Illinois introduces HB 3673 – the Climate Corporate Data Accountability Act – joining California, Colorado, New Jersey and New York in requiring Scope 1, 2 and 3 Reporting if Passed

On February 18, 2025, the Illinois House introduced and referred HB 3673 to its Rules Committee . See attached draft copy at https://legiscan.com/IL/text/HB3673/id/3109030/Illinois-2025-HB3673-Introduced.html 

Like the New Jersey, Colorado and New York bills that were previously reported on and which are being considered by their respective state legislatures, if enacted, the Illinois Climate Corporate Data Accountability Act could become the fifth bill passed in the United States, which bills are all aimed at requiring entities with connections to Illinois to report on their greenhouse gas emissions under Scope 1, Scope 2 and Scope 3 beginning 3 years from the effective date of the Illinois Bill (which could be as soon as 2028). Illinois would join Colorado, New Jersey, California and New York (if New York’s, New Jersey’s and Colorado’s bills move to passage) as the fifth state in the US in requiring this type of reporting for companies with over $1 Billion in revenue.

Between Illinois at $1.025 Trillion, New Jersey at $666.9 Billion, Colorado at $437 Billion, New York at $1.6 Trillion of real GDP and California at $2.9 Trillion of real GDP, these four states together would represent more than 30.8% of the US’s real GDP being subject to Scope 1, 2 and 3 reporting requirements for greenhouse gas emissions.

California passed their version of a very similar reporting bill, SB 253, in 2023, with an effective date of January 2026. Illionois’ bill, if enacted, required regulations to be passed by July 1, 2026, with an effective reporting requirement for entities subject to the bill during 2027 for Scope 1 and 2 and 2028 for Scope 3. Colorado’s bill if passed will require reporting of Scope 1 and 2 by January 1, 2028, and Scope 3 by January 1, 2029. New Jersey’s bill, if passed, will require reporting of Scope 1 and 2 within 3 years of the passage of the NJ Bill and Scope 3 within 4 years of passage of the Bill. New York’s bill if passed will require reporting of Scope 1 and 2 by 2027 and by January 1, 2028, for Scope 3.

As readers will likely recall and as commented on in our pieces on New Jersey, New York and Colorado, the SEC had pursued a similar path during 2023 and 2024, issuing proposed rules, and then final rules and then revised final rules which were then challenged and consolidated into one case in the 8th Circuit. The SEC’s final rules only required reporting on Scope 1 and 2 after receiving a backlash of comments about required Scope 3 reporting. As of February 11, 2025, the SEC’s acting Chairman Mark Uyeda said that the Commission will pause litigation of its climate disclosure rule in the 8th Circuit case, effectively ending, for now at least, the SEC’s pursuit of federal rules focusing on climate disclosure of Scope 1 and 2 greenhouse gases for reporting companies.

Despite the SEC’s position, it appears that states will continue to pursue their own path regarding climate disclosure. While California’s law had been challenged by various parties, earlier this month on February 3, 2025, the District Court for the Central District of California issued an order (https://www.troutman.com/a/web/gEwAfXN75c6MMmenKh3yd3/us_dis_cacd_2_24cv801_d96315207e190_order_granting_defendants_motion_to_dismiss_plaint.pdf) dismissing constitutional challenges posed to SB 253 and SB 261 and clears a path for the California Air Resources Board to develop necessary implementing regulations.

The Illinois, New Jersey, Colorado and New York bills are very similar to the California bill and require reporting starting in 2027 and additional reporting in 2028 for Illionois and New York and starting in 2028 and continuing in 2029 for Colorado and potentially in 2028 and 2029 for New Jersey depending on when the NJ version is passed. The bills also require either a third-party verification in the case of Colorado, or a third-party report of limited assurance on Scope 1 and 2 in 2027 and a reasonable assurance report starting in 2031 and if in New Jersey beginning in the 4th year after passage of the NJ Bill and thereafter.

Note that unlike the New Jersey bill there is not a specific penalty per day for the failure to report.

If Illinois follows the path of California here, companies with limited contacts to Illinois will find themselves subject to this reporting regime and need to put in the work to measure, monitor and report on their Scope 1, 2 and 3 greenhouse gas emissions if they have sales of over $1 Billion Dollars (and those sales need NOT be in Illinois alone, rather they are in the aggregate and likely will include subsidiary and related entities).

