected Party which prevents or delays the performance of any obligation under this Agreement. Without limiting the generality of the foregoing, Force Majeure includes:
(a) climate-related events including wildfires, unseasonal flooding, drought, extreme temperatures, or other severe weather phenomena attributable to climate change;
(b) governmental orders or regulations enacted in response to environmental emergencies or climate-related legislation;
(c) supply chain disruptions caused by climate-related infrastructure damage.
The affected Party shall promptly notify the other in writing, take all reasonable steps to mitigate the effects of the Force Majeure event, and resume performance as soon as practicable.”
3. Change in Law Clause
- Avoid absolute “no change in law” protections that prevent cost recovery for compliance with new climate regulations—especially in multi-year or staged projects.
- Ensure it covers climate-related regulations, including carbon pricing, emissions caps, environmental reporting, or adaptation mandates.
- Allocate risk of compliance costs or required changes to design/specifications.
- Simplified example clause:
“If, after the Effective Date, any applicable law, regulation, or directive relating to climate change, carbon pricing, emissions reduction, or environmental protection is enacted or amended and materially affects the cost or execution of the Work, the Parties shall promptly meet to negotiate an equitable adjustment to the Contract Price, schedule, or scope of Work.”
4. Sustainability Clause
- Include specific climate performance requirements in the project development agreement, such as:
- Green building certifications (e.g., LEED);
- Use of low-emissions materials;
- Carbon intensity thresholds;
- Lifecycle carbon assessments.
- Simplified example clause:
“The Contractor shall comply with the Owner’s Environmental and Sustainability Objectives as set out in Schedule [♦], including:
(a) Reducing greenhouse gas emissions associated with the Project;
(b) Using sustainable and low-emissions materials wherever practicable;
(c) Achieving certification under [LEED/Envision/etc.], where applicable;
(d) Conducting a lifecycle GHG assessment of the Project within [♦] months of commencement.”
5. Insurance Clause
- Require insurance coverage for climate-related events.
- Consider specific additional insurance coverage for wildfire, flood, and business interruption due to climate change-related events.
- Simplified example clause:
“The Contractor shall, at its own expense, maintain insurance policies that provide coverage for climate change-related risks, including:
(a) Builder’s risk insurance covering flood, wildfire, and extreme weather;
(b) Business interruption insurance triggered by environmental events;
(c) Environmental liability insurance, where applicable.
All policies must name the Owner as an additional insured and be in effect throughout the duration of the Project.”
6. Design Standards Clause
- Incorporate climate-resilient design requirements.
- Reference applicable guidelines such as CSA standards for flood or wildfire resilience, or provincial climate adaptation strategies.
- Simplified example clause:
“The Contractor shall ensure that all design and construction services consider climate resilience, including but not limited to:
(a) Incorporation of flood protection measures in accordance with [insert applicable standard];
(b) Use of wildfire-resistant materials in accordance with [insert applicable standard] or local authority guidelines;
(c) Heat resilience measures for outdoor workers and systems exposed to temperature extremes.”
7. Indemnity Clause
- Tailor to allocate risks for climate-related third-party claims, especially if the project may contribute to or be impacted by such risks.
- Simplified example clause:
“Each Party (the “Indemnifying Party”) shall indemnify, defend, and hold harmless the other Party, its affiliates, and their respective directors, officers, employees, and agents (collectively, the “Indemnified Parties”) from and against any and all losses, damages, liabilities, penalties, fines, judgments, claims, demands, actions, costs, and expenses (including reasonable legal fees and disbursements) (collectively, “Losses”) incurred or suffered by the Indemnified Parties to the extent arising out of or in connection with:
- the Indemnifying Party’s non-compliance with any applicable law, regulation, order, directive, or guideline relating to climate change, greenhouse gas (GHG) emissions, carbon pricing, climate-related disclosure obligations, or climate-related environmental requirements (collectively, “Climate Laws”);
- any increase in costs, delays, penalties, or third-party claims suffered by the Indemnified Parties as a result of the Indemnifying Party’s failure to design, construct, manage, operate, or maintain the Project (or its portion thereof) in accordance with:
(a) Climate Laws in force at the time of performance; or
(b) best industry practices relating to climate resilience, GHG reduction, or climate adaptation reasonably expected to be followed by similarly situated parties in [INSERT JURISDICTION]; - the Indemnifying Party’s failure to obtain or maintain any climate-related approvals, permits, or authorizations required under Climate Laws; or
- any contamination, release, or emission of GHGs or other substances regulated under Climate Laws caused by the Indemnifying Party that results in liability, clean-up costs, or damages to any third party.
