New ESG Disclosure Rules: EU Corporate Sustainability Reporting Directive

In April 2021 the European Commission presented a proposal for a Corporate Sustainability Reporting Directive (CSRD) that would amend the current Non-Financial Reporting Directive (NFRD) and form part of the wider EU policy to require companies to publicly disclose information and data around environmental, social affairs and governance matters.

On 28 November 2022, the European Council adopted the CSRD following adoption by the European Parliament on 10 November 2022. The CSRD will come into force 20 days after publication in the EU Official Journal and EU member states will then have 18 months to incorporate it into their national laws.

To read the full text of this blog post by Drew Salvest, Natalie Stewart and Rebecca Green, please visit the Duane Morris London Blog.

ESG – NJBPU issues Order requiring Energy and Water reporting for all Buildings over 25,000 SF

In September, 2022, the New Jersey Board of Public Utilities (NJBPU) issued an order requiring the owner or operator of every commercial building over 25,000 square feet in the state to benchmark their energy and water use as part of an effort to spur energy efficiency.

Building owners must use the U.S. Environmental Protection Agency’s online Portfolio Manager Tool to measure and analyze their respective facilities’ energy and water usage. NJBPU’s website has information about how to report benchmarking. The first benchmarking submissions are due on Oct. 1, 2023, for energy and water consumed in 2022.  Portfolio Manager is a FREE tool from the EPA that enables owners to input data and measure and monitor consumption.

“This is the next important step in implementing a best in class, statewide, energy efficiency program which will help us achieve Governor Murphy’s goal of 100% clean energy by 2050,” said NJBPU President Joseph L. Fiordaliso. “Creating a system of benchmarking allows us to measure the use of energy (electricity and gas) and water by the state’s biggest buildings and support building owners in reducing energy and water usage and operating costs.”

Benchmarking is intended to help commercial building owners and operators measure and analyze their respective facilities’ energy and water usage and compare it to other similar buildings. Building owners and operators can use this information to make informed decisions about taking advantage of financial incentives for energy efficiency improvements.

The NJBPU initiative is directed by the  New Jersey’s Energy Master Plan, which calls for transparent benchmarking and energy labeling. The program it intended to enable building owners to obtain aggregated, building-level energy and water data from their utility companies through a data access service. The Board will also establish a “help desk” to assist building owners as they measure and analyze their respective buildings’ energy and water performance.

This program will also protect individual ratepayers’ energy and water use information by requiring utilities to securely provide aggregated, building-level data. Building owners are required to obtain their tenants’ affirmative, written consent for the utilities from which they receive services to provide building-level energy and water data to the building owner in certain situations to protect individual energy and water use information.

Consent will be required only when there are fewer than four tenants in a building or if one tenant exceeds 50% of the energy or water consumption.

More information about building benchmarking through NJBPU is available at https://njcleanenergy.com/commercial-industrial/programs/energy-benchmarking.

Food For Thought – NJ through the NJBPU Order joins California and Washington state as well as over 42 cities and 2 counties in requiring some form of energy and water disclosure mandate.  While many do not like being forced to report which is understandable, having this mandate will enable the State and tenants to better access which buildings are more efficient than others when it comes to energy and water consumption that are often paid for by common area charges assessed to these tenants. If and to the extent the SEC’s proposed rules on climate disclosure become effective, having a tool that allows for measurement and verification of various data sets will help bolster various companies ability to measure, verify and report on such data in the energy, water, waste, recycling, materials and air quality space.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how these new rules  might apply to you. For more information or if you have any questions about this post, please contact Sheila Rafferty-Wiggins, Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

EPA proposes to Designate 2 new PFAS and PFOS Chemicals as Hazardous Substances!

Earlier this week on August 25, 2022, the U.S. Environmental Protection Agency (EPA) took a significant step under Administrator Regan’s PFAS Strategic Roadmap in an effort to protect people and communities from the health risks posed by certain PFAS, also known as “forever chemicals.”

EPA is proposing to designate two of the most widely used per- and polyfluoroalkyl substances (PFAS) as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as “Superfund.”

The proposal applies to perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), including their salts and structural isomers, and, according to EPA’s press release, is based on significant evidence that PFOA and PFOS may present a substantial danger to human health or welfare or the environment. According to various reports, PFOA and PFOS can accumulate and persist in the human body for long periods of time and evidence from laboratory animal and human epidemiology studies indicates that exposure to PFOA and/or PFOS may lead to cancer, reproductive, developmental, cardiovascular, liver, and immunological effects.

If finalized, the rulemaking would trigger reporting of PFOA and PFOS releases, providing the EPA with improved data and the option to require cleanups and recover cleanup costs to protect public health and encourage better waste management.

EPA is also focused on holding responsible those who have manufactured and released significant amounts of PFOA and PFOS into the environment. In its press release, the EPA announces that they will use enforcement discretion and other approaches to ensure fairness for minor parties who may have been inadvertently impacted by the contamination. EPA is also doing further outreach and engagement to hear from impacted communities, wastewater utilities, businesses, farmers and other parties during the consideration of the proposed rule.

If this designation is finalized, releases of PFOA and PFOS that meet or exceed the reportable quantity would have to be reported to the National Response Center, state or Tribal emergency response commissions, and the local or Tribal emergency planning committees.

EPA stated that they anticipate that a final rule would encourage better waste management and treatment practices by facilities handling PFOA or PFOS. The reporting of a release could potentially accelerate privately financed cleanups and mitigate potential adverse impacts to human health and the environment.
Additionally, the proposed rule would, in certain circumstances, facilitate making the polluter pay by allowing EPA to seek to recover cleanup costs from a potentially responsible party or to require such a party to conduct the cleanup. In addition, federal entities that transfer or sell their property will be required to provide a notice about the storage, release, or disposal of PFOA or PFOS on the property and a covenant (commitment in the deed) warranting that it has cleaned up any resulting contamination or will do so in the future, if necessary, as required under CERCLA 120(h).

EPA will be publishing the Notice of Proposed Rulemaking in the Federal Register in the next several weeks. Upon publication, there will be a 60-day public comment period.

As a subsequent step, EPA anticipates issuing an Advance Notice of Proposed Rulemaking after the close of the comment period on its proposal to seek public comment on designating other PFAS chemicals as CERCLA hazardous substances.

EPA has taken a number of recent actions on PFAS including:

• Releasing drinking water health advisories for 4 PFAS – using the best available science to attempt to address PFAS pollution, protect public health, and provide critical information quickly and transparently;

• Making available $1 billion in grant funding through President Biden’s Bipartisan Infrastructure Law;

• Issuing the first Toxic Substances Control Act PFAS test order under the National PFAS Testing Strategy;

• Adding five PFAS Regional Screening and Removal Management Levels that EPA uses to help determine if cleanup is needed;

• Publishing draft aquatic life water quality criteria for PFOA and PFOS;

• Issuing a memo to address PFAS in Clean Water Act permitting;

• Publishing a new draft total adsorbable fluorine wastewater method; and

• Issuing the 5th Unregulated Contaminant Monitoring Rule to improve EPA’s understanding of the frequency that 29 PFAS are found in the nation’s drinking water systems and at what levels and preparing to propose a PFAS National Drinking Water Regulation by the end of 2022.

Food For Thought – while some argue that the EPA has gone to far in their regulatory rule making, others view these proposed designations as a big step in the appropriate direction to regulate and capture critical data on the location of PFAS and PFOS so that these chemicals can be trapped and then eliminated from our water system and our sewage systems.  Many reports now exists which indicate the negative impact of PFAS and PFOS on the human body.  Wherever you come out on this topic, taking steps to reduce our own exposure and our children’s exposure to PFAS and PFOS and to focus on entrapment and non-hazardous destruction of these impactful chemicals is continuing to be the focus of many within the industry.  New and improved technology for breaking down PFAS and PFOS into its constituent parts in a non-off gassing, safe manner are a very near future event and can be done.  

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how these new PFAS and PFOS rules might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

 

ESG – What is included the Inflation Reduction Act?

Earlier this week the President signed into law the Inflation Reduction Act.  Without pontificating on its virtues or short comings, here is how the Inflation Reduction Act breaks down by the numbers:

HEALTH CARE:

Cutting Prescription Drug Cost

As estimated by the office of Management and Budget:

5-7 million Medicare beneficiaries could see their prescription drug costs reduced because of the provision allowing Medicare to negotiate prescription drug costs; 

50 million Americans with Medicare Part D will have their costs at the pharmacy capped at $2,000 per year, directly benefiting about 1.4 million beneficiaries each year; 

3.3 million Medicare beneficiaries with diabetes will benefit from a guarantee that their insulin costs are capped at $35 for a month’s supply.

Lowering Health Care Costs – per the White House:

13 million Americans will continue to save an average of $800 per year on health insurance premiums under Obama Care;

3 million more Americans will be eligible for health insurance; and

The current uninsured rate is at an all-time low of 8%.

CLEAN ENERGY:

Lowering Energy Costs

$14,000 in direct consumer rebates for families to buy heat pumps and other energy efficient home appliances;

a 30% tax credit for solar on roofs program, saving families and estimated $9,000 over the life of the system or at least $300 per year;

Up to $7,500 in tax credits for new electric vehicles and $4,000 for used electric vehicles, helping families save $950 per year – noting there are requirements that various parts of the car be made in America which at this time is not part of the supply chain;

The Administration has stated that their goal in the IRA is to power homes, businesses, and communities with much more clean energy by 2030, including adding:

950 million solar panels;
120,000 wind turbines; 
2,300 grid-scale battery plants;
Advance cost-saving clean energy projects at rural electric cooperatives serving 42 million people;
Strengthen climate resilience and protect nearly 2 million acres of national forests; and 
Creating millions of good-paying jobs making clean energy in America.
Reducing Harmful Pollution

The hope is that through these actions, the IRA will help reduce greenhouse gas emissions by about 1 gigaton in 2030, or a billion metric tons – 10 times more climate impact than any other single piece of legislation ever enacted.

Moreover, the Administration is incenting carbon capture technology in order to deploy clean energy and reduce particle pollution from fossil fuels to avoid up to 3,900 premature deaths and up to 100,000 asthma attacks annually by 2030.

Fuel For Thought – while some argue that the IRA is too expensive and that carbon reduction goals are not necessary, others view these steps as a good step but not nearly enough to reduce green house gas emissions as set forth in the Paris Accord by 2030.  Wherever you come out on this topic, taking steps to reduce our own personal greenhouse gas impact are within our own power.  As such, if you don’t believe that humankind contributes to green house gas impacts and global warming then try doing something to help your own personal reduction to support those that really believe this is a serious issue.  Your own reduction cannot hurt and it just might help if we all engage and look to help.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how the Inflation Reduction Act might apply with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ainsley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

 

Financing: C-Pace for Multi-Family Residential Projects Finally Approved in PA

A new day dawns in Pennsylvania for mixed use residential rental projects and C-PACE financing. C-PACE stands for Commercial Property Assessed Clean Energy Financing and has now been approved in over 28 states in the US,

C-PACE financing provides borrowers with a low-cost, long term financing option that typically supplements senior financing from traditional banks and can act to reduce required equity needed for a given project.

Terms of C-PACE vary by state but many C-PACE lenders will provide funds for up to 30 years, at approximately 5.25% for approximately 25-30% of the total project cost. As such, C-PACE financing is only slightly more expensive than conventional debt and has a much longer term, and is much cheaper than traditional real estate transaction equity.

C-PACE allows existing and new properties to improve their infrastructure, reduce operating expenses and thereby increase overall value. Eligible improvements typically include energy efficiency, renewable energy, seismic and storm water measures and are typically available for office, industrial, mixed use and hotel projects.

Prior to the passage of SB 635 earlier this week, PA’s C-PACE program did not allow for residential rental mixed use projects to participate. Due to the hard work of many constituents, the legislature amended their statute to now permit mixed use rental residential to qualify as a “qualifying commercial property.”

C-PACE acts as on-bill financing for the cost of applicable approved improvements. Costs are assessed much like a sewer easement or real property tax bill on the borrowers bill. C-PACE loans cannot be accelerated in the event of a default which works to protect the senior lender to the project from being outbid at a foreclosure. C-PACE lenders are willing to lend funds to projects despite this limitation as they have a first priority lien status for outstanding amounts then due and when a project continues to receive energy the bill will include the C-PACE charge – i.e., the C-PACE lender may have to wait a bit to get paid but they will be paid so long as the property is receiving and being billed for energy.

The focus of the C-PACE program is to enable energy and water efficiency upgrades at properties, as well as resiliency improvements, water conservation and renewable energy projects.

Fuel For Thought – once the Bill is signed by Governor Wolf and goes into effect in approximately 60 days, one of the hottest property types in Pennsylvania (i.e., multi family rental residential) will qualify for C-PACE on a go forward basis and will likely see a marked uptake in the amount of C-PACE lending in the Pennsylvania arena. New Jersey has also approved C-PACE lending but regulations have not been published by the NJEDA since passage of C-PACE in 2021 (stay tuned on that front),

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how C-PACE might apply with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Nanette Heide, Joel Ephross, Robert Montejos or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

Data Centers – From the Clouds – Much Ado about ESG!

We had the opportunity to chat with some of the leading owners and builders of data centers space today on our Data Centers Task Force group meeting. Fascinating and fun conversation with Aaron Binkley of Digital Realty and David Hall and David Sitkowski from Clune Construction Company.

Some key take aways from the conversation:

– multiple new entrants into the data center space are putting pressure on rents (upward) with a lot of venture capital funding the new entries

– Increased focus by Owners (and customer/users) on renewable energy with an understanding that the renewable energy is cheaper but NOT Free.

– Energy markets remain a bit volatile for renewable energy with federal tariff on solar panels continuing to negatively impact supply

– Climate related reporting from the EU taxonomy, Singapore and potential SEC proposed rules creating a continued ESG focus by owners and customers in the Date Center space

– Supply chain issues continue to negatively affect delivery times and cost – causing consternation but opportunity as well

– Noting generators are taking in certain locations over 72 weeks for delivery and switch gear breakers taking over 16 months for delivery from the normal 6 months

– Labor Shortages continue in various markets delaying jobs – e.g., Pacific NW on carpentry and Phoenix on electricians and other trades

– Deals continue to increase in size and scale despite increased need for local based service of smaller scale

– Increased cooperating and sharing of work pipeline to enable design and build on time

– increased federal work in the data center site space

– increased interest by customers in LEED and Energy Star certifications but not everywhere

– increased interest in power coming from solar and wind sources both on site and off site through power purchase agreements (e.g., in VA, TX, CA, Illinois and NJ)

– customers and employees continuing to ask about sustainable features in buildings and in power supply and other areas of design

– Communities are beginning to wake up to data centers and in certain locations object to their noise and power consumption, noting the lack of traffic and school impacts given their use

– Water is becoming more and more relevant to the conversation and how water is or is not used in cooling systems (noting – Digital Realty does not use water in its cooling solution but towns where they operate are starting to ask about this resource)

– Permitting for generators which used to be relatively easy to obtain is now starting to get a bit trickier and harder to get on an over the counter baiss given potential air quality issues and diesel for generator issues – resulting in additional time for development permits

– Site Selection – certain jurisdictions with a high amount of data centers are beginning to increase real estate taxes for the data center user/owner which will likely, in turn, have these owners focus on other locations which are not so pricey by way of taxes.

From the Cloud – on balance, labor shortages, supply chain and increased focus by customers on ESG is driving various changes to design and build in the data center space to ensure timely and on budget deliveries. While supply chain issues should clear up in Q4 to Q1 of 23′, the focus on ESG should continue well into the future as more and more customers are adopting GhG reduction targets and more and more owners follow the lead of big industry players like Digital Realty and Prologis.

Duane Morris has an active Data Centers Team as well as an ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your data center project and your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Joel Ephross, Robert Montejos or David Amerikaner or the attorney in the firm with whom you in regular contact.or the attorney in the firm with whom you are regularly in contact.

 

New Climate-related Financial Disclosure Regulations for UK Companies

On 19 January 2022 the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (the “Regulations”) were published in the UK. As of 6 April 2022, these Regulations are now in force. Companies that are subject to the Regulations will need to comply with the new reporting requirements for accounting periods ending on or after 6 April 2022.

What do the Regulations do?

The Regulations amend the Companies Act 2006 and expand the type of companies that are required to provide information in accordance with the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) as part of their strategic reports. The Regulations require mandatory disclosure of material information in the four TCFD categories: Governance, Strategy, Risk Management, and Metrics / Targets.

It is mandatory for companies that are subject to the Regulations to disclose climate and sustainability-related information outlined in the Regulations in the non-financial information section of their strategic reports. The information required to be provided depends on the type of company, for example, AIM companies are subject to less extensive requirements. These reports will be publicly available, accessible free of charge and filed at Companies House.

Similar requirements will also apply to certain limited liability partnerships (LLPs) in the UK. The LLP Regulations amend The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 and require certain LLPs to incorporate TCFD-aligned climate disclosures in their annual reports.

In-scope companies should familiarise themselves with the new reporting requirements and be aware of the potential for overlap with other reporting requirements. The BEIS Guidance offers additional detail on the expected disclosures. In general, companies and LLPs will be required to disclose the following information:

  • a description of the governance arrangements of the company or LLP in relation to the assessment and management of climate-related risks and opportunities;
  • an explanation of how the company or LLP identifies, assesses and manages climate-related risks and opportunities;
  • details of the processes the company or LLP uses to identify, assess and manage climate-related risks and how these processes are integrated into the overall risk management process of the company or LLP;
  • identification of the principal climate-related risks and opportunities arising in connection with the operations of the company or LLP;
  • a description of the actual and potential impacts of the principal climate-related risks and opportunities on the business model and strategy of the company or LLP;
  • an analysis of the resilience of the business model and strategy of the company or LLP, taking into consideration different climate-related scenarios;
  • a description of the targets used by the company or LLP to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
  • the key performance indicators used to assess progress against targets and a description of the calculations on which those key performance indicators are based.

Which companies do the Regulations apply to?

The Regulations apply to UK companies that are:

  1. AIM / traded companies;
  2. Banking companies;
  3. Authorised insurance companies;
  4. Companies with a high-turnover;

Provided that each such company has more than 500 employees (or together with its subsidiaries has more than 500 employees).

Are there any exemptions to the Regulations?

A company will not be subject to the Regulations if it is a subsidiary and annual climate-related disclosure is included in its parent company’s strategic report for the group. To be exempt, the parent must be a UK company (or LLP) and the strategic report must be prepared for a financial year that ends on or before the subsidiary’s financial year. The report must also include non-financial and sustainability information in respect of the subsidiary.

UK subsidiaries of a non-UK parent:

However, where a U.K. subsidiary has a non-UK parent that reports on a consolidated basis, the exemption does not apply. This means a non-UK parent may be exempt but their UK subsidiaries may be subject to the Regulations.

Non-UK companies with UK subsidiaries should be aware that their UK subsidiaries may fall within the scope of the Regulations and consider whether their strategic reports should be on an individual or consolidated basis with respect to their UK subsidiaries.

If you have any questions about this post, please contact Drew D. SalvestNatalie A. StewartRebecca Green any of the attorneys in our Banking and Finance Industry Group or the attorney in the firm with whom you in regular contact.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. For more information, please contact Brad A. MolotskyDavid AmerikanerNanette HeideDarrick MixVijay BangeSteve Nichol, or the attorney in the firm with whom you are regularly in contact.

 

ESG: Sustainability Linked Loans becoming more Commonplace in the Marketplace – Louise Melchor, Esq.

 

As environmental, social, and governance (“ESG”) initiatives are increasingly implemented by borrowers and lenders, sustainability linked loans provide opportunities for both.

What are Sustainability Linked Loans?

Sustainability linked loans (“SLLs”) are based on the Sustainability Linked Loan Principles developed by the LMA, APLMA and LSTA.[1]  In SLLs, a borrower, together with its lender group, determine and set certain sustainability performance targets (“SPTs”) for the borrower to achieve, to be measured by key performance indicators (“KPIs”).  Independent organizations, including the Sustainability Accounting Standards Board (“SASB”), provide guidance on the ESG metrics most relevant to certain industry sectors.  Once agreed between the borrower and lenders, the KPI/SPT benchmarks are then integrated into margin adjustments to the interest rate or commitment fee for the credit facility (i.e., by achieving the KPIs, the interest rate is reduced).  The credit facility documentation will also include reporting requirements for independent, external verification of the borrower’s performance level with respect to each SPT for each KPI, at least annually.

Borrower Benefits

Many companies have already undertaken ESG data collection and reporting, and more will likely do so as the SEC expands its focus on ESG disclosures and as more investors demand this information. While the above noted third party verification and reporting costs are inherent to SLLs, borrowers that are already engaging in these efforts may find they can efficiently obtain an additional economic incentive through SLL financing.  Additionally, SLLs can be part of a comprehensive alignment with the borrower’s ESG strategies and policies.

Lender Benefits

Lenders are undertaking ESG initiatives as well, in which SLLs may be a component.  And, regulatory agencies for certain lenders are communicating their plans to provide guidance on climate-related risks, and integrate these principles into their supervisory expectations.[2]  Further, studies have shown that companies (e.g., SLL borrowers) that identify and manage their ESG risks have improved financial performance.[3]  So, financing SLLs can benefit lenders across policy, regulatory and business aspects.

Current State of the Market and Next Steps

Although SLLs are a relatively new financing concept, particularly in the U.S., the volume of SLLs globally quadrupled in issuance between 2020 and 2021.[4]  As ESG momentum continues to build in the U.S., the volume of SLLs is likewise expected to continue to grow.  Currently, terms are negotiated on a transaction specific basis, and market provisions have not been added to the LSTA’s suite of documentation.  But, as SLLs become more common, the market is likely to coalesce on terms.  Stay tuned for more updates on SLLs and other trending sustainable finance products, including green bonds and commercial property assessed clean energy (C-PACE) financing.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. For more information, or if you have any questions about this post, please contact Louise Melchor, the author or Brad A. Molotsky, Nanette Heide, Seth Cooley, David Amerikaner, Jolie-Anne Ansley or the attorney in the firm with whom you are regularly in contact.

 

[1] Available at https://www.lsta.org/content/sustainability-linked-loan-principles-sllp/

[2] See https://www.occ.gov/news-issuances/bulletins/2021/bulletin-2021-62.html and https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202111032

[3] https://www.msci.com/esg-101-what-is-esg/esg-and-performance

[4] See https://about.bnef.com/blog/1h-2022-sustainable-finance-market-outlook/

 

 

 

Don’t Say Climate Change

As Florida’s “Don’t say gay” bill  (SB 1834) occupies the front pages of many media outlets today, one is reminded of an earlier (2012) state legislative exercise in prohibiting engagement with reality: North Carolina’s “Don’t say climate change” bill (H819).Unhappy with the perceived prospect of dampened economic development resulting from the state’s Coastal Resources Commission estimating that the sea level would rise by 39 inches in the next century, the state legislature chose to bury the state’s head in the sand. It passed a bill prohibiting the state’s coastal management and environmental agencies from defining the rate of sea level rise for regulatory purposes for the next four years. (“The Coastal Resources Commission and the Division of Coastal Management of the Department of Environment and Natural Resources shall not define rates of sea-level change for regulatory purposes prior to July 1, 2016.”) 

Well, the climate didn’t care. Based on a 5-year report newly released by NOAA (full NOAA report), the estimate generated by NC’s Coastal Resources Commission has proven to be very much on target. The NOAA report is enlightening, if one wishes to get into the seaweed and look at empirical data and methods for projecting forward. But an easier read can be found in the NC section of the website published by SeaLevelRise.org (here). Among the information presented is a simple graph showing the actual (not projected) increases and decreases in sea level, by year, in Wilmington, NC, measured using tidal gauges. Between 2012, when the NC legislature put the kibosh on defining the rate of sea level rise, and 2016, when doing so was again permitted, the sea level in Wilmington rose by about 4.5 inches (from 6.83 to 11.27 inches higher than the 1950 baseline measurement). The simplest of math tells us that this rate of increase exceeded one inch per year.

A 30 year mortgage loan on a Wilmington, NC or Long Beach Island, NJ shore property purchased today will not be paid off until after 2050, when NOAA is projecting that the East Coast sea level will be 10 to 14 inches higher than it is today. Legislators in many states may not yet be listening, but mortgage lenders surely must be. Maybe even erstwhile buyers, however much they may have been dreaming about a house at the beach.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discuss your proposed project with you. For more information, or if you have any questions about this post, please contact Brad A. Molotsky, Nanette Heide, Seth Cooley, David Amerikaner, Jolie-Anne Ansley, Hari Kumar or the attorney in the firm with whom you are regularly in contact.

ESG: – New York City Council Passes a Natural Gas Ban for New Buildings

Last week, New York City’s city council approved a ban on natural gas as a fuel source in newly constructed buildings.

Per reporting from NPR, nearly 40% of carbon emissions in the country — and more than 50% of New York City’s emissions — come from buildings.

The new natural gas ban in newly constructed buildings, by a vote of 40-7, applies to buildings that are up to 7-stories in height by the end of 2023; buildings that are taller than 7-stories have until 2027 to comply.

The bill contains several exceptions, including hospitals, laundromats and crematoriums.

As noted by NPR, the legislation also requires that the Mayor’s Office of Long-Term Planning and Sustainability conduct 2 long term studies. The first will examine the use of heat pump technology and the second is a study on the impact of the new bill on the city’s electrical grid.

Not surprising there has been massive pushback from the natural gas industry against these type of natural gas bans. This pushback, however, has not stopped cities around the country from proceeding with various types of natural gas ban efforts. By way of example, at least 42 cities in California have acted to limit natural gas in new buildings, and Salt Lake City, Utah and Denver, Colorado have also made plans to move toward required electrification in buildings.

Moreover, in Ithaca, New York, the city committed to ending the use of natural gas in all buildings — not just new ones.

Passing this type of natural gas ban for new buildings in New York City, the largest city in the country, marks a significant move for other cities trying to move similar legislation to attempt to cut down carbon emissions in the fight against climate change, joining cities like San Jose and San Francisco that have made similar commitments to reduce emissions.

The efforts to ban natural gas in new buildings in New York City is also being considered on a state wide basis in the New York Senate and House. Senator Brian Kavanagh (D) and Assembly Member Emily Gallagher (D) are working on legislation that would require any buildings constructed in New York after 2023 to be entirely powered by electricity. If their legislation passes, New York would become the first state to ban natural gas in new buildings on a state-wide level.

Triple Bottom Line – By passing this type of natural gas ban in new buildings, focusing on buildings as one of the largest emitters of green house gases,  New York has provided other cities with a leader to attempt to follow if they are so inclined.  As noted, California has been attempting this type of ban on a city by city basis and has passed 42 such bans throughout the state.  If New York state follows the NYC lead it will become the first state to enact such a ban and would mark a bit of a watershed moment in the fight against greenhouse gas emissions showing that buildings can indeed be constructed in this manner if reduced emissions are one of the  key goals attempting to be achieved by the builder/owner or the legislature.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. For more information, or if you have any questions about this post, please contact Brad A. Molotsky, Nanette Heide, Seth Cooley, David Amerikaner, Jolie-Anne Ansley, Hari Kumar 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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