The Covenant Test
Draft a sustainability-linked covenant for a data centre transaction and test whether it would bind. Four criteria, three people doing their job properly on the words as drafted, and the question no covenant on a single transaction can reach.
Sociable Systems · Standards
The Covenant Test
A sustainability-linked instrument does work only if something in it could be shown to have been missed. Draft a covenant for a data centre transaction, then watch three people try to get out of it.
For people who write and price environmental and social conditions into financing. It characterises a facility class and describes no particular transaction.
Every claim these projects are approved on is a promise about the future. Jobs, water, flexibility, benefit to the place. A promise becomes a covenant at the moment somebody can state, in advance, the evidence that would show it was broken. Most never reach that moment, and nobody had to lie for that to happen.
Pick the claim to bind
Choose how it is written
Four drafting levels, in the language each one actually appears in. The step from the third to the fourth is the one almost nobody takes.
Does it bind?
Choose a drafting level.
Three people, trying to get out of it
A sponsor's counsel, a monitoring officer and a community representative, each doing their job properly on the words as drafted.
Facilities on this system with an equivalent covenant
unknown
Take the covenant all the way to binding, and one question stays outside its reach. A condition written into one transaction governs that transaction. Nothing tells anybody what the others on the same municipal system agreed to, or whether that system can still serve the next applicant once all of them are built.
Where this sits
The covenant is the instrument end of an argument that starts at classification. These run in a browser, send nothing anywhere, and show their coefficients so the arithmetic can be argued with.