This mutual indemnity applies solely to matters arising from or connected to climate change or Climate Laws and does not apply to general environmental liabilities, except to the extent those liabilities are directly linked to climate change regulation or risk.
This indemnity survives the termination or expiry of this Agreement.”
8. Change Order Clause
- Change Order clauses should be tailored to specifically address climate change-related delays and provide schedule flexibility for qualifying delays, but include strict documentation and notice requirements to protect all parties.
- Simplified example clause:
1. Entitlement to Change Order for Climate Change Impact
The Contractor may be entitled to a Change Order for an extension of time to the Project Schedule, and if expressly agreed in writing by the Owner, an adjustment to the Contract Price, to the extent that performance is delayed, disrupted, or otherwise adversely affected by a Climate Change Impact, as defined below.
2. Definition of Climate Change Impact
For the purposes of this Section, a “Climate Change Impact” means an occurrence that:
(a) is caused directly or indirectly by climate change, including but not limited to: increased frequency or severity of extreme weather events (e.g., floods, heatwaves, wildfires, droughts, high winds); changes in seasonal weather patterns affecting construction windows; or material disruptions to supply chains or workforce availability caused by climate-related disasters; and
(b) is not reasonably foreseeable at the time of contract execution and could not be prevented or mitigated using commercially reasonable efforts consistent with best industry practices for climate resilience in the construction industry.
3. Notice Requirements
As a condition precedent to any entitlement under this Section, the Contractor must:
(a) Provide written notice to the Owner within five (5) Business Days of becoming aware, or reasonably should have become aware, of any Climate Change Impact likely to delay performance;
(b) Provide, within a further ten (10) Business Days, a detailed report including:
(i) the nature and extent of the Climate Change Impact;
(ii) the affected Work and the estimated delay to the Project Schedule;
(iii) evidence that the delay was not reasonably foreseeable or preventable;
(iv) measures taken to mitigate or avoid the delay.
4. Change Order Review and Approval
Upon receiving a timely and complete submission under Section 3, the Owner shall, within a reasonable period, assess the Contractor’s entitlement to a Change Order. The Parties shall cooperate in good faith to:
(a) verify the cause and extent of the delay;
(b) determine the period of justified extension, if any;
(c) identify any additional mitigation or resequencing opportunities; and
(c) agree on a Change Order reflecting the schedule adjustment and, where applicable, any cost relief.
5. Limitations
(a) No Change Order shall be granted for Climate Change Impacts that result from the Contractor’s failure to take reasonable steps to prepare for and mitigate foreseeable weather-related risks based on historical data and project location.
(b) No adjustment to the Contract Price shall be granted unless the Climate Change Impact results in an actual increase in direct costs that are documented and unavoidable despite the Contractor’s diligent mitigation efforts.
6. Mitigation Obligation
The Contractor shall, at all times, use commercially reasonable efforts to mitigate the effect of any Climate Change Impact, including but not limited to adjusting work sequencing, accelerating unaffected portions of the Work, or utilizing alternative means, methods, or materials, where practicable and cost-effective.”
9. Termination Clause
- Amend to ensure climate-related compliance costs or carbon pricing adjustments don’t unfairly trigger early termination without compensation.
- Simplified example clause:
“If the impact of a climate-related event or regulation results in a material and adverse change to the feasibility, cost, or timeline of the Project, either Party may request renegotiation of the affected provisions. If no agreement is reached within thirty (30) days, the Party requesting renegotiation may terminate this Agreement on thirty (30) days’ written notice without liability, except for payment due for Work performed to date.”
10. Representations & Warranties Clause
- Project agreement should include contractor representations about sustainability compliance, use of climate-resilient materials or technologies.
- Simplified example clause:
“1. Sustainability Compliance
The Contractor represents and warrants that, as of the Effective Date and throughout the performance of the Work:
(a) It is, and shall remain, in material compliance with all Applicable Laws relating to environmental protection, climate change, energy efficiency, greenhouse gas (GHG) emissions, and sustainable construction practices, including any applicable standards under:
(i) the Greenhouse Gas Pollution Pricing Act (Canada);
(ii) [The Environmental Management and Protection Act, 2010 (Saskatchewan)] [OR APPLICABLE ALTERNATE PROVINCIAL LAW];
(iii) [The Management and Reduction of Greenhouse Gases Act (Saskatchewan)] [OR APPLICABLE ALTERNATE PROVINCIAL LAW];
(iv) any building codes, regulations, or permits incorporating climate or energy performance thresholds.