Green Spouts: While it is highly likely that various parties like the US Chamber of Commerce (who sued California for implementing SB 261 and 253) will also attempt to block Illinois from implementing its version of HB 3673, given the District Court’s ruling noted above, it appears that if passed in Illinois, that the constitutional challenges raised by the plaintiffs are not likely to withstand Illinois court scrutiny and Illinois could join California (and Colorado, New Jersey and New York) as requiring such reporting as early as 2028. Again, the Bill needs to clear the House Rules Committee and then needs to be voted on and approved by the full House, the Assembly and also needs the Governor’s signature, but it appears that these steps are not only possible but likely in 2025, partially/fully in reaction to the Federal government’s overall environmental position and its position taken in withdrawing from the SEC Final rules on climate disclosure. This author’s view is that the Bill will likely pass in Illinois and in New Jersey, Colorado and New York and be signed by the respective Governors, will attract challenges like California’s version did and that those challenges under Illinois, New Jersey, Colorado and New York law will survive such a challenge and that these laws will become a reality during 2025/2026.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

Tennessee House introduces HB 716 – Climate Resiliency Fund Act

Earlier in February, we posted about New York’s second in the U.S. “Polluter Pays” law (check the website for a copy of the post that outlines the law that was signed by Governor Hochul in 2024). Not surprisingly, 22 states and some private concerns sued New York claiming the law constitutes “an attack on US energy producers that will be felt by consumers.” An interesting phrase given that one could argue that tariffs on energy do exactly the same thing but a turn of the phrase for a different day.

The states who filed the action (close your eyes and stop reading and see if you can guess who …) via their Attorneys General against New York include Alabama, Arkansas, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah and Wyoming. Others joining in the lawsuit include Alpha Metallurgical Resources Inc. (a coal supplier), the West Virginia Coal Association, the Gas and Oil Association of West Virginia and America’s Coal Association.

Surprisingly, Tennessee has now put forth a bill in their House entitled the “Climate Resiliency Fund Act.” The bill was assigned to its Agriculture and Natural Resources Subcommittee who is due to meet late this month. Given that Tennessee joined the States who are fighting New York’s bill it would come as a bit of a surprise if this Tennessee Bill which was put forth by a Democrat, actually moves in a Republican-controlled House and Senate.

Tennessee’s bill is similar to the New York and Vermont Superfund Acts in that the bill seeks to hold polluters (i.e., refiners of fossil fuels in this bill) strictly liable and responsible for climate impact damages resulting from more than one billion metric tons of covered greenhouse gas emissions during the covered period. The applicable covered period is defined as January 1, 1995, to December 31, 2025. Funds collected from fines of these responsible actors would be used to prioritize climate change adaption projects.

Green Spouts: The Tennessee Climate Resiliency Fund Act would be the third of its kind state law that attempts to hold a polluter strictly liable for past acts that have created a negative impact on the State’s infrastructure and climate adaptability. The Act makes any entity or successor company that engaged in the trade or business of fossil fuel extraction or refining crude oil between 1-1-1995 and 12-31-2025 strictly liable for its share of costs incurred by the State.  The emitters are being held responsible for their respective portion of greenhouse gas emissions above the 1 billion metric tons noted above. 

So far, only New York and Vermont have passed these types of “Polluter Pays” laws, noting that Massachusetts, California, New Jersey and Maryland are considering them. Whether this type of State Superfund strict liability law gets traction and passage by other states and whether these 22 State Attorneys General follow up with other lawsuits in an effort to blunt the impact of these laws, remains to be seen but it is surely a further evolution/development and one which bears watching, especially in light of the new Administration federally which will likely see the Federal government take a step back from its climate initiatives and by default will leave the leadership role for climate change initiatives in the hands of state and local government. That said, given that Tennessee is one of the 22 states challenging the legality of the New York bill it would stand to reason that it is very unlikely that this Tennessee bill will move out of its Subcommittee, but we will keep an eye out in case lightning strikes here.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact. Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

New Jersey introduces S4117 – the Climate Corporate Data Accountability Act – joining California, Colorado and New York in requiring Scope 1, 2 and 3 Reporting if Passed

On February 3, 2025, the New Jersey Senate introduced and referred S4117 to its Environment and Energy Committee proposed Bill S4117. See attached draft copy at https://legiscan.com/NJ/text/S4117/2024

Like the Colorado and New York bills that were previously reported on and which are being considered by their respective state legislatures, if enacted, the New Jersey Climate Corporate Data Accountability Act could become the fourth bill passed in the United States, which bills are all aimed at requiring entities with connections to New Jersey to report on their greenhouse gas emissions under Scope 1, Scope 2 and Scope 3 beginning 3 years from the effective date of the NJ Bill (which could be as soon as 2028). New Jersey would join Colorado, California and New York (if New York’s and Colorado’s bills move to passage) as the fourth state in the US in requiring this type of reporting for companies with over $1 Billion in revenue.

Between New Jersey at $666.9 Billion, Colorado at $437 Billion, New York at $1.6 Trillion of real GDP and California at $2.9 Trillion of real GDP, these four states together would represent more than 26.9% of the US’s real GDP being subject to Scope 1, 2 and 3 reporting requirements for greenhouse gas emissions.

