Environmental Risk Advisor:
Environmental Risk Policy

Charlotte, North Carolina - Federal and state environmental laws and regulations impose a variety of liabilities and penalties on owners and operators of contaminated real property. Appropriate environmental due diligence minimizes financial loss attributable to diminished collateral value, impairment of the borrower's cash flow due to environmental costs and inability to foreclose.  In August 2013, the Office of the Comptroller of the Currency (OCC) published the Comptroller’s Handbook for Commercial Real Estate Lending.  The document includes guidelines for developing and implementing an environmental risk policy.

The handbook states that an effective environmental risk policy should include the following:  appropriate procedures and manuals that address environmental issues associated with markets and industries served by the lender; an evaluation of environmental risk prior to the bank committing to lend; procedures for assessment of environmental concerns before the bank takes title in a foreclosure situation; and assurance that the persons responsible for evaluation of environmental risk possess knowledge, skill and competence to perform the task.
In addition, the environmental risk policy and procedures should also establish procedures that lending staff should follow to monitor potential environmental concerns during the life of the loan. Environmental Risk Management is addressed on page 69 of the Comptroller’s Handbook.

After just a couple of meetings with the lender’s Chief Risk Officer or Chief Appraiser, ERI can assist the bank in developing an environmental risk policy.  The environmental policy will be designed to meet the lender’s level of real estate lending practice, the target bank’s risk profile and comply with local conditions and environmental regulations.  ERI also reviews existing environmental risk policies to ensure they are meeting the needs of the lending institution.

About Environmental Risk Innovations
Environmental Risk Innovations (ERI) is the nation’s largest environmental risk consulting firm, specializing in the environmental risk management services for commercial lenders.   ERI’s clients include a broad base of commercial lenders, from small regional banks to large banks with national footprints.  ERI develops internal environmental risk policy for commercial lenders, provides third-party review of environmental assessment reports, and conducts Records Search with Risk Assessments (RSRAs)/“desktop reviews” on commercial properties.  ERI is not a traditional environmental consulting firm that performs Phase I or Phase II Environmental Site Assessments.  As a result, ERI’s recommendations represent a truly independent, third-party opinion that conforms to the client bank’s specific risk tolerance. 

For more information on ERI's environmental consulting expertise, please contact Karen Nelson at knelson@eRiskInnovations.com or 704.548.9333.

© 2013 Environmental Risk Innovations, LLC