Due Diligence for Environmental and Climate Risks
For investment and owner-occupied commercial real estate lending, project finance, oil and gas reserve loans, and cash flow lending
- Phase I Environmental Site Assessments for all kinds of projects and properties
- Environmental compliance assessments that covers major environmental laws to a level of materiality that supports credit decisioning
- Property resilience assessments to identify vulnerabilities to extreme weather and climate conditions and identify actions to improve resilience, reduce downtime, support insurance underwriting, and impacts to valuation and loan grading
- Post disaster support for recovery and loss management for on-balance sheet loans
Asset Quality Policy and Procedures
We provide everything you need to stand up an environmental risk program or broader asset quality function that reflects our decades of experience and a deep foundation of industry benchmarking. We also provide program updates and integration when banks are completing a merger or acquisition, ensuring that staff and governance reflects the post-M&A lines of business, risk framework, and risk appetite statements. Whether you are a community bank, regional banking organization, or large/systemically important institution, we have the experience to work efficiently to support your risk management program.
- Governance policy, procedures, guidance, and documentation
- FDIC, OCC, NCUA financial regulatory requirements as applicable
- Awareness training for first line underwriters, analysts, relationship managers
- Programmatic training for second line credit risk, appraisal, and internal environmental risk staff
- Outsourcing support to select the best match for external environmental and engineering vendors and develop scopes of work that conform to financial vendor management requirements
Portfolio Reviews
Cross-discipline review of environmental, engineering, property inspection, seismic, and resilience reports to provide lenders with an effective summary of key data and risks to support asset quality elements of credit risk decisions.
Outputs can be customized, or a default template can be used to provide lenders with key asset quality data to modify valuation, loan conditions, and credit scoring tasks.
- Pre-closing due diligence
- Distressed loan portfolio bid preparation
- Support for portfolio management
- Merger and acquisition review
Risk vs Compliance
Most due diligence activities focus only on those risks that materially impact the credit decision being made for a property. Take a look at any recent Phase I environmental site assessment and you’ll see a section on limitations that will specifically state that the report does not contain any determination of regulatory or statutory compliance. That’s because environmental firms tend to work at the national level with national standards, and the depth of a Phase I assessment does not include digging into the specific regulations that apply to a property or all the permits that may have been issued.
The time frame for the date of construction or major renovation, passage of new laws, and applicability of specific building codes can have a major impact on the conditions of a property and the specific obligations or liabilities of an owner or operator and their ability to repay a loan. But it can also make an impact on exit options for a property in the event of default. A lender’s decision to foreclose or take title to a property should always include consideration of that property’s code status and compliance status.