Joel Ephross – Environmental, Social and Governance (ESG)

April 27, 2023 by Brad A. Molotsky

Plastic Bag Bans – Do They Work?

According to an article in the Philadelphia Inquirer per a report issued by the City of Philadelphia (the “City”), the City’s 2019 plastic bag ban has resulted in a significant reduction in the use of plastic bags – i.e., the equivalent of filling Philadelphia City Hall with plastic bags every 8 months which would be approximately 200 Million less plastic bags. The City’s report – “Evaluating the Ban: Philadelphia’s Plastic Bag Ban and Changes in Bag Usage in the City” (the “Report”) focused on 2021 to 2022, was conducted by the University of Pittsburgh and Swarthmore College and, concluded that the ban significantly reduced plastic bag use in the City.

Click on this link for a copy of the Report. extension://elhekieabhbkpmcefcoobjddigjcaadp/https://www.phila.gov/media/20230426164234/PlasticBagBanReport-1.pdf#:~:text=We%20used%20a%20difference-in-difference%20approach%20to%20estimate%20the,clear%20boundary%20between%20the%20regulated%20and%20unregulated%20areas.

The City’s ban was passed by City Council in 2019 and took effect on July 1, 2021. It prohibits retailer from providing single use plastic bags and paper bags not made of at least 40% recycled material.

Per the Inquirer, 16 other municipalities in Pennsylvania have some sort of plastic bag ban, including Cheltenham, Radnor, Haverford, Media and Pittsburgh. Cheltenham’s ordinance was recently adopted earlier this week and regulates single use plastic bags, including restaurants’ use of such bags.

The Report concluded that in each category improvement was shown in both the City and the suburbs by way of reusable bag use and reduction of plastic bag use (i.e., proportion using any plastic bag (down), proportion using any paper bag (up) , proportion using any recycled bag (up), proportion using no bag (up), number of plastic bags used per customer (down), number of paper bags used per customer (up) and number of reusable bags used per customer (up)).

As hoped for, the ban resulted in a 53% reduction in the likelihood of a consumer using a plastic bag.

Across the bridge in New Jersey, the State enacted the Single Use Waste Reduction Act in May, 2022 which banned plastic bags and foam food containers and built off of an earlier plastic straw ban which went into effect in 2021. Bags in NJ used to wrap uncooked meat, fish or poultry; bags used to package loose items; and bags used to carry live animals are all exempt from the ban. Residents continue to be frustrated, per recent polling, with the inclusion of a ban on paper bags which are not permitted to be handed out or sold at big box stores and grocery stores larger than 2,500 feet in size. The NJ ban also includes carry out and to go styrofoam cups, plates and to go containers .

Take Aways – it appears pretty clear that behavior can be changed via regulation and that the ban on the use of single use plastic bags and similar products is, in fact, reducing the among of these bags in the waste stream and in common usage without a real negative effect other than some convenience by consumers. Like many things these days, not all municipalities or States will pursue this avenue as a means to reduce dependence on plastics which tend to find their way into our water ways and waste streams, but those that do pass such bans are seeing a marked decrease in the use of these products.

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. For more information or if you have any questions about this post, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 17, 2023 by Brad A. Molotsky

The SEC and its continued focus and enforcement of “Greenwashing” by Alek Smolij

The U.S. Securities and Exchange Commission (SEC) has positioned itself as one of the United States’ leading government regulators on environmental, social, and governance (ESG) issues and in 2023 has continued a pattern of active enforcement actions focusing on their perceived view of ESG misconduct.

The underpinning of these actions has its roots in various places, including those that occurred on March 4, 2021, when the SEC announced the creation of a “Climate and ESG Task Force” in its Division of Enforcement, to focus on ESG-related gaps and misstatements in disclosures by publicly-traded companies, mutual funds, and other investment vehicles.

One of the SEC’s main enforcement focuses is “greenwashing,” a term that describes when a publicly-traded company, mutual fund, or other public investment vehicle makes a misleading claim about its ESG policies or credentials. For instance, some mutual funds may market themselves as an “environmentally-friendly” energy fund but have a relatively small amount of investor funds invested in renewable energy sources. Critics of the current regulation regime have asserted that many investment vehicles mislead investors with terms like “green,” “carbon-neutral,” and “environmentally-friendly.” These broad terms, critics say, are not adequately defined and may convince investors to direct their money to funds that the investors believe align with ESG values when the funds themselves are not actually evaluating whether their investments are in line with such values.

In late March 2022, the SEC’s Division of Examinations used the term “greenwashing” in its 2022 Examination Priorities to describe certain activities that the SEC would be paying particular attention to in the coming months The SEC noted that it would focus on whether public investment vehicles are “overstating or misrepresenting the ESG factors considered or incorporated into portfolio selection (e.g., greenwashing), such as in their performance advertising and marketing.”

The SEC proposed new greenwashing-focused rules in 2022 that would strengthen the Division of Enforcement’s ability to fight against misleading ESG disclosures. In August 2022, after a public comment period, the SEC’s commissioners voted 3-to-1 to move forward with proposed climate disclosure ESG-focused rules. These rules focus on both publicly-traded companies and investment advisors and funds. Under these climate disclosure rules (expected to be made final in April, 2023), publicly-traded companies are required to include certain climate-related disclosures in their public filings. Further, these rules will require investment advisors and funds who associate their investments with ESG to provide specific disclosures about how they pursue ESG strategies in their investments.

While these rules are still pending and have not yet been finalized, the Division of Enforcement has continued its focus on greenwashing enforcement efforts without even having the benefit of these proposed rules.

The SEC has publicly announced various settlements in the banking space and in the manufacturing space involving tens of millions of dollars in agreed-upon penalties in multiple enforcement actions focused on greenwashing. These actions have focused on SEC investigations of internal policies governing mutual funds and investment strategies branded as ESG investments.

The ESG task force has also investigated and charged companies whom the SEC found were not adequately disclosing environmental-related risks. The SEC has, for instance, settled a charge with a mining company related to failure to disclose the financial risks of mercury contamination of a river located near a Brazilian mine.

Through these actions, the SEC has indicated that it will target companies whose policies do not adequately ensure that these investment products align with stated goals of investing in ESG-focused products. Further, the SEC is keeping a close eye on required disclosures by public companies as these disclosures relate to ESG risks and issues that companies may be required to communicate to investors. The SEC undertook these enforcement efforts under existing securities laws and regulations without final passage of the proposed ESG-focused climate disclosure rules mentioned above.

Clearly, the SEC is not waiting for final climate disclosure rules to hone in on greenwashing practices, and the proposed climate disclosure rules will only strengthen the SEC’s ability to engage in similar investigations and enforcement actions.

The Division of Examination’s 2023 Examination Priorities do not explicitly use the term “greenwashing,” but they indicate that the SEC will continue to focus on enforcement actions against companies that engage in this practice. The 2023 Priorities state that the SEC will examine “whether ESG products are appropriately labeled and whether recommendations of such products for retail investors are made in investors’ best interests.” This language indicates that greenwashing-focused enforcement is clearly still a priority for the SEC, especially when paired with the SEC’s proposed new rules requiring ESG climate disclosures.

The SEC’s focus on greenwashing means that organizations associating themselves or their investments with ESG objectives should assess whether their actions line up with their stated ESG efforts and whether their disclosure matches what their records show and whether they are measurable, verifiable and provable statistics and data. Regular auditing of ESG programs, company disclosure, ESG reporting and comprehensive ESG strategy planning could help avoid a costly SEC enforcement action.

Note, we have also published on the Federal Drug Administrations renewed focus on “Greenwashing” in an early post on our blog where we documented the renewed FDA focus in the area of cosmetics and other products and issued additional guidance on greenwashing in the context of utilization of words such as “natural”, “free (of)”, “eco-friendly”, “Cruelty Free”, “renewable” and “sustainable”.

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. For more information or if you have any questions about this post, please contact Alek Smolij (the author), Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 3, 2023April 3, 2023 by Rebecca Green

ESG and the Growing Interplay with Class Action Lawsuits

The plaintiffs’ class action bar is exceedingly innovative and in constant pursuit of “the next big then” insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance – known as “ESG” – each of the verticals within ESG are surely are topics on the mind of leading plaintiffs’ class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. This blog post reviews the current landscape of litigation risks, and underscores how good corporate compliance programs and corporate citizenship are prerequisites to minimizing risk.

The Class Action Context:

In 2022, the plaintiffs’ class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review https://blogs.duanemorris.com/classactiondefense/2023/01/04/it-is-here-the-duane-morris-class-action-review-2023/, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights.

As “success begets success’ in this litigation space, the plaintiffs’ bar is loaded for bear in 2023, and focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk.

The ESG Context

Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or “CSR”), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial.

In recent years, ESG programs have become more extensive and more deeply integrated with companies’ core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value.

As ESG programs become larger and more integrated into a company’s business, so do the risks of attracting attention from regulators and private litigants.

And The Lawsuits Begin From All Quarters:

While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space.

Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling https://blogs.duanemorris.com/classactiondefense/2023/01/30/delaware-says-corporate-officers-are-now-subject-to-a-duty-of-oversight-in-the-workplace-harassment-context/ in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.

Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC’s proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for “greenwashing” claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company’s general statements about its commitment to sustainability.

State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false advertising and other misleading marketing statements. The plaintiffs’ bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face “reverse discrimination” claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements.

Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged contributions to climate change or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.

Implications For Corporate America:

The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG progams will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.

Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one’s exposure.

Duane Morris has an active Class Action Team to help organizations respond to the ever increasing need to be proactive to these types of risks. For more information or if you have any questions about this post, please contact Gerald (Jerry) L. Maatman, Jennifer Riley or the attorney in the firm whom you are regularly in contact with. We also have ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

September 8, 2022 by Brad A. Molotsky

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.

August 31, 2022 by Brad A. Molotsky

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.

August 17, 2022 by Brad A. Molotsky

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.

July 1, 2022 by Brad A. Molotsky

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.

June 10, 2022 by Brad A. Molotsky

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.