environment

ESG and Its Impact on the Real Estate Industry

Posted on by abrahamwien18

By: Amy Menist
View the original article here

Environmental, social and corporate governance (“ESG”) practices are becoming an increasingly significant topic for businesses and a vital investment criterion for real estate capital sources. Increases in the frequency and intensity of severe-weather-related events are forcing companies to assess property vulnerability and resiliency to proactively manage risk and mitigate the effects of climate change. A company’s corporate social responsibility is just as important because it draws attention to community outreach and talent development. Furthermore, with proper governance in place, management can implement and assess its policies, goals and reporting efforts for their ESG initiatives. Due to these compounding matters, real estate companies now have an increasing responsibility to perform climate-risk due diligence; assess its corporate social responsibility initiatives; and develop, implement and govern its ESG policies. As a result, investors and lenders are beginning to factor a company’s ESG policies into their decision-making processes because they want to ensure the business is developing sustainable plans to combat the effects of climate change; reduce costs; attract tenants; create ways to support the community; retain talent; and properly set, monitor and report on the company’s goals. What exactly is ESG, and how does it influence investor and lender decisions within the real estate sector?

Environment

The environmental aspect of ESG represents management’s responsibility to assess each property’s vulnerabilities, resilience and fortification with respect to its climate and to investigate the environmental impact of operating its properties. While reviewing or developing a building portfolio, it is crucial for management to perform an environmental analysis of each property to determine each building’s vulnerability and/or resistance to severe weather (e.g., hurricanes, flooding, extreme heat or cold, wildfires, tornadoes, blizzards) as well as to consider the environmental and community impacts associated with property development.

Using a variety of tools, management can establish and track key environmental factors associated with property development and operations, including the amount of energy used, the usage and/or possible contamination of water, the amount of waste generated and/or avoided in favor of recycling initiatives, and the building’s impact on air quality and the surrounding ecosystem. By evaluating a property’s environmental impacts, companies can be proactive about mitigating risk and assuring proper protocols are in place—not to mention saving money.

Management also should consider weather forecast predictions and climate migration trends in its analysis because climate change poses both physical and transitional risks that can have a substantial financial impact on a real estate business. As outlined in “Climate Risk and Real Estate Investment Decision-Making,” an article published by Urban Land Institute, “Physical risks, such as catastrophes, can lead to increased insurance premiums, higher capital expenditure and operational costs, and a decrease in the liquidity and value of buildings. Transitional risks—which center on the economic, political and societal responses to climate change—can see locations and even entire metropolitan areas become less appealing because of climate-change-related events, leading to the potential for individual assets to become obsolete.” Accordingly, climate migration presents a legitimate concern to real estate investors because climate relocation will lead to significant shifts in demand for real estate as individuals respond to environmental changes.

ESG initiatives are gaining significant attention among regulators and the Biden administration due to a rise in the necessity of, and public interest in, sustainability. In January 2022, the Biden administration launched a coalition of states and local governments to strengthen building performance standards. This partnership, consisting of 33 state and local governments, focuses on providing “cleaner, healthier and more affordable buildings.” The new commitments to design and implement more efficient building performance standards are intended to “accelerate progress toward reducing buildings emissions, advance climate action and environmental justice, create good-paying union jobs, lower energy bills for consumers, keep residents and workers safe from harmful pollution, and cut emissions from the building sector.” Property owners and operators must closely follow the developments of these governmental policies to stay current with their ESG initiatives.

Additionally, as part of the government’s initiative to strengthen building performance standards, the Department of Energy (“DOE”) and the Environmental Protection Agency (“EPA”) announced technical assistance opportunities to design, measure and manage local building-performance policies. For example, the “Biden-⁠Harris Administration Launches Coalition of States and Local Governments to Strengthen Building Performance Standards Whitehouse Statement” outlines the following:

  • The DOE will share best practices for state and local governments that are adopting building performance standards, including public- and private-sector financing options, and will also provide analytical support to examine how policies targeting emissions reductions in existing buildings can pave the way for minimum new-construction building energy codes.
  • There will be enhanced support from the EPA Climate Protection Partnerships Division. The EPA will support policy development and implementation, including through analysis and recommendations of metrics and best practice toolkits. The EPA will provide insight into current building energy use data as the foundation for jurisdiction-specific analysis and target setting and will enhance ENERGY STAR Portfolio Manager to provide new policy tracking and reporting capability and will assist jurisdictions in its use. The EPA will also provide new tools that calculate localized greenhouse gas emissions to inform reporting, compliance and assessment.