(b) It has made, and shall continue to make, reasonable inquiries to ensure that no part of the Work will breach or circumvent any known or reasonably foreseeable sustainability requirement imposed by any Authority Having Jurisdiction during the Term.
2. Use of Climate-Resilient Materials and Design Principles
The Contractor represents and warrants that:
(a) The design, specification, and selection of materials for the Project incorporate climate resilience and adaptation principles, consistent with:
(i) current industry best practices for the geographic location of the Project, and
(ii) publicly available standards, such as [ISO 14090 (Adaptation to Climate Change)] and the [Canadian Standards Association’s climate-resilient infrastructure guidance].
(b) All permanent works and materials have been selected and procured with due consideration of their ability to withstand foreseeable climate-related hazards, including but not limited to:
(i) extreme temperatures;
(ii) precipitation and flooding;
(iii) wildfire exposure;
(iv) freeze-thaw cycles; and
(v) high-wind events.
(c) The Contractor has not specified or used any materials that are known to be substantially less durable, adaptable, or sustainable than readily available alternatives suitable for the intended use and lifecycle of the Project.
3. Integration of Climate-Adaptive Technologies
The Contractor further represents and warrants that:
(a) To the extent specified in the Project Requirements or agreed by the Parties, the Project integrates climate-adaptive technologies designed to reduce emissions, improve operational efficiency under variable environmental conditions, or support long-term sustainability objectives.
(b) Any such technologies or systems:
(i) are commercially available and supported by reliable performance data;
(ii) are appropriately integrated with the rest of the Project infrastructure; and
(iii) will not unreasonably increase the Project’s lifecycle costs without corresponding climate or resilience benefits.
4. Continuing Obligation
The Contractor acknowledges that the above representations and warranties are ongoing and:
(i) shall be deemed repeated upon each material milestone under the Agreement;
(ii) are relied upon by the Owner in approving designs, accepting commissioning, and issuing payment;
(iii) and shall survive Final Completion to the extent necessary to enforce latent defects or failures to comply with applicable climate or sustainability requirements.”
Remember it is absolutely critical that you seek legal advice before using any of the above clauses in any form of agreement or in any document. Many terms are undefined, applicable legislation or applicable standards must be determined, the clauses must be inserted in the appropriate agreement in the correct place within the agreement, jurisdiction-specific laws must be addressed, clauses and terminology therein must be standardized across all project agreements and very importantly, the clauses must be tailored specifically to the project owner, contractor, subcontractor, supplier or lender/investor.
As jurisdictions intensify efforts to regulate and respond to climate change, project stakeholders must ensure their contracts evolve accordingly. The ten critical clauses outlined in this article are not merely technical refinements—they are essential tools for allocating climate-related risk, protecting long-term project viability, and complying with a rapidly changing legal and regulatory landscape. As governments continue to legislate in response to climate change, and as courts increasingly hold parties accountable for foreseeable risks, outdated contracts are a liability. By addressing climate change explicitly in project development agreements, owners, contractors, and suppliers can reduce uncertainty, manage costs more effectively, and demonstrate leadership in sustainable infrastructure development. A modest investment in proper drafting today may prevent millions in losses tomorrow. Proactive contractual planning today is essential to avoid costly disputes and disruptions tomorrow.
How Procido LLP Can Help
✓ Fixed-Fee Climate Change Contractual Risk Audit
We will review your current project agreements and identify missing or underdeveloped climate-related clauses. You will receive a tailored legal strategy and recommended amendments, all for a fixed price.
✓ Climate Laws and Instruments Schedule
We prepare a current, plain-language schedule of applicable federal and provincial climate legislation, instruments, and regulatory risks for your project. This schedule can be appended to any agreement.
✓ Climate Risk and Resilience Addendum
Already signed your contracts, and they do not address climate change-related risks in your project agreements? We can draft an addendum that integrates key protections—mitigating your exposure to climate change-related risk without reopening the entire agreement.
Disclaimer
This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topics discussed in this article.meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topics discussed in this article.