Corporate Real Estate and Environment Responsibility. Image, Reality and Transparency

[from Hersch at Vita Nuevo]

Regulators are strongly pushing corporations to report their environmental performance and liabilities. Sarbanes-Oxley disclosure requirements included revealing potential environmental liabilities from contaminated properties as well as other environmental risks. While some consultants foresaw, and probably wished for, a dramatic change in corporate policy, the results have been more gradual. In particular corporations have not rushed to dispose of contaminated site, but rather focused on identifying the problems, containing the risk, and selling properties into strong markets when secure that the environmental risk is limited.

Recent FASB regulatory proposals for greater potential disclosure of loss contingencies may further impact corporate real estate practice, and litigation. In a recent letter to the Wall Street Journal responding to an editorial FASB's Lawyer Bonanza" FASB's Chairman Bob Herz defends FASB's proposed disclosures for loss contingencies, saying "new disclosures are aimed at providing information earlier to existing and potential investors in order to give them a greater understanding of the risks companies are facing," and pointing out that, "the proposal allows companies to aggregate claim amounts, so that the plaintiffs attorneys would not be able to identify specific cases."  GE has been an illuminating example. During the Welch era, GE developed a well-deserved reputation as recalcitrant. One former EPA official said, "Show most companies the edge of the cliff, and they will comply. With GE, you had to push them over the cliff and when they are a foot from hitting with a thud, they'll start to reluctantly negotiate". One specific