High-performing buildings are not only good for the environment, but they are also good for the bottom line. Although capital is needed to build or retro fit such properties, companies that invest in ESG initiatives often see a quick return because high-performing buildings attract higher occupancy rates, thereby generating more revenue and decreasing the amount spent on utilities, insurance premiums and repairs due to severe-weather-related events. Additionally, there are incentives available at both the federal and state levels that are issued to businesses to help make the initial investment more attractive. Businesses today should assess their building portfolios, evaluate their alignment with industry benchmarks and leading practices, evaluate future trends and possible policy changes, and identify gaps and opportunities. With a thorough understanding of the company’s current position, its plans and stakeholders’ expectations, management can prioritize goals and set efficient ESG targets.

Businesses can develop appropriate strategic ESG plans by using climate risk scorecards, performing property vulnerability and resilience assessments, mapping physical risk, and evaluating benchmarks established by organizations such as the Sustainability Accounting Standards Board, Global ESG Benchmark for Real Assets or ISO 14001, as well as state and local governmental regulations.

Social

Strong ESG policies and procedures can help build trust, attract and retain employees and tenants, and prevent costly mishaps while meeting community needs. Social initiatives, which are often assessed at the partnership and overall company level, represent the company’s corporate social responsibility. Today, the need for companies to evaluate their social actions is great because employees are demanding ESG services and better working conditions. These include demands for ensuring diversity, equity and inclusion throughout the business and governing board; developing ways to attract, retain and promote employees; and implementing an effective code of conduct. Additionally, businesses could further enhance their social responsibility by ensuring all employees have a safe and clean work environment, requiring all vendors and contractors to follow the company’s code of conduct, hiring contractors and vendors whose social responsibility is in line with their own social efforts, and assigning an internal resource dedicated to the ESG initiatives. Businesses today excel from the use of strong social responsibility practices because they incorporate diversity and inclusion, recruitment, talent development and mentorship programs, health and wellness, and create a conducive work environment for everyone throughout the company.

Tenants today are also considering companies’ ESG initiatives as a deciding factor for their tenancy because they want to rent high-performing spaces from a socially responsible company with strong ESG policies. Therefore, it is imperative that management evaluates its social responsibility with respect to the surrounding community. This could include a company publicly displaying its ESG policies, promoting its progress in sustainability efforts, and asking its tenants for feedback. Furthermore, tenants want affordable and accessible space, quality access to/from the property, and equal access to features and amenities within the community including good schools and shopping centers. By management taking into consideration tenants’ desires and opinions, it will help the business improve tenant attraction and retention and, thus, generate more rental income.

Governance

ESG is metrics-based with documented evidence. Consequently, it’s necessary that there are strong governing practices in place to help the company report and oversee its business performance, track progress, and strengthen data management and analytics. Management has a responsibility to implement the ESG policies and procedures as well as maintain and evaluate its progress and standards. Therefore, governing practices need to be in place to enable the company to perform due diligence and collect data and documentation to further improve planning efforts. Investors and lenders expect companies to track their environmental and sustainability metrics at the asset level and provide transparent reports that support the process for making meaningful and effective ESG plans. Through use of effective governing practices, management can perform decisive analytics, track progress, and create accurate and transparent reports on its corporate social responsibility and ESG efforts that showcase sustainability evidence to attract investors, lenders and tenants.

Companies often struggle with collecting data to support their ESG plans. However, data is in high demand because it enables companies to understand where change or innovation is needed. There are a variety of software and tools available that can help management efficiently document, track and assess its ESG progress. New emerging property technology (“proptech”) and proptech companies are designed to help streamline the gathering of data and aid in auditing and reporting for real estate. Using proptech, companies can review real-time data on energy usage, determine if environmental and sustainability opportunities exist, and quantify and standardize resource consumption to maintain safer and more valuable real estate. Through use of proper and effective governing practices, companies will develop a more efficient work environment backed by strong and accurate data, thus fostering a greater likelihood they will successfully achieve their ESG initiatives.

