Top Ten Checklist for Your Environmental Policy

Dianne Crocker, Principal Analyst for EDR Insight, authored a technical brief for commercial real estate lenders entitled, "Top Ten Things to Think About When Writing or Updating Your Environmental Policy."

1. Roles and Responsibilities
Does your policy clearly define the roles and responsibilities of key individuals? Policies often spell out which business units/groups at the bank must adhere to the policy, who will enforce it, who can approve exceptions (and under what circumstances) and who is responsible for reviewing environmental reports and communicating the results to loan officers and other stakeholders at the bank.

2. Qualifications for Environmental Professionals
Does your policy limit the outsourcing of Phase I environmental site assessments only to those who have the
requisite experience, education and training? Many financial institutions adopted the definition of “environmental
professional” included in the U.S. EPA All Appropriate Inquiries rule and the ASTM E 1527-05 Standard Practice for Phase I Environmental Site Assessments, while others established their own professional qualifications. The policy should also define who at the bank is responsible for approving individual vendors, and reviewing and maintaining the list over time.

3. Phase I ESA Thresholds
Does your policy define conditions that automatically trigger a Phase I environmental site assessment? In the past, bank policies typically did this by assigning a loan size threshold (“All loans above $1 million require a Phase I ESA.”). Today it is more common for Phase I ESA decisions to also define specific high-risk property uses (e.g., requiring any property once used as a gas station to get a Phase I ESA). The latter is consistent with the approach adopted by the U.S. Small Business Administration policy which requires Phase I ESAs for loans on properties associated with particular NAICS codes. (If your policy references the SBA policy, be sure it is the most recent version 50 10 5 (D) that was released in September 2011.)

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