California passed their version of a very similar reporting bill, SB 253, in 2023, with an effective date of January 2026. New York’s bill, if enacted, required regulations to be passed by December 31, 2026, with an effective reporting requirement for entities subject to the bill during 2027 for Scope 1 and 2 and 2028 for Scope 3. Colorado’s bill if passed will require reporting of Scope 1 and 2 by January 1, 2028, and Scope 3 by January 1, 2029. New Jersey’s bill, if passed, will require reporting of Scope 1 and 2 within 3 years of the passage of the NJ Bill and Scope 3 within 4 years of passage of the Bill.

As readers will likely recall and as commented on in our pieces on New York and Colorado, the SEC had pursued a similar path during 2023 and 2024, issuing proposed rules, and then final rules and then revised final rules which were then challenged and consolidated into one case in the 8th Circuit. The SEC’s final rules only required reporting on Scope 1 and 2 after receiving a backlash of comments about required Scope 3 reporting. As of February 11, 2025, the SEC’s acting Chairman Mark Uyeda said that the Commission will pause litigation of its climate disclosure rule in the 8th Circuit case, effectively ending, for now at least, the SEC’s pursuit of federal rules focusing on climate disclosure of Scope 1 and 2 greenhouse gases for reporting companies.

Despite the SEC’s position, it appears that states will continue to pursue their own path regarding climate disclosure. While California’s law had been challenged by various parties, earlier this month on February 3, 2025, the District Court for the Central District of California issued an order (https://www.troutman.com/a/web/gEwAfXN75c6MMmenKh3yd3/us_dis_cacd_2_24cv801_d96315207e190_order_granting_defendants_motion_to_dismiss_plaint.pdf) dismissing constitutional challenges posed to SB 253 and SB 261 and clears a path for the California Air Resources Board to develop necessary implementing regulations.

The New Jersey, Colorado and New York bills are very similar to the California bill and require reporting starting in 2027 and additional reporting in 2028 for New York and starting in 2028 and continuing in 2029 for Colorado and potentially in 2028 and 2029 for New Jersey depending on when the NJ version is passed. The bills also require either a third-party verification in the case of Colorado, or a third-party report of limited assurance on Scope 1 and 2 in 2027 and a reasonable assurance report starting in 2031 and if in New Jersey beginning in the 4th year after passage of the NJ Bill and thereafter.

Note that the New Jersey Bill includes an increasing fine of $10,000 for the first offense, up to $20,000 for the second offense and up to $50,000 for the third offense and each subsequent offense. Note that if a violation continues, each day is an additional and separate offense of $50,000 each for failure to file the applicable report.

If New Jersey follows the path of California here, companies with limited contacts to New Jersey will find themselves subject to this reporting regime and need to put in the work to measure, monitor and report on their Scope 1, 2 and 3 greenhouse gas emissions if they have sales of over $1 Billion Dollars (and those sales need NOT be in New Jersey alone, rather they are in the aggregate and likely will include subsidiary and related entities).

Green Spouts: While it is highly likely that various parties like the US Chamber of Commerce (who sued California for implementing SB 261 and 253) will also attempt to block New Jersey from implementing its version of S4117, given the District Court’s ruling noted above, it appears that if passed in New Jersey, that the constitutional challenges raised by the plaintiffs are not likely to withstand New Jersey court scrutiny and New Jersey could join California (and Colorado and New York) as requiring such reporting as early as 2028. Again, the Bill needs to clear the Senate Committee and then needs to be voted on and approved by the full Senate, the Assembly and also needs the Governor’s signature, but it appears that these steps are not only possible but likely in 2025, partially/fully in reaction to the Federal government’s overall environmental position and its position taken in withdrawing from the SEC Final rules on climate disclosure. This author’s view is that the Bill will likely pass in New Jersey given the Governor will be leaving office at the end of 2024 and in Colorado and New York and be signed by the respective Governors, will attract challenges like California’s version did and that those challenges under New Jersey, Colorado and New York law will survive such a challenge and that these laws will become a reality during 2025/2026.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

Colorado Introduces Bill to require Greenhouse Gas Disclosure – following California and New York

On January 28, 2025, the Colorado House in its Energy and Environment Committee proposed House Bill 25-1119. See attached draft copy at https://leg.colorado.gov/sites/default/files/documents/2025A/bills/2025a_1119_01.pdf.

Like the New York bill, if enacted, the Colorado bill would become the second or third set of bills passed in the United States which are aimed at requiring entities with connections to Colorado to report on their greenhouse gas emissions under Scope 1, Scope 2 and Scope 3 beginning in 2028. Colorado would join California and likely New York (if New York’s bill moves to passage) as the third state in the US in requiring this type of reporting for companies with over $1 Billion in revenue.

Between Colorado at $437 billion, New York at $1.6 Trillion of real GDP and California at $2.9 Trillion of real GDP, these three states together would represent more than 21.5% of the US’s real GDP being subject to Scope 1, 2 and 3 reporting requirements for greenhouse gas emissions.

California passed their version of a very similar reporting bill, SB 253, in 2023, with an effective date of January 2026. New York’s bill, if enacted, required regulations to be passed by December 31, 2026, with an effective reporting requirement for entities subject to the bill during 2027 for Scope 1 and 2 and 2028 for Scope 3. Colorado’s bill if passed will require reporting of Scope 1 and 2 by January 1, 2028, and Scope 3 by January 1, 2029.

As readers will likely recall and as commented on in our piece on New York, the SEC had pursued a similar path during 2023 and 2024, issuing proposed rules, and then final rules and then revised final rules which were then challenged and consolidated into one case in the 8th Circuit. The SEC’s final rules only required reporting on Scope 1 and 2 after receiving a backlash of comments about required Scope 3 reporting. As of February 11, 2025, the SEC’s acting Chairman Mark Uyeda said that the Commission will pause litigation of its climate disclosure rule in the 8th Circuit case, effectively ending, for now at least, the SEC’s pursuit of federal rules focusing on climate disclosure of Scope 1 and 2 greenhouse gases for reporting companies.

Despite the SEC’s position, it appears that states will continue to pursue their own path regarding climate disclosure. While California’s law had been challenged by various parties, earlier this month on February 3, 2025, the District Court for the Central District of California issued an order (https://www.troutman.com/a/web/gEwAfXN75c6MMmenKh3yd3/us_dis_cacd_2_24cv801_d96315207e190_order_granting_defendants_motion_to_dismiss_plaint.pdf) dismissing constitutional challenges posed to SB 253 and SB 261 and clears a path for the California Air Resources Board to develop necessary implementing regulations.

The Colorado and New York bills are very similar to the California bill and require reporting starting in 2027 and additional reporting in 2028 for New York and starting in 2028 and continuing in 2029 for Colorado. The bills also require either a third-party verification in the case of Colorado, or a third-party report of limited assurance on Scope 1 and 2 in 2027 and a reasonable assurance report starting in 2031.

Note that the Colorado bill includes a $100,000 fine per day for failing to file the applicable report.

If Colorado follows the path of California here, companies with limited contacts to Colorado will find themselves subject to this reporting regime and need to put in the work to measure, monitor and report on their Scope 1, 2 and 3 greenhouse gas emissions if they have sales of over $1 Billion Dollars (and those sales need NOT be in Colorado alone, rather they are in the aggregate and likely will include subsidiary and related entities).

Green Spouts: While it is highly likely that various parties like the US Chamber of Commerce (who sued California for implementing SB 261 and 253) will also attempt to block Colorado from implementing its version of HB 25-1119, given the District Court’s ruling noted above, it appears that if passed in Colorado, that the constitutional challenges raised by the plaintiffs are not likely to withstand Colorado court scrutiny and Colorado could join California (and New York) as requiring such reporting as early as 2028. Again, the Bill needs to clear the House Committee and then needs to be voted on and approved by the full House, the Senate and also needs the Governor’s signature, but it appears that these steps are not only possible but likely in 2025, partially/fully in reaction to the Federal government’s overall environmental position and its position taken in withdrawing from the SEC Final rules on climate disclosure. This author’s view is that the Bill will likely pass in Colorado and New York and be signed by the respective Governors, will attract challenges like California’s version did and that those challenges under Colorado and New York law will survive such a challenge and that these laws will become a reality during 2025/2026.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

New York Senate Proposes Climate Corporate Data Accountability Act – SB 3456; Companion Bill to NY Assembly Bill A4282

Last week, the New York State Senate in its Environmental Conservation Committee proposed Bill SB 3456 which is a companion bill to Assembly Bill A4282. See attached draft copy at https://www.nysenate.gov/legislation/bills/2025/S3456

These bills, if enacted, would become the second set of bills passed in the United States which are aimed at requiring entities with connections to New York to report on their greenhouse gas emissions under Scope 1, Scope 2 and Scope 3 beginning in 2027. New York would join California as the second state in the US in requiring this type of reporting for companies with over $1 Billion in revenue.

Between New York at $1.6 Trillion of real GDP and California at $2.9 Trillion of real GDP, these two states together would represent more than 17.5% of the US’s real GDP being subject to Scope 1, 2 and 3 reporting requirements for greenhouse gas emissions.

California passed their version of a very similar reporting bill, SB 253, in 2023, with an effective date of January 2026. New York’s bill, if enacted, required regulations to be passed by December 31, 2026 with an effective reporting requirement for entities subject to the bill during 2027 for Scope 1 and 2 and 2028 for Scope 3.

As readers will likely recall, the SEC has pursued a similar path during 2023 and 2024, issuing proposed rules, and then final rules and then revised final rules which were then challenged and consolidated into one case in the 8th Circuit. The SEC’s final rules only required reporting on Scope 1 and 2 after receiving a backlash of comments about Scope 3. Currently, as of February 11, 2025, the SEC’s acting Chairman Mark Uyeda said that the commission will pause litigation of its climate disclosure rule in the 8th Circuit case, effectively ending, for now at least, the SEC’s pursuit of federal rules focusing on climate disclosure of Scope 1 and 2 greenhouse gases for reporting companies.

Despite the SEC’s position, it appears that states will continue to pursue their own path regarding climate disclosure. While California’s law had been challenged by various parties, earlier this month on February 3, 2025, the District Court for the Central District of California issued an order (https://www.troutman.com/a/web/gEwAfXN75c6MMmenKh3yd3/us_dis_cacd_2_24cv801_d96315207e190_order_granting_defendants_motion_to_dismiss_plaint.pdf) dismissing constitutional challenges posed to SB 253 and SB 261 and clears a path for the California Air Resources Board to develop necessary implementing regulations.

The New York bill is very similar to the California bill and requires reporting starting in 2027 and additional reporting in 2028. It also requires a third party report of limited assurance on Scope 1 and 2 in 2027 and a reasonable assurance report starting in 2031.

If New York follows the path of California here, companies with limited contacts to New York will find themselves subject to this reporting regime and need to put in the work to measure, monitor and report on their Scope 1, 2 and 3 greenhouse gas emissions if they have sales of over $1 Billion Dollars (and those sales need NOT be in New York alone, rather they are in the aggregate and likely will include subsidiary and related entities).

Green Spouts: While it is highly likely that various parties like the US Chamber of Commerce (who sued California for implementing SB 261 and 253) will also attempt to block New York from implementing its version of SB 3456, given the District Court’s ruling noted above, it appears that if passed in New York, that the constitutional challenges raised by the plaintiffs are not likely to withstand New York court scrutiny and New York could join California as requiring such reporting as early as 2027. Again, the Bill needs to clear the Senate Environmental Committee and then needs to be voted on and approved by the Senate and also needs Assembly approval and the Governor’s signature, but it appears that these steps are not only possible but likely in 2025, partially/fully in reaction to the Federal government’s overall environmental position and its position taken in withdrawing from the SEC Final rules on climate disclosure. This author’s view is that the Bill will likely pass in New York and be signed by the Governor, will attract challenges like California’s version did and that those challenges under New York law will survive such a challenge and that the law will become a reality during 2025/2026.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

Insurance and Risk Mitigation in a Changing Climate -Commercial Real Estate

Yesterday, I had the pleasure of hosting Dr. Chris Pyke (GRESB), Chris Cayten, M. Arch, LEED AP (Code Green), and Duncan C. Ellis (Marsh) on my monthly sustainability and risk mitigation webinar where we focused on the ever-intensifying impact of storms, wildfires and natural disasters and how insurance is figuring into the picture (or not) for commercial real estate.

As weather related climate risks intensify, the panelists uniformly agreed that real estate and insurance industries are shifting from high-level risk awareness to tangible asset-level resilience and action. We spent the hour exploring how climate risk, insurance market trends, and financial resilience are reshaping the built environment.

Key Takeaways:

  • The Climate Risk Landscape Is Evolving Rapidly, and the number of events and the impact of these weather-related events are increasing in number and severity.
  • Natural disasters are increasing in frequency and cost, with the U.S. averaging 23 billion-dollar plus disasters per year in the last four years (compared to 9 events per year from 1980-2024).
  • Canada’s insurance claims have surged 93% over the past decade, signaling market instability.
  • Practitioners have moved from discussing rental premiums for having certain green features at their properties to focusing on Risk Mitigation and Efficiency (some would say they have returned to this place)
  • Sustainability is no longer just about certifications; it’s about financial risk reduction and fiduciary responsibility in asset preservation.
  • Building performance standards (BPS) are increasingly incorporating resilience and physical climate risk into their analysis of where to invest and where to hold vs. sell.
  • Insurance Premiums Are Climbing—And Discounts Aren’t Guaranteed for building in resiliency features, but the lack of focus will likely make a property much less desirable to insure at all. Property insurance has leveled over the last few years despite the increase in number of losses and the severity of such losses; the casualty side of the business is driving cost at this point in the cycle.
  • Many factors are driving higher property premiums—such as community risk, rebuilding costs, and interest rates—these factors are some of the features which insurance carriers review in pricing coverage are beyond the control of individual property owners.
  • While resilience measures may not yield direct insurance discounts, they can help secure better access to coverage and slower premium hikes over time.

Insurance Market Challenges & Risk Differentiation:

Insurers are tightening terms, raising deductibles, and exiting high-risk markets like California and Florida due to regulatory constraints and continued extreme weather risks. Carriers have exited these markets on the residential front rather than the commercial front, but insurance costs in the commercial real estate markets have been priced to take into account property level risk and the insurance carriers’ appetite to take risk in particular markets given the past history with their clients’ losses.

Resilient properties in lower-risk areas may retain more value and command higher rents, thereby reinforcing the financial case for adaptation.

Modeling of these risks and Data Transparency Are Key to Risk Assessment at the property level as the Insurers rely on tools like RMS and AIR to help price and assess weather related risk, but inconsistencies in modeling approaches continue to create confusion for real estate owners. Better data alignment between insurers and property owners is critical to improving risk assessment and pricing. Simple things like making sure the insured data is accurate regarding sprinklering, the location of HVAC equipment, what type of resiliency measures have been enacted at the property are critical to making sure the carrier is pricing the applicable real risk into its premium quote.

What Real Estate Owners & Investors Should Do Next:

✅ Understand the insurance models and data sources that underwriters use to assess risk.
✅ Implement resilience measures that demonstrate tangible risk reduction to insurers.
✅ Engage insurers early and improve transparency to ensure fairer risk assessments and pricing.

As climate-driven losses mount, risk mitigation is becoming a business necessity rather than an optional sustainability strategy. Those who adapt will not only protect asset value but also navigate insurance challenges more effectively in an increasingly volatile market.

Physical risk assessment and mitigation is part of a broader trend in sustainable real estate where down-side risk reduction is replacing the ephemeral “green premium”.

Green Spouts: Undeniable risks such as the increase in severity of weather-related events (e.g., flooding, hurricanes, wildfires) and similar climate events and upcoming Building Performance mandates in various cities and states are motivating owners of all sizes to build and operate buildings more responsibly, regardless of their ideology or opinion of “sustainability”. Irrespective of being blue or red, owners are focusing on risk mitigation measures that make financial sense, including physical risk mitigation.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

New York “Polluter Pays” Law Under Attack

At the end of December 2024, we posted about New York’s second in the US “Polluter Pays” law (check the website for a copy of the post that outlines the law that was signed by Governor Hochul in 2024). Not surprisingly, earlier this week, 22 states and some private concerns sued New York claiming the law constitutes “an attack on US energy producers that will be felt by consumers.” An interested phrase given that one could argue that tariffs on energy do exactly the same thing but a turn of the phrase for a different day.

The states who filed the action (close your eyes and stop reading and see if you can guess who …) via their Attorneys General against New York include Alabama, Arkansas, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah and Wyoming. Others joining in the lawsuit include Alpha Metallurgical Resources Inc. (a coal supplier), the West Virginia Coal Association, the Gas and Oil Association of West Virginia and America’s Coal Association.

In their 76 page complaint, the plaintiffs accuse New York of attempting to “seize control over the makeup of America’s energy industry” by imposing over $75 Billion Dollars of sanctions on large fossil fuel producers in an effort to hold those that New York views as being responsible for material climate change impact in New York to task, and to specifically require that the funds that are collected as damages be used to rebuilding New York’s negatively impacted infrastructure.

The plaintiffs have claimed that New York has violated the US Constitution and the Clean Air Act because the law has gone too far in its applicability and breadth. The plaintiffs also argue that the law violates the domestic and foreign commerce clauses against companies located outside of New York as well as the due process clause and the equal protection clause – invoking what some might call, a veritable kitchen sink of constitutional claims.

Green Spouts: The New York Climate Change Superfund Act (the “Act”) is the second of its kind state law that attempts to hold a polluter strictly liable for past acts that have created a negative impact on the State’s infrastructure and climate adaptability. The Act makes any entity or successor company that engaged in the trade or business of fossil fuel extraction or refining crude oil between 1-1-2000 and 12-31-2018 strictly liable for its share of costs incurred by the State.  The emitters are being held responsible for their respective portion of greenhouse gas emissions above the 1 billion metric tons noted above. 

So far, only New York and Vermont have passed these types of “Polluter Pays” laws, noting that Massachusetts, California, New Jersey and Maryland are considering them. Whether this type of State Superfund strict liability law gets traction and passage by other states and whether these 22 State Attorneys General follow up with other lawsuits in an effort to blunt the impact of these laws, remains to be seen but it is surely a further evolution/development and one which bears watching, especially in light of the new Administration federally which will likely see the Federal government take a step back from its climate initiatives and by default will leave the leadership role for climate change initiatives in the hands of state and local government.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and Risk Mitigation planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

New York passes second in the nation “Polluter Pays” Superfund Type Law – $75B Fund to be Created for infrastructure projects by attempting to hold Fossil Fuel Companies Strictly Liable for past actions.

As of December 27, 2024, New York becomes the second state in the US, after Vermont, to pass a version of a polluter pays climate change bill entitled the “Climate Change Superfund Act” (the “CCSA”).

The new law, which can be found at Article 76 – Climate Change Adaption Cost Recovery Program and requires the State Comptroller along with the Department of Taxation, to report, by January 2026, on the costs to residents and the State from greenhouse gas emissions that occurred between January 1, 2000, and December 31, 2018. This comprehensive assessment is intended to include impacts on agriculture, biodiversity, ecosystem services, education, finance, healthcare, manufacturing, housing, real estate, retail, tourism, transportation, and municipal and local government, using federal data to attribute emissions to specific greenhouse gas emitting fossil fuel companies. The fund to be raised from the CCSA is $75 Billion Dollars.  These funds, when collected from the responsible parties, will be thereafter used to help fund climate change adaptive infrastructure projects.

The law recognizes that the amount that will be charged to the companies who have emitted greenhouse gases over the State standard “represents a small percentage of the extraordinary cost for New York State for repairing from and preparing for climate change-driven extreme events over the next 25 years.”  The State found that the “largest one hundred fossil fuel producing companies are responsible for more than 70% of global greenhouse gas emissions since 1998.”

The CCSA law follows Vermont’s polluter-pays model, targeting companies involved in fossil fuel extraction, storage, production, refinement, transport, manufacture, distribution, sale and the use of fossil fuels or petroleum products extracted, produced, refined or sold that are linked to greenhouse gas emissions during the 2000 to 2018 specified period. Companies that have exceeded the 1 billion metric ton emissions mark are required to pay for their pro rata share of climate adaption measures needed by the State.  The funds collected will then be specifically allocated to “climate change adaptive infrastructure” improvements such as roads and bridge upgrades, storm water management and drainage systems, coastal wetlands projects, making defensive upgrades to subways and transit systems, preparing for, and recovering from hurricanes and other extreme weather events, sewer treatment plant upgrades and retrofits and energy-efficient building enhancements.

The CCSA takes the position, much like the Federal Superfund laws, that the polluter in this case is strictly liable for its applicable share of costs incurred for climate change adaptation projects. Entities that are part of a controlled group are jointly and severally liable for the applicable costs.

The theory behind the approach to the CCSA is that the companies who have specifically contributed to greenhouse gas impacts are the ones required to fund necessary upgrades to existing or necessary climate change adaptive infrastructure and other “climate change adaptation projects” as defined under the CCSA.  A State report due within 1 year is required to measure and provide a summary of various costs that have been incurred due to the greenhouse gases that were emitted during the relevant time-period and costs that are projected to be incurred in the future within the State to abate the effects of covered greenhouse gas emissions from 1-1-2000 through 12-31-2018. The State provided specific guidance under the CCSA regarding the conversion of coal (i.e., 942.5 Metric Tons of Carbon Dioxide released/1 Million pounds of coal used by such company), crude oil (i.e., 432,180 Metric Tons of carbon dioxide/1 Million barrels of crude oil used by such company) and natural gas (e.g., 53,440 Metric Tons of carbon dioxide/1 Million cubic feet of natural gas used by such company) used by the applicable companies into greenhouse gas emission numerics for purposes of measuring impact and, if applicable, calculating the overage above the 1 Billion Metric Ton standard set by the CCSA.

The CCSA also set forth certain mandatory prevailing wage and apprenticeship requirements for public entities utilizing funds from the climate fund to pay for climate change adaption projects. The CCSA also includes certain “labor harmony” requirements, certain “made in the US” requirements for various components of public entity projects, and also requires that the Comptroller and the Commissioner of Taxation keep the climate fund comprised of responsible party payments in a separate dedicated account that is NOT comingled with other funds of the State.

Within 1 year, the department is required to promulgate regulations and adopt methodologies to determine responsible parties and their share of applicable costs of covered greenhouse gas emissions and thereafter to issue notices of cost recovery demand amounts against the responsible parties.

Within 2 years, the department is required to complete a statewide climate change adaption master plan for guiding the dispersal of funds in a timely, efficient, and equitable manner to all regions of the State.  The dispersal of funds will also take into account a stated goal of at least 35% of the expenditures being made to climate change adaptive infrastructure projects that benefit “disadvantaged communities”.

Green Spouts: The CCSA is the second of its kind state law that attempts to hold a polluter strictly liable for past acts that have created a negative impact on the State’s infrastructure and climate adaptability. The CCSA makes any entity or successor company that engaged in the trade or business of fossil fuel extraction or refining crude oil between 1-1-2000 and 12-31-2018 strictly liable for its share of costs incurred by the State.  The emitters are being held responsible for their respective portion of greenhouse gas emissions above the 1 billion metric tons noted above.  Interestingly, New York in joining Vermont are NOT alone here, as Maryland and Massachusetts are considering similar legislation as well. Whether this type of State Superfund strict liability law gets traction and passage by other states remains to be seen but it is surely a further evolution/development and one which bears watching, especially in light of the upcoming change in Administration federally which will likely see the Federal government take a step back from its climate initiatives and by default will leave the leadership role for climate change initiatives in the hands of state and local government.

Duane Morris has an active Sustainability and Risk Mitigation Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo, or the attorney in the firm with whom you are regularly in contact.

NJEDA Opens Opt-In Process for NJ Municipalities to Allow for NJ-C-PACE

Earlier this month (December 2024), the New Jersey Economic Development Authority (NJEDA) published municipality opt-in documents to participate in the Garden State Commercial Property Assessed Clean Energy (C-PACE) Program.

C-PACE is a program that has been adopted in 38 states and the District of Columbia and allows commercial property owners in Participating Municipalities to access a new form of financing to undertake energy efficiency, water conservation, renewable energy, and resiliency improvements. Typically loan proceeds approximate 30% of the stabilized value of the project (i.e., a higher value to base proceeds on that merely just hard costs).  Moreover, while typical commercial lenders were initially skeptical of allowing C-PACE lenders to have “soft” second positions in their deals, most regional and national lenders have come around to the program and realized that because the C-PACE lender is not permitted to accelerate their loan for non-payment, the risk of a foreclosure by the C-PACE lender is quite remote.

C-PACE financing is typically non-recourse, does NOT involve a payment guaranty or completion guaranty and does NOT involve filing a mortgage on the property.  The term of the financing is often 25 years (not the amortization period, rather, the actual term of the loan) and the interest rate is derived using the 10-year Treasury not SOFR plus a spread.

The Garden State C-PACE Program allows property owners to repay investments from Qualified Capital Providers (i.e., Lenders) into eligible projects through a special assessment to a Participating Municipality, similar to the owner’s real property tax, sewer, or water bill. The Participating Municipality then remits the payment to the initial capital provider. This unique form of financing can result in lower-cost, longer-term financing, making it easier for projects to be cashflow-positive from the outset. In other words, property taxes are incrementally increased and used to pay back the C-PACE lender over the 25-year term.

As such, NJEDA has finally published relevant opt-in documentation for any municipality in NJ that is interested in allowing C-PACE financing in their town. Under the rules, municipalities are required to first adopt the Opt-In Ordinance prior to submitting an application for participation in the program to the NJEDA.

According to the NJEDA website, applications will open shortly and will be accepted on a rolling basis.

Green Spouts: After passing legislation over 3 years ago, NJEDA has finally moved forward to issue applicable regulations to implement the legislation.  Now interested municipalities will need to opt into the program.  It will be curious to see how this information is shared with the 566 municipalities in the State of New Jersey and how “easy” the process is to opt in.  Only time will tell but for developers and owners looking for financing or refinancing on projects, this could not come too soon especially given that all surrounding states to New Jersey have had this C-PACE arrow available to projects for years.

Duane Morris has an active Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo or the attorney in the firm with whom you are regularly in contact.

Montana Supreme Court rules proposed State law that restricts consideration of Greenhouse Gas Impact Unconstitutional

Earlier this week (December 17, 2024), in Rikki Held et al. vs, the State of Montana, the Montana Supreme court affirmed a lower court ruling that struck down a proposed state law that barred consideration of greenhouse gas emissions in state permitting decisions. In other words, the Supreme Court agreed that greenhouse gas emissions can be considered in permitting decisions. 20241218_docket-DA-23-0575_opinion.pdf

The Court agreed with the plaintiffs who made the argument to the lower court that the Montana state lawmakers attempted amendments to the Montana Environmental Policy Act prohibiting regulators from taking into consideration greenhouse gas emissions in permitting decisions violated the plaintiffs’ constitutional right to a “clean and healthful environment”.

The Court rejected the state’s argument that the authors of the State constitutional provision could NOT have intended to include climate change concerns in the right to a “clean and healthful environment”. Instead, they indicated that …”new advancements, consistent with the object and true principles of the constitution are provided for within Montana’s living constitution.”

The plaintiffs had sued in 2020, claiming that the Montana Legislature had compromised their future and the rights of Montana citizens by prioritizing the development of carbon intensive fossil fuels and by barring the review of greenhouse gas impacts as part of the permit review process. The lower court had agreed with the plaintiffs and struck down the proposed legislation as unconstitutional.

The justices also agreed with the plaintiffs in ruling that they had standing to bring the suit based on the plaintiffs providing that that they had a sufficient personal stake in their right to a clean and healthful environment as well as that they had shown sufficient injury resulting from the proposed amendments.

Plaintiffs showed at trial—”without dispute—that climate change is harming Montana’s environmental life support system now and with increasing severity for the foreseeable future,” the order states. “Plaintiffs showed that climate change does impact the clear, unpolluted air of the Bob Marshall wilderness; it does impact the availability of clear water and clear air in the Bull Mountains; and it does exacerbate the wildfire stench in Missoula, along with the rest of the State.”

Green Spouts: While this case is limited to the facts and drafting of the Montana proposed legislation and the State’s constitution, plaintiffs in other states will likely take notice of the arguments used by the Rikki Held plaintiffs in crafting similar arguments to a recent proliferation of legislation in various states that seek to limit regulatory bodies from taking into account greenhouse gas emissions in their rule making.

Duane Morris has an active Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Jeff Hamera, Jolie-Anne Ansley, Robert Montejo or the attorney in the firm with whom you are regularly in contact.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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