ESG and Investors

ESG is shaping and influencing real estate valuation and, therefore, gaining in importance among capital providers. Investors today use a variety of tools to determine future opportunities, and ESG policies are getting higher on their due diligence checklists. Although not a deciding factor, a business’s ESG plans can significantly impact an investor’s decisions. Through developments in technology and an increased transparency in reporting, investors now have more insight and want to know that businesses are forward looking and have sustainable business practices in place. By assessing a business’s ESG plans, investors can assess the risk versus the rewards as well as potential growth areas. Additionally, investors often believe the more proactive a company is with its ESG initiatives, the more attentive and responsive the company will be in mitigating risks. Accordingly, a strong ESG policy adds value to the investment because it attracts tenants, reduces operating costs and increases capital demand.

Debt and equity capital providers are incorporating the analysis of ESG and climate risk in their transaction due diligence. Recent floods, fires and extreme heat are forcing tenants (and their insurers) to assess property vulnerabilities. As confirmed in EisnerAmper’s article, “Commercial Real Estate 2022 Outlook: Fixing the Horizon to Navigate Through Change,” real estate companies should consider:

  • Hodes Weill’s 2021 Institutional Real Estate Allocations Monitor indicates that 49% of investors globally consider the ESG policies of the investee.
  • ULI’s 2022 Emerging Trends in Real Estate indicates that 82% of survey respondents consider ESG elements when making operational or investment decisions.
  • A recent report by JLL showed that office tenants are considering an owner’s ESG activities when selecting space, focusing particularly on building sustainability and efforts to create a healthy work environment, including quality air flow.
  • A Cushman & Wakefield study found that sellers are achieving 25% higher prices per square foot in Class A LEED-certified office buildings and 77% higher prices in Class B LEED-certified office buildings versus non-certified buildings.

Real estate companies and their management must develop a plan for prioritizing the implementation of ESG policies and initiatives because capital providers look for climate data and disclosures as well as resiliency, proactiveness and a property’s ability to attract tenants. Furthermore, as governmental policies are being implemented and net zero targets are set for 2050, capital providers need to know real estate companies are forward looking and performing due diligence to assess the impact of net zero goals on its assets to achieve new ESG standards. As a result of a growing trend and strong push for a decrease in the carbon footprint worldwide, there is an increase in investor demand for ESG policies that will significantly impact their decision-making process.

Most businesses today are looking to limit their impact on the environment by following real estate trends, moving away from fossil fuels, using renewable energy and developing net-carbon-zero real estate efforts. For property developers, this formidable endeavor includes management mapping out the ideal location using weather forecast predictions and climate migration trends, while also developing properties with the lowest emissions level possible and then offsetting the emissions created by finding ways to reduce and/or reuse waste and utilize renewable energy sources. Resilience is the key because it generates value. The initial investment will be repaid after these companies attract tenants and capital on the revenue side and reduce operating costs.

The need for socially responsible business practices will continue to grow because there are strong demand indicators for ESG and sustainability services. This, it is imperative that real estate companies continue to be forward looking and implement ESG initiatives to protect their assets. Effective ESG policies are directly correlated with stronger financial performance and better risk management because they provide companies the opportunity to mitigate risks and appease investors. Creating sustainable business practices, while preparing for implementation of future regulations, will help companies be environmentally conscious and socially responsible in conducting their day-to-day business, while simultaneously aide them in mitigating risks associated with climate change, improving relationships with investors and increasing overall long-term financial performance.

BACK TO THE FUTURE

Posted on by abrahamwien18

IS IT 1919 OR 2020?

By: Ted Konigsberg, President
Infinity Commercial Real Estate

AS YOU CAN SEE IN THESE OLD PHOTOS, WE’VE BEEN HERE BEFORE.

  • WHAT CHANGES TO OUR BUILDINGS AND CITIES RESULTED?
  • WHAT CHANGES CAN WE EXPECT TODAY?

After months of conference calls, Zoom videos and webinars, only now is our industry’s vision of the new physical world beginning to emerge.

If the past is prologue, we can predict the future through research of the structural changes that occurred after the Cholera Epidemics of the 1800’s the Typhoid Epidemics of the 1800’s & 1906-1907), and the Spanish Flu of 1918 -1919.

Six cholera pandemics in the 19th century cost hundreds of thousands of lives. The renovation of Paris’ and London’s infrastructures followed, as did the construction of New York’s Central Park in 1857.

Upgraded sanitation, broadened streets and open public areas. The Spanish Flu took over 50 million lives around the world. Robert Koch’s discovery of the tuberculosis bacillus in 1882, transmitted by droplets (sound familiar?) gave rise to sanitoriums, buildings designed to house, treat, and isolate patients, emphasizing strict hygiene and ample exposure to sunlight and air.

The beginning of the 20th Century gave birth to Minimalism and Modernism. Victorian décor (soft fabrics, velvet drapes and wall coverings, small rooms, carpets and rugs) where dust and germs could linger and become vectors of disease, was replaced by modern stark designs, with minimalist furniture and cleanable surfaces like tile, glass and steel. Buildings were designed to bring light and fresh air to the occupants. The visionary Swiss architect Le Corbusier designed structures that included sinks at the entrances: Today, this survives as the guest or half bath. Open terraces, roof gardens, skylights and cross ventilation became prevalent. Rooms were large, open, airy. These photos are of buildings and interiors 85 -100 years old!

Dust lodged in decorative features was the enemy of hygiene. Designers used lightweight, washable materials. Michael Thonet used bentwood and cane, Aalto used bent plywood, and Marcel Breuer and Mies van der Rohe used tubular steel. Furniture was light and easily moved for cleaning, to deprive dust, germs and insects of hiding places in the dark.

By the 1920’s air conditioning was viable and in use in buildings of public accommodation. Yet, the Empire State Building has multiple open-air decks, and single hung, OPENING windows, as do vertical buildings of the time. Light, fresh air, social distancing…

Restaurants changed too. Below is a photo of the original Lawry’s The Prime Rib, built in Los Angeles in the 1920’s. Note the banquette seating for isolation and the materials used for surfaces throughout the room, all easily cleanable.

The events of the early 1900’s impacted our collective psychology, and the effects long outlived the events themselves.

The changes in our constructed environment became the norm, but the difficult lessons were forgotten as the generations that lived through these pandemics passed. We are now compelled to relearn them.

OK, SO YOU’VE LOOKED AT SOME COOL OLD PHOTOS AND ARE TOTALLY BORED BY MY MUSINGS… WHAT DOES THE FUTURE LOOK LIKE?

  • CIVIL ENGINEERING, PLANNING: Cities will expand open areas, such as parks and streets. No car zones, which London and Paris have had for many years, will become common in shopping and entertainment districts, to allow for distancing and outdoor tables and exhibits. Expect significant upgrades to water and sanitation systems. Working from home has created huge demand for high speed internet access: Fiber optic installations, new towers for 5g. The death of the automobile has been vastly over-hyped. When will you feel safe traveling by train, bus, or subway? When will you feel safe ridesharing? So, upgrades to parking and roads, less construction of new public transportation. A return to the suburbs. Rezoning and reconfiguration of many high-density buildings, such as failed hotels and offices.
  • EXISTING VERTICAL BUILDINGS: Major upgrades to HVAC systems, such as UV lights in air handlers, HEPA filters, coil disinfectant systems. Wall sconces in hallways replaced by UV light air purifiers. Larger washrooms with hot water sinks and touchless faucets. Tile instead of carpeting. Reconfigured common areas for distancing. Rooftop gardens. Cleanable wall coverings and furniture. Touchless door systems. Voice-activated elevators.
  • NEW VERTICAL BUILDINGS: In addition to the above, opening windows, Balconies, open-air decks, and rooftop amenities, like running tracks and gardens. Wider and windowed stairwells and hallways, larger and more elevators. Perhaps a return of the atrium concept with skylights. Much larger common areas.
  • RESIDENTIAL: Do you feel safe walking through a crowded lobby, pushing buttons on an elevator with multiple people in it, passing your neighbors in the hallway? Not having access to the building gym, restaurant, or pool if there’s another outbreak in the future? Vertical condos and apartment buildings will suffer. On the lower-end, garden style apartments with their stairwells and patio or balconies will become desirable again. For larger residences, townhouses and single-family homes (sale and rent) will benefit. A fenced yard will matter. High speed internet will matter, as you will spend more time working from your “cave”. A half bath at or near the entrance will matter. A spare room separate from the main living areas with a dedicated washroom for use as your office, grown kids room, or parent’s room (will you send mom to an assisted living facility unless you have to?) will be a very desired feature, as will an entry “parlor” separated from the living areas.
  • OFFICE: A protracted decline. Companies realize their employees can effectively work from home, while reducing risk of infection and corporate liability. In high-tech industries, international employees will not have to be relocated to work in the US; software engineers can stay in Bangalore and be just as productive via VPN, WebEx and Zoom. Why apply for a Visa? An offset will be a greater amount of footage required per occupant to effect social distancing, but that won’t be enough to fully compensate the increased vacancy. The “We-Work” co-working and hoteling concept will face demise, but operators such as Regis will thrive. Rents will fall, CAP rates will rise. A shift to single story walk-in, non-CBD (suburban) property locations, much of which will be repurposed retail space and industrial/office flex buildings.
  • INLINE RETAIL: Will suffer in the short term but rebound strongly. Local services still matter. Convenience stores, liquor stores, dry cleaners, hair salons, drug and grocery stores are necessary. Expect countless neighborhood restaurant closings, but also expect “virtual” restaurants (kitchens) to emerge, as online ordering will continue. Outdoor seating will help make up for lost table density. Expect alternate types of uses, like office, medical and dental.
  • BIG BOX RETAIL: Power centers give their tenants something malls can’t: Control of their sites. Curbside pickup will continue. Further, many of these are in “last mile” locations. Think of Best Buy, which is thriving. They use their stores as distribution centers: When you order from them, chances are the item comes right from store inventory, which how they compete with Amazon on delivery. Expect to see more of this model. Amazon’s share of the total US retail market is only 3%. Walmart does 3 times the volume of Amazon, and their operations are extremely efficient and improving. Those retailers with a brand that matters to consumers, an efficient and friendly online experience and a store centric logistics model will capture market share. As to broad-line big boxes like JC Penney, Sears, Neiman-Marcus… They will continue to suffer, and possibly not survive.
  • MALLS: Only the best operators will endure. Those that do will be greatly changed. Most failed anchor stores will require complete repurposing and reconstruction. Both large and small tenants will want outward facing ingress and egress, so malls will have to face outwards, not inwards. With their large land areas, the best locations will make those changes, and attract outparcel operators. Those that survive will embrace mixed use: Residential, office, and even “last mile” logistics facilities will replace many existing tenants. Rents will fall. The short-term pain will be immense, and failed malls may be a great investment opportunity for developers.
  • HOSPITALITY: Central Business District facilities will be badly impacted. We may see numerous properties repurposed. To survive, touchless check-in and doors, expanded common areas. No significant new construction of CBD and airport properties, pure survival mode for years to come. As folks drive more and fly less, roadside motels and extended stay properties, with outdoor room entrances and kitchenettes, will thrive again. Soon, companies like Airbnb will have a resurgence, continuing to capture market share, as they offer travelers privacy and control.
  • INDUSTRIAL: The lack of supply chain reliability has become painfully evident, and as time to delivery becomes increasingly important, manufacturing will return to our shores. Even Grandma orders online now and expects everything to be delivered immediately. Manufacturers will gladly pay a little bit more to source components from a reliable US based supplier, instead of waiting a month (at best) for a “slow-boat from China”. Further, automated manufacturing depends much less on the cost of labor than the cost of electricity and real estate: Both are cheaper here than in Asia.

As retail become more reliant on fast delivery, expect “last mile” locations to excel, along with dedicated cold chain distribution facilities. Many local and regional tenants will ditch their dedicated office locations and seek out industrial flex with 20% to 40% office components, so they can reduce overall rents, control access and exposure, and feel safe. Rear loaded multi-tenant properties with curb appeal and high parking ratios are gold!

MANUFACTURING, INDUSTRIAL FLEX AND LOGISTICS WILL THRIVE.

Improving Indoor Air Quality the Easy Way

Posted on by abrahamwien18

Environmental Leader, 5/2/2014
View the original article here

The natural first step most building managers take when they suspect that their building is causing health problems is to find the root cause and remove, replace or fix the problem. However, there are often more direct and less costly ways to attack poor indoor air quality, LEED trade magazine EDC reports.

Among these ways:

  • Use fewer chemicals. Cleaning chemicals, whether green or not, impact the indoor environment and using less will, naturally, lessen the impact. Janitors and other cleaning staff are wont to mix more chemical with water than necessary, according to EDC. This can be eliminated by installing an automatic dilution system.
  • Using greener chemicals can help, too. Look for products that have been independently tested and bear ecolabels such as UL’s Ecologo or the EPA’s Design for the Environment program. These are a better bet for those wanting to buy VOC-free or low environmental-impact chemicals.
  • Check vacuum cleaners. Vacuum filters are the one piece of equipment that can most contribute to indoor air quality improvement. By selecting advanced filtration filters and changing them regularly — twice a year is usually adequate — you can make drastic improvements.
  • Train workers on green cleaning. Many custodial workers don’t use environmentally friendly products in the right way. Implementing a training plan or sending workers to a green cleaning training program can overcome this problem.
  • Educate building users. Educating all those who use the building on the best ways to improve indoor air quality is the best way of making sure all building users are playing their part.

The global revenue for the indoor air quality monitoring and management market, driven by new building standards and regulations as well as a rebounding economy, will grow 80 percent to $5.6 billion by 2020, according to a forecast from Navigant Research released earlier this week.

The developed markets for indoor air quality-related HVAC markets remain sluggish — a holdover from the 2009 global recession. However, the North American market will become more robust this year. Europe will follow a similar trend but will not begin to recover until late 2014, the report says.

A Commitment to Action: Taking Recycling to the Next Level in the United States

Posted on by abrahamwien18

January 13, 2014

Elisabeth Comere
Director, Environmental and Government Affairs
View the original article here

When asked why recycling is so important, my response is simple: it is integral to business. Recycling is a fundamental requirement to uphold competitiveness and reputation as responsible and innovative companies.

For decades, companies and their respective trade associations have invested in various recycling initiatives aimed at recovering their own used packaging and printed paper products.  While initially such efforts reaped measurable recovery benefits, very little progress has been made in the past 10 years. We, too, have seen firsthand the benefits of a carton-specific voluntary approach through our own efforts and that of the Carton Council. However, future carton recovery progress relies on addressing the infrastructure, promotional, and harmonization needs that affect the recovery of all packaging and printed paper materials.

Discussion is ongoing among brand owners, packaging manufacturers and other “producers” regarding how to substantially increase material recovery and recycling in the United States via cross-sector collaboration.  While it has not led to much action to date, the forums for discussion have kept the conversation alive and have succeeded in elevating the knowledge and awareness level of all stakeholders through the process. The dialogue exposed the risks of inaction as well as the opportunities inherent in a robust recovery system.

Discussions have also led to extensive research conducted by multiple organizations to develop an understanding of the nuances that impact recovery success. AMERIPEN, for instance, has collected data and developed findings regarding what works best to dramatically improve recovery in cities across the US. AMERIPEN’s study combined with other research efforts have laid the groundwork by defining what needs to be done. It is now clearly understood that effective recovery requires a comprehensive set of best practices – optimized infrastructure, effective promotion and education, incentives, policies aimed at boosting recycling participation, and sustainable program funding.  Implementing best practices in all of these areas is unreasonable to ask of local governments and is more than any one material sector can bring about on their own.

Forums like Alcoa’s Action to Accelerate Recycling and AMERIPEN have primed stakeholders for collaboration bringing the right people to the table and raising the right questions to facilitate action.

The New Ask

Industry is now rallying around a new call to action: create an organized coalition(s) of private and public sector representatives to create a scalable but phased systems approach to recycling. Building upon past learnings, this approach will leverage pooled resources and use a combination of tools to strategically address priority opportunities as opposed to a series of discreet pilot programs and projects.

Experimentation in Coalition Building

To support the move from talk to collaborative action, my company is launching projects in Tennessee and North Carolina that will target communities with customized action plans addressing multiple barriers to materials recovery performance.  Depending on a community’s existing infrastructure and resources, we have identified the policies, practices and investment focus areas that will yield the greatest impact on recovery. Examples include recycling mandates or ordinances for variable-rate waste collection pricing, a transition to single-stream, roll-cart recovery systems, investment in optimizing processing facilities, working with state government to align policy and grant funding with local needs, and so on. We have estimated a total increase in recovery of over 220,000 tons if best practices and a robust outreach and education campaign are brought to bear on recycling programs across Tennessee.

We see our role in this experiment as the catalyst for collaboration. We are now building informal coalitions in Tennessee and North Carolina with key industry and government stakeholders to bring these system improvements to fruition. This experiment is testing a series of approaches on the ground to see what works at the local level allowing for replication elsewhere on a greater scale.

Aiming Higher: The SERDC Coalition

We now want to move forward with regional campaigns for collaborative voluntary producer initiatives – campaigns that build upon the learnings from state-by-state activities and stress best practices in packaging recovery to overcome funding constraints, infrastructure gaps and barriers to policy adoption.

In support of this idea, we took part in the Southeast Recycling Development Council’s (SERDC) Paper & Packaging Symposium this month in Atlanta. Involving over 100 participants, SERDC issued a straightforward call to action: Work together to recover more recyclables, of better quality, and quickly.

A common discussion thread was what distinguishes the SERDC initiative from past efforts and how that will bring about success.  Key differences are that SERDC is an established organization of state government and industry partners and other key stakeholders – the influencers are already at the table. Research to inform priorities for the region has been conducted and the group is ready to move on building the organizational mechanism to transition from research to action.

SERDC recovery initiative partners intend to explore the optimum levels of engagement of public and private resources, expertise and funding. Given growing consumer expectations and the threat of government regulation, the risk of inaction surpasses the rationale for a laissez-faire approach. We all have a stake in the outcome of recycling performance in this country and will achieve more by combining forces than through disparate action. We call on you to commit to participating in SERDC’s coalition.

Elisabeth Comere is the director of environment and government affairs for Tetra Pak in North America, the world leader in packaging and food processing solutions. She joined the company in 2006 as Environment Manager for Europe where she helped define and drive Tetra Pak’s environmental strategy. She joined the North American operations in 2010, focusing on advancing Tetra Pak’s commitment to sustainability in the US and Canada, and she is active in various industry and customer packaging and sustainability initiatives. Elisabeth previously served as a political adviser to a member of the European Parliament in Brussels, Belgium, and headed the environment department of the Food & Drink Industry group in Europe.

New Phase I Environmental Assessment Standard Just the Starting Point for Managing the Purchase of Contaminated Property

Posted on by abrahamwien18

February 25, 2014
Peter R. Duchesneau
Partner, Manatt, Phelps & Phillips, LLP
View the original article here

On December 30, 2013, the U.S. Environmental Protection Agency (“EPA”) adopted ASTM E1527-13, an updated Phase I environmental assessment standard for performing all appropriate inquiries to establish landowner liability protections under the U.S. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). This new Phase I protocol clarifies the previous standard for all appropriate inquiries, which is an important first step, but not the only one for establishing landowner liability protections. With the adoption of ASTM E1527-13, buyers of potentially contaminated property should take the opportunity to revisit the other requirements and scope of landowner liability protections. By doing so, prospective purchasers will not only better their chances of effectively establishing such protections, but can also better manage risks that may fall beyond them.

CERCLA Landowner Liability Protections
Under CERCLA, existing property owners are strictly liable for the cleanup of contamination of their property, including new owners who acquire the property years after the contamination occurred. To promote the development of contaminated property, on January 11, 2002, President Bush signed the Small Business Liability Relief and Brownfields Revitalization Act, Public Law 107–118 (‘‘the Brownfields Amendments’’), which amended and clarified CERCLA by establishing three forms of landowner liability protections for new owners of contaminated property: the bona fide prospective purchaser (“BFPP”), the contiguous property owner, and the innocent landowner.

To qualify for these CERCLA landowner liability protections, the Brownfields Amendments provide that parties purchasing potentially contaminated property must comply with a number of requirements, including undertaking ‘‘all appropriate inquiries’’ into the ownership and use of the property prior to purchase. On November 1, 2005, the EPA promulgated regulations that set standards and practices for all appropriate inquiries and authorized the use of ASTM E1527-05 to comply with the rule.

ASTM E1527-13 Phase I Standard
In November 2013, ASTM International published ASTM E1527-13, “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process,” replacing ASTM E1527-05. In many respects, ASTM E1527-13 is the same as its predecessor. However, the new standard contains some important revisions, including a clarification that all appropriate inquires must include an assessment of vapor migration and vapor releases on, at, in or to the subject property. Other revisions to the standard include updated definitions of “Recognized Environmental Conditions” (“REC”), “Historical Recognized Environmental Conditions,” and “de minimis conditions,” as well as the addition of a new form of REC, “Controlled Recognized Environmental Conditions.” ASTM E1527-13 also contains additional requirements pertaining to regulatory agency file and records review and clarification of the “User” obligations.

A New Property Owner’s Post-Acquisition Obligations
For the most part, the requirements to establish the three protections are similar, including the necessity of performing all appropriate inquiries prior to purchasing property. While many prospective purchasers diligently attempt to perform all appropriate inquiries, the other requirements can be overlooked, as can the limitations of CERCLA landowner liability protections.

Perhaps of most concern are real property transactions where contamination or other recognized environmental conditions are identified in the course of performing all appropriate inquiries. Despite such knowledge, as a BFPP, the new owner can largely be exempt from CERCLA liability for preexisting contamination. Yet the requirement to establish the BFPP defense does not end with performing all appropriate inquires under ASTM E1527-13 prior to purchase. Buyers also have important obligations after the acquisition of property.

Parties seeking the benefit of the BFPP protections must establish, by a preponderance of evidence, each of the “painstakingly detailed statutory elements,” as one court put it in the course of rejecting a bid to secure the BFPP protections. See U.S. v. Slay, 2013 U.S. Dist. LEXIS 46204, n. 6 (2013). In all, there are eight statutory elements, including that a new property owner must provide all legally required notices with respect to the discovery or release of hazardous substances at the property; exercise appropriate care with respect to the hazardous substances found at the facility by taking reasonable steps to stop any continuing release, prevent threatened future releases and preventing or limiting exposure to previous releases; and provide full cooperation, assistance and access for response actions.

A number of courts have recently declined or otherwise expressed doubt as to BFPP claims due to the claimants’ failures to demonstrate they met their post-acquisition obligations. For instance, in Saline River Properties, LLC v. Johnson Controls, Inc., 823 F. Supp. 2d 670, 686 (E.D. Mich. 2011), the court held that the defendant had failed to demonstrate that it had not impeded performance of a response action when it broke up a concrete slab alleged to have caused hazardous substances beneath the barrier to migrate into additional soils and groundwater. In Voggenthaler v. Maryland Square, 724 F.3d 1050, 1062-1063 (9th Cir. 2013), although the Court of Appeals remanded the issue to the trial court, it expressed skepticism that the party would be able to establish a BFPP defense and show it prevented further harm and limited exposure to preexisting contamination after it demolished a building and took no steps to remove the contaminated soil or limit its spread. Similarly, in PCS Nitrogen v. Ashley II of Charleston, 714 F.3d 161, 180-181 (4th Cir. 2013), the court found that a party’s delay in filling in sumps and not stopping runoff amounted to failure to exercise appropriate care, thwarting its BFPP defense.

Environmental Risks Outside CERCLA Landowner Liability Protections
Even where a party can establish CERCLA landowner liability protections, the scope of such protections warrants careful consideration for buyers of contaminated property. There are a number of environmental risks that fall outside the purview of the CERCLA landowner liability protections. For instance, the protections do not extend to releases of fuel from underground storage tanks, given CERCLA’s petroleum exclusion. Nor do the protections necessarily apply to state cleanup claims or toxic tort actions, with laws varying by state. For example, under the California Land Reuse and Revitalization Act of 2004, an agreement with a state environmental agency must be entered into before the land owner liability protections will attach. Buyers must also be astute of contractual provisions for property acquisitions that may stymy the protections.

Despite the potential limitations of the CERCLA landowner liability protections, ASTM E1527-13 establishes a valuable starting point for buyers to assess potential environmental risks of real property and achieve CERCLA landowner liability protections. However, prospective purchasers need to remember that all appropriate inquiries is only the start and just one element for managing environmental risk when acquiring contaminated property. Other means to manage risk may be necessary, and new property owners should take care not to neglect post-acquisition obligations to achieve landowner liability protections.

Peter R. Duchesneau is a partner in the Los Angeles office of Manatt, Phelps & Phillips, LLP. His practice focuses on environmental law involving litigation, administrative proceedings, regulatory compliance and business transactions. He holds a B.S. degree in Chemical Engineering; is admitted to practice before the U.S. Patent and Trademark Office; and regularly advises clients on corporate and real estate transactions, Brownfields, and environmental due diligence. Mr. Duchesneau can be reached at (310) 312-4209 or [email protected].

This column is part of a series of articles by law firm Manatt, Phelps & Phillips, LLP’s Energy, Environment & Natural Resources practice.