ESG – EPA Announces National Recycling Strategy

Earlier this month, the Environmental Protection Agency (EPA) released its National Recycling Strategy.  Interestingly, as they have not always been aligned on issues in the past, the American Chemistry Council’s (ACC) Plastics Division issued the following statement …“America’s Plastic Makers® today welcomed EPA’s National Recycling Strategy, which will help the U.S. achieve its goal of recycling 50% of post-use materials by 2030. EPA’s Strategy also recognizes the potential of advanced (chemical) recycling technology to transform plastic recycling rates in the United States. Advanced recycling is critical for achieving a more circular economy for plastics. Since 2017, 65 advanced recycling projects have been announced that have the potential to divert more than 5 million metric tons of waste annually from landfills.”

“There is significant alignment in what America’s Plastic Makers are calling for in our 5 Actions for Sustainable Change and what EPA has laid out in its National Recycling Strategy. This is particularly evident in the Strategy’s support of increasing domestic markets for recycled material, creating national recycling standards to reduce contamination and measure results more effectively, and enhancing recycling infrastructure.

Further to this end, the ACC called on Congress to further help the EPA implement its strategy and achieve its recycling goals by enacting policies such as a national standard requiring plastic packaging to contain 30% recycled plastic by 2030 and an American-designed producer responsibility system to improve recycling access and collection of all materials.  While some might view this as enlightened self-interest given the 70% no- recycled plastic, this author prefers to focus on the positive attribute of having a 30% recycled content requirement and the positive progress this will represent on this front.

Per the ACC, “consumers want packaging with more recycled plastics material, more than 400 brands have committed to increasing the amount of recycled material in their packaging, and America’s Plastic Makers have set a goal to have 100% of plastic packaging to be reused, recycled, or recovered in the U.S. by 2040. EPA’s Strategy lays the groundwork to make much of this possible.”

Triple Bottom Line – While it is sometimes easy to be cynical about alliances and partnerships in the ESG and sustainability space, in this instance it is nice to see the alignment of the EPA and the ACC regarding increasing recycled content and setting industry wide standards with the ultimate goal to create a 100% goal for recycled, reused or recovered for particular materials.  N

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, Jolie-Anne S. Ansley, David Amerikaner,  Seth Cooley, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

Decarbonization of the UK Construction Sector?

It’s probably too early to deliberate whether COP 26 was a success, and if progress has been made since Paris. Glasgow will be remembered for the passionate speech from the Maldives representative, which reminded us (if ever we needed reminding) of the Armageddon-esque effects of climate change to the planet as a whole, and to small island nations in particular. The target remains to aim for net-zero carbon emissions by 2050, and to keep global warming close to 1.5 degrees.

To read the full text of this post by Duane Morris partner Vijay Bange, please visit the Duane Morris London Blog.

ESG – NJ Single Use Plastic Ban becomes effective as of November 4, 2021

Beginning this coming week, on Thursday, November 4th, restaurants, convenience stores and other food-service businesses are required to comply with a new NJ state law that prohibits them from providing customers with single-use plastic drinking straws unless the customer has specifically requested one.

The new restriction does not impact the sale of beverages that are prepackaged with a plastic drinking straw, such as juice boxes, nor does it apply to the sale of boxes of straws in food stores.

Per NJBIZ, the by-request-only restriction on plastic single-use drinking straws applies to all food-service businesses, including restaurants, convenience stores and fast-food establishments.

Additional restrictions, which take effect May 4, 2022, include bans on single-use plastic carryout bags, single-use paper carryout bags at grocery stores of 2,500 square feet or more, and polystyrene foam food-service products.

For additional information, the state has created a new website at www.nj.gov/dep/plastic-ban-law which includes information on who are “regulated entities”, a Frequently Asked Questions page, a list of establishments and how the law impacts them, and more.

Additionally, the NJ Business Action Center has created a clearinghouse at https://business.nj.gov/bags/vendorclearinghouse to aid businesses in identifying vendors and manufacturers who sell reusable carryout bags permitted by the new law.

Triple Bottom Line – New Jersey joins a growing list of cities, counties and other states who are clamping down on single use plastics as a source of pollution which is exacerbating a growing issue within our sea life as plastics find their way to streams, rivers and oceans, break down and are ingested by the fish we often eat.

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, Jolie-Anne S. Ansley, David Amerikaner,  Seth Cooley, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

ESG – NJ BPU awards 165 MW of Community Solar in Yr 2 of Pilot Program

Earlier this week, on October 28, 2021, the New Jersey Board of Public Utilities (“BPU”) approved 105 applications under New Jersey’s Community Solar Energy Pilot Program.  The applications and awards will create 165 megawatts of clean energy – enough energy to power approximately 33,000 homes – available to low-to-moderate income and historically underserved communities. Year 2 of the pilot program represented a significant increase in the amount of power generated (i.e., from 78 MW to 165 MW) and the number of applications seeking to install community solar.

According to Governor Murphy, “our Community Solar Pilot Program is a national model for clean energy equity and environmental justice, This program not only makes solar available to those in historically underserved communities, but also will spur economic growth and create career opportunities for a diverse, more inclusive workforce. Community solar is a key pillar in our commitment to transition New Jersey away from harmful emissions and towards 100% clean energy by 2050.”

A community solar project is a solar array whose output is divided between multiple homes or businesses that want to use renewable energy but don’t have a solar array on-site.

Community solar programs aim to create a more equitable solar market.

According to NJ BIZ, the projects will each allocate a minimum of 51% of their capacity to low- and moderate-income participants and will all be located on landfills, brownfields or rooftops.

Though 105 projects were approved, the NJBPU received 412 applications, representing almost 804 MW, for the second year of the pilot program.

In the pilot program’s first year, the BPU received a total of 252 applications representing more than 650 MW of total capacity, and approved 45 applications providing almost 78 MW in solar energy capacity.

Earlier this month, the BPU announced that it will be moving forward to make the Community Solar Pilot Program permanent.

Triple Bottom Line – New Jersey continues to be a factor in the US solar market place.  Making the community solar pilot program a permanent program will continue to position the state as a leader in solar deployment and per capita renewable energy use.  The power creation represented by the program will likely solidify existing solar jobs  and create new ones to service the demand for installations and service.  Low and Moderate income families will benefit by the cheaper cost of energy given the renewable nature of the deployment.  As the program moves to a permanent status we will continue to keep an eye on the regulations and report back with our findings.

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, Jolie-Anne S. Ansley, David Amerikaner,  Seth Cooley, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

 

#ESG – NJ Utility PSEG announces two new environmental commitments and issues 2021 Sustainability Report

Local utility Public Service Enterprise Group (“PSEG”) announced earlier today, October 15, 2021, that it has joined The Race to Zero and Business Ambition for 1.5°C, two campaigns that use science-based targets to aid the fight against climate change.

The Race to Zero and Business Ambition for 1.5°C campaigns are designed to help mobilize support from businesses, cities, regions and investors for a healthy and resilient zero-carbon economy, in line with global efforts to limit warming to 1.5°C.

PSEG’s also issued its 2021 Sustainability and Climate Report, which updates the company’s achievements and goals for a wide range of topics, including air emissions, energy efficiency, transportation and waste minimization.

PSEG Chairman and CEO Ralph Izzo said “Climate change is one of the preeminent challenges of our time, and PSEG has an obligation to help address climate change and its effect on our environment, our customers and communities around the world.”

Their Report showed PSEG’s generation portfolio emission rates for NOx and SO2 were down year-over-year by 58% and 77%, respectively, reflecting emission rates that are significantly below industry averages.

The Report also provides updates on PSEG’s progress across a range of sustainability categories, including:

  • Energy efficiency: PSEG’s energy efficiency targets have been updated and remain on track. New Jersey regulators approved $1 billion of energy efficiency spend for the three-year programs, designed to help the state achieve its updated framework for energy efficiency and peak demand reduction programs, setting five-year savings targets of 2% for electric distribution and 0.75% for gas distribution companies. PSEG’s targets are aligned with New Jersey’s Clean Energy Act (2018), which calls for these savings to be achieved by 2023.
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  • Transportation: PSEG aims to reduce fossil fuel use in its own transportation fleet through vehicle electrification, rightsizing the fleet and utilizing renewable fuels. By 2030, PSEG aims to convert its passenger vehicles, such as sedans and SUVs, 60% of medium-duty vehicles and 90% of heavy-duty vehicles to battery electric vehicles, plug-in hybrids or anti-idle jobsite work systems.
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  • Waste minimization: Companywide, waste and recycling programs successfully diverted 95.5% of material from landfills in 2020. The ongoing goal for its utility, PSEG to focus on new waste streams for recycling, which will continue to decrease landfill tonnage. The waste minimization goal for PSEG is to divert in excess of 95% of material from landfills.
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  • Air emissions: PSEG is reducing air and other emissions by updating its operations and transitioning to cleaner sources of energy, and, per their Report, already has one of the lowest emissions rates among investor-owned power producers, according to MJ Bradley’s Benchmarking Air Emissions report, July 2021. As of 2020, PSEG has reduced its greenhouse gas emissions by more than 54% since 2005 through switching to lower-carbon fuels, improving energy efficiency and modernizing its electricity and natural gas networks, among other strategies.
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  • Biodiversity: PSEG is committed to promoting and enhancing biodiversity through natural resource conservation while continuing to operate in a safe and reliable manner. PSEG established the Estuary Enhancement Program in 1994. Protection of natural resources and biodiversity informs their environmental philosophy and the planning process considers the potential impacts on regional biodiversity.
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  • Diversity, equity and inclusion: PSEG has a target of 30% of total applicable spending allocated to diverse suppliers, including minority-, women-, veteran- and LGBTQ+-owned suppliers. During 2020, PSEG had a sixth consecutive record-setting year by buying more than $644 million worth of goods and services from diverse suppliers, a 15% increase over 2019. More than 28% of the company’s purchases were with diverse vendors. And PSEG is helping develop New Jersey’s clean energy workforce through innovative training and development programs, emphasizing low- to moderate-income and underrepresented communities.
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  • Environmental justice: According to the Report, PSEG is developing an environmental justice commitment in support of the many diverse communities it serves across the region and believes such a commitment should convey the importance of centering environmental justice considerations across the organization so that customers — especially those in underrepresented communities — can benefit from the coming changes of a decarbonized future.

Triple Bottom Line – PSEG is one of a growing number of public utilities that have pivoted and started to embrace climate goals and climate change as being critical to their future success.  While not all utilities are aligned this way, many are beginning to take real steps to make change in this regard.  Much still to do for sure but good, solid, accountable and reportable steps in the sustainability and ESG arenas.  Kudos for the effort and the transparency. 

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, Darrick Mix, Jolie-Anne S. Ansley, David Amerikaner, Christiane Campbell, Sheila Slocum-Hollis, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

ESG: Boston University Joins the Growing List of Universities Divesting from Fossil Fuels

Earlier this week, Boston University’s Board of Trustees announced that they had decided to divest its endowment from fossil fuels

According to an open letter dated Sept. 23 and posted on the school’s website, President Robert Brown said the board made its decision earlier that week. 

As of Sept. 22, the school will no longer commit direct investments in companies that extract fossil fuels. It will also divest from current, direct investments in fossil fuel extractors and will not commit to any new investments in dedicated fossil-fuel focused products in any asset class.

However, the school has private fossil fuel investments that will likely take more than a decade to wind down per reporting from Justin Mitchell. 

The release also indicated that the endowment will seek out investment managers that can provide opportunities in renewable energy sources and “fossil-fuel-free products.”

Brown’s letter also stated that only “a very small fraction” of the university’s endowment is invested in “fossil fuel producers and extractors,” rendering the move to divest “economically inconsequential.”

According to Mr. Mitchell, the endowment is valued at more than $3 billion, according to Boston University’s website and it had approximately $2.4 billion at the end of the 2020 fiscal year, according to an annual report from the National Association of College and University Business Officers.

Boston University is the latest prominent university endowment to announce a divestment from fossil fuels, joining  the University of California, Brown University, Cornell University, Georgetown University and Harvard University, in committing to this type of divestiture program.

Triple Bottom Line – BU has joined the growing chorus of major institutions that have begun divesting their endowments of fossil fuel investments.  While BU’s announcement is not individually overly statistically significant numerically, the number of major higher educational institutions is continuing to grow and gain momentum.  As more institutions of higher education join this chorus, it is likely that fossil fuel divestiture will become more than a few one offs and has the potential to become a trend in the ESG space.

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, Darrick Mix, Jolie-Anne S. Ansley, David Amerikaner,  Edward Cramp, Katherine D. Brody, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

ESG – Wynn Resorts Announces Sustainability Goals with public ESG Reporting – Big Moves!

Earlier this week, on September 21, 2021 Wynn Resorts issued its Environmental, Social and Governance (ESG) Report, which included the Company’s collective pledges and defined goals to decrease emissions and confront the mounting risk of climate change.

According to the report, Wynn Resorts has achieved various ESG and Diversity, Equity and Inclusion (DEI) goals, with strides being made in community outreach and crisis relief efforts, responsible business practices, and human rights.

In the report’s forward, Wynn Resorts CEO Matt Maddox remarked, “…operating in today’s socially and environmentally-fraught world, [the company] is called to a higher standard: to take responsibility, not just for our decisions, but for the all future impacts of those decisions. Impacts we ourselves may not live to see, but will have caused, nonetheless. Decision-making with careful consideration to the impacts 20 or 30 years from now isn’t just essential, it’s an existential imperative. That is what the future demands of us.”

The Wynn Resorts sustainability program, known as Goldleaf, attempts to bring solutions to the wide range of environment and climate challenges that are unique to each resort that Wynn Resorts operates.

Under the direction of CEO Matt Maddox and Chief Sustainability Officer Erik Hansen, the Company has committed to the following Wynn Resorts Corporate Sustainability Goals:

Net-Zero by 2050: To reduce or offset all carbon dioxide (CO2) produced by our operations no later than 2050.

Carbon Dioxide Emissions Peak by 2030: To stop and reverse year-over-year growth of operational carbon dioxide (CO2) emissions by 2030.

50% Renewable Energy Procurement by 2030: To increase Wynn Resorts supply of renewable energy produced or procured to at least 50% of total consumption by 2030.

The above commitments are aligned with the recommendations made by the Intergovernmental Panel on Climate Change (IPCC) for limiting global warming to below 1.5 degrees Celsius, as referenced in the 2015 Paris Climate Accord.

In 2020, Wynn Resorts completed several major projects in renewable energy, waste diversion, and emissions reduction, including:

Wynn Resorts installed 23 Megawatts of solar power capacity in the United States, which offsets 100% of the energy consumed in the 560,000 square-feet of convention space in Las Vegas, and up to 75% of the peak power demands of the entire 10-million-square-foot Las Vegas resort.

Wynn Las Vegas reduced its annual energy consumption by 20% in 2020 relative to 2015 through capital investments in critical energy-reducing technologies and operational efficiencies, most notably the 160-acre Wynn Solar Field and a concerted effort on preventive systems maintenance.

Encore Boston Harbor received 100% of its energy from renewable and green sources of power and, according to the Report, is the first integrated resort in the Unites States with an onsite microgrid balancing solar energy production, combined heat and power co-generation, and battery storage.

Wynn Las Vegas reduced Carbon Dioxide (CO2) emissions by over 80,000 metric tons from 2019 to 2020, achieved by offsetting energy procured from traditional fossil fuel-based generation with renewable and green energy products. 

Encore Boston Harbor diverted 100% of waste from the landfill in 2020 during its first full year of operation, utilizing its comprehensive waste management infrastructure of recycling, composting and waste-to-energy conversion to ensure no waste goes to a landfill.

Wynn Resorts CEO Matt Maddox spearheaded the creation of one of the hospitality industry’s first science-based Health & Safety Plan, which Maddox presented during the White House Business Council on Reopening. The plan became the preeminent roadmap to a successful reopening effort, with policies adopted by several other international brands and industries.

Wynn Las Vegas collaborated with University Medical Center (UMC) to open the UMC COVID-19 Vaccination Center, the first vaccination site to be located onsite at a resort, which administered over 50,000 vaccinations to eligible Nevada residents.

Wynn Las Vegas built and opened the Lighthouse Lab COVID-19 testing facility, a 3,000-square-foot facility at the resort staffed by medical professionals from Lighthouse Lab Services who administer up to 7,000 PCR tests per day, helping usher the return of convention business and group events.

Globally, per the Report, Wynn Resorts donated $23 million USD in funds and in-kind donations to charities in 2020, which included $4.75 million in direct COVID-19 relief efforts, almost $1 million in food and meals, and over 2.5 million pieces of personal protective equipment to recipients like the Nevada National Guard and the Macau Government. In addition, Wynn Resorts global workforce volunteered over 34,000 hours of time in 2020.

The Wynn Resorts Human Rights Policy was broadened in 2020 to include specific expectations and core principles for diversity, inclusion, and non-discrimination. In addition, the Wynn Resorts Diversity Council drafted the first Wynn Resorts DEI Policy to codify goals that foster a culture of inclusion, embrace a diverse workforce, and develop vendor partnerships that create a fair and equal economy.

According to the company, extensive training and security procedures were enhanced in 2020 to combat human trafficking and commercial sexual exploitation, including the development of a company-wide training program for trafficking awareness that will be mandatory for all employees.

The Wynn Resorts ESG Report presents information that references select Global Reporting Initiative (GRI) Standards and Sustainability Accounting Board Standards (SASB).

Triple Bottom Line – Wynn’s public announcement of their Sustainability Goals is a big step and will likely put pressure on their competitors to make similar announcements regarding their plans. Time will tell. Care to take a bet on this front?

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, Darrick Mix, Jolie-Anne S. Ansley, David Amerikaner, Adam Berger, Frank DiGiacomo, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

ESG – Green Bonds and Green Financing Continues Torrid Pace of Uptake – $2.36 Trillion Anticipated by 2023

I had the pleasure of hosting Emily Paciolla (Federal Realty), Dan Winters (GRESB), Ethan Gilbert (Prologis) and Ben Myers (Boston Properties) this past week on our monthly ESG podcast.

Wow, what a fascinating conversation focusing on what each of their companies (leaders in their own industry segments of industrial, office and retail as well global benchmarking on the GRESB front) are doing and how they are utilizing green bonds as a part of their strategies for continuing to invest in sustainable solutions for their companies and their clients (i.e., their tenants).

The panelists represent over 1 Billion Square Feet of office, industrial and retail space in the US and abroad and are market movers in their respective sectors.

We heard on the podcast that interest in GRESB, the Global Real Estate Sustainability Benchmark that is used to rate companies (i.e., aggregation of assets not just single buildings but portfolios), has also continued to have an incredible uptake of clientele companies joining GRESB and submitting to their voluntary benchmarking and scoring.  In 2020, over 1,200 international companies submitted to GRESB and, with yesterday’s filing deadline for 2021, it is likely that over 1,600 companies will be submitting in 2021.  Each of these companies have multiple assets and, as such, represent a growing footprint of square footage willing and interested in participating in measurement, verification and benchmarking.

The panelists also discussed that within their companies, they are voluntarily reporting their results publicly and are having these results verified by external reporting.  These ESG and sustainability reports have been published and other public companies are following their lead and also publishing their results (e.g., over 85% of Fortune 500 companies publish their results). 

All panelists have issued green bonds and anticipate likely future issuances.  Both Boston Properties and Prologis have issued over $1B of green bonds each and continue to expand the depth and breadth of their investments.  Federal Realty has also used their green bond proceeds to broaden and deepen their LEED certifications  and other sustainability programs within the portfolio of over 110 properties in the US.  Green bond dollars have been used to  further other ESG and sustainability initiatives and help expand building certifications (LEED and BREAM as well as WELL and Fitwel) within each of their respective portfolios and enable initiatives to be pushed further and faster.

Of particular interest is not only the scale that they are issuing bonds but also that these bonds are being priced with a discount of 5-15 basis points cheaper than non green bonds – meaning, it is cheaper to borrow this type of money for green usage and investment than for non green usage.  Over a few billion dollars, these basis points may sound small but these savings are NOT…think millions of dollars of savings each year and over the life of the bond.  Real money being invested in green investments at a cheaper rate!

During 2021, ESG efforts at these companies will be focusing on supply chain sustainability metrics, use of materials, embodied carbon, renewables including on-site solar energy generations, energy efficiency, the Task Force on Climate Disclosure, Scope 3 emissions and diversity, equity and inclusion.

While not all tenants everywhere are asking about green features in their buildings, more and more are interested in them in the panelists’ views and to address this interest, these companies continue to offer more and more green attributes and features within their respective portfolios.  Moreover, with return to work post pandemic being somewhat imminent, the panelists also saw the role of the Chief Sustainability Officer being expanded in most cases to include some level of involvement or oversight with respect to health and safety and return to work – think elevator policy, green cleaning and chemicals, plexiglass and social distancing, air conditioning and fresh air intake and MERV filtering of air (13 or higher to trap 99% of air borne particulate matter), etc.

Our panelists have also tied their revolving credit facility metrics on rate to various ESG metrics and are also tying executive compensation to various ESG and sustainability metrics.  As we have reported previously, as more public companies tie compensation to reaching various ESG goals, the uptake will continue to build until this approach is not viewed as novel but, rather, common place, as others will likely begin to follow this lead or be viewed by investors as not paying attention or caring.

We also heard the Roger Platt-ism of a “self-licking ice cream cone” being used to describe the interplay of measuring, verification and outcome in the green space across various segments (longer explanation need than we have room for but ring me and we can discuss) – as well as describing the ESG space as being a lot of Plan, Do, Check and Act!

Triple Bottom Line – with over 23 countries represented and a Strategic Framework being created and issued by the World Bank in 2008, green bond issuances started slow and steady but have seen a massive uptake in interest and investment in the last 6 years.  The bonds and financings have been used to support and encourage environmentally friendly projects in the US and internationally (including required covenants to maintain these projects on a go forward basis).  In 2020 over $269 Billion in green bonds were issued, noting that the pandemic did little to dampen enthusiasm for this green type of investment vehicle.  In Q-1 of 2021 we saw over $106.86 Billion of green bond issuances, a bit of a harbinger of a super green bond year.  All in all there have been approximately $1 Trillion of green bond issuances cumulatively with an annual year of year uptake of 60% growth since 2015.  Current estimates have cumulative totals of green bond issuances at over $2.36 Trillion dollars by the end of 2023

As such, this author’s view is that green bonds as a financing source is NOT a passing fad, rather they are a viable source of debt capital and continuing to build in interest and issuances both nationally and internationally and will continue to do so.

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, Darrick Mix, Jolie-Anne S. Ansley, David Amerikaner, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

P.S. Our panelists divulged that their favorite podcasts these days include “How things Work”, “The Hidden Brain”, “How to Save a Planet”, “The Energy Gang” and “Big Switch” – check it out!  Also, if you are looking for a super children’s book to help explain climate change to your kids, check out “Earth’s Climate Heroes” – A+

 

 

NYC enacts Racial Equity Reporting for Many Land Use Projects

On June 17, 2021 the New York City Council passed Intro – 1572-B,  legislation which requires “racial equity reports” for certain land-use actions. According to Langan and the ordinance, racial equity reports will be standalone, project-specific, publicly-available documents that provide supplemental information for use  during the Uniform Land Use Review Procedure (“ULURP”) process.

Starting June 1, 2022, a racial equity report will be required for applications involving all of the following actions:

  • Adopting citywide zoning text amendments that affect 5 (or more) community districts;
  • Designating historic districts that affect 4 (or more) city blocks;
  • Acquiring or disposing of (selling) city-owned land for a project containing at least 50,000 square feet of floor area;
  • Increasing permitted residential floor area by at least 50,000 square feet;
  • Increasing permitted non-residential floor area by at least 200,000 square feet;
  • Decreasing permitted floor area or number of housing units on at least four contiguous city blocks;
  • Changing the permitted floor area (for any use) in a manufacturing district; and
  • Changing use regulations in a manufacturing district with a project containing at least 100,000 square feet of floor area.

The New York City Department of City Planning (“DCP”) and Department of Housing Preservation and Development (“HPD”) will have administrative oversight of the racial equity reports and have been charged with aggregating the data and developing detailed guidance for further report preparation.

According to the Real Deal, the measure requires the DCP and the HPD to create a database (called the “equitable development data tool” (“EDD”)) with current and historic information focusing on neighborhood demographics, affordability and displacement risk. The EDD will include a 20 year lookback, disaggregated by race origin, aimed at spotting trends in the data over time.

For residential developments, reporting would include proposed rents or sales prices and the household incomes as well as listing the number of government-regulated affordable units at different income levels.

For nonresidential projects, reporting would include the “projected number of jobs in each sector or occupation, median wage levels of such jobs based on the most recently available quarterly census data on employment and wages or other publicly available data, and the racial and ethnic composition and educational attainment of the workforce for the projected sectors of such jobs.”

It’s easy to provide this information for projects with government regulatory agreements; not so for areawide re-zonings and private applicants, where many outcomes are possible. By acknowledging the “worst” possible outcomes (market-rate housing! non-union jobs!), the reports will tee up the opposition’s demands.

Triple Bottom Line – often California leads policy and mandates on various social issues, in this instance, New York City has taken action and mandated racial equity reporting in various land use developments for new projects on a go forward basis.  This action will require the aggregation of critical data in order to make land use decisions which will likely result in a different, more informed decision making process that takes into account racial disparity and equity.  A big step in the process and one which many towns and municipalities in the US will look to in their own decision making.  Too early to call on overall success of the initiative or what will occur, but in my view, a big important step in enabling more informed decisions, that this commentator believes will be the beginning of a more national move in many cities to similar reporting and requirements.

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, Darrick Mix, David Amerikaner, Vijay Bange, Stephen Nichol, or the attorney in the firm with whom you are regularly in contact.

ESG: Will Creating C-Suite Pay Linkages with Diversity, Equity and Inclusion Goal Achievement drive behavior change?

Earlier this year we saw some large market movers tie certain of their credit facility metrics to achieving various ESG goals regarding gender and diversity goals. This appears to be gaining some traction as more companies who’s facilities are renewing are seeing some pressure on this front (i.e., cheaper credit/borrowing rates for achievement of ESG goals).

In addition to borrowing rates now starting to bear some correlation to ESG goal achievement, some companies are now tying executive compensation to specific ESG goal achievement as well.

As recently reported by Emily Glazer and Theo Francis in the Wall Street Journal, Starbucks (increase in managerial diversity), McDonald’s (increase in minority and racial minority leadership roles), Nike (increase in racial and gender diversity) have announced actual compensation based targets that will affect CEO and sr. officer pay depending upon specific ESG DEI (diversity, equity and inclusion) goal achievement. While some would argue this is in relation to increased Board, shareholder and stakeholder engagement and pressure on these companies, others would respond that the companies were already moving in the direction of more causal linkage of ESG goals and compensation.  

Nike – setting a goal of 45% of global leadership positions to be held by women, up from 40% in 2025; and 30% of US directors to be members of a racial and ethnic minority, up from 27%

McDonald’s – setting a target of 15% of top executive bonuses being tied to human capital measures including improving the number of women and minorities in the company i.e., 45% of international senior directors and higher managers should be women and 35% in the US are to be held by racial and ethnic minorities, up from 37% and 29% according to the reporters.

Looking back at corporate disclosures from 2020, it was reported that 165 companies or 33% of the S&P 500 companies had disclosed using some level of diversity metric in their compensation structure.  This 33% is up from 2020 where Glass Lewis reported that 20 companies had specific DEI metrics tied to compensation and up from 2018 where only 10 had any such metrics. 

As these metrics continue to evolve, my sense is better and more transparent measurements will emerge and begin to be assured by external audit type companies to confirm and verify goal achievement.  How one retains a worker, recruits a worker and how diverse their supply chain is subject to interpretation, and, as such, clarifying what is being measured and by whom will take some work but our sense is this will be clarified in the next 1-3 years.

“There is a growing body of evidence that shows that companies that have diverse teams outperform companies that are not diverse, whether they’re looking at operating performance or financial performance or innovation“, according to Simiso Nzima, head of corporate governance for California Public Employees’ Retirement Systems as identified in the WSJ article.

Triple Bottom Line – Will putting their proverbial money with their disclosure mouths have been drive additional change? I tend to believe that directly incenting behavior with targeted bonus compensation will, and does, drive specific behavioral outcomes. In this case linking specific bonus targets to ESG DEI outcome achievement will create additional focus and precision in the company’s adhering to and achieving these DEI goals. As such, my sense is that as more and more companies adopt these practices, ISS and Glass Lewis will consider if these metrics should be “matter of course” and as such if a company does NOT have it as a compensation metric it will run the risk of being singled out as poor performer.

Thus, one’s ESG diversity and inclusion goals will actually begin to have a direct fiscal impact on a company’s compensation to its senior officers which is highly likely to get additional or continued focus by these senior officers to insure achievement of these goals.  As other S&P 500 corporations begin to include DEI metrics as being tied to compensation, this will also put additional pressure on other public and non public companies to begin measuring and then reporting on DEI type outcomes.

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, Darrick Mix, David Amerikaner, Vijay Bange, Stephen Nichol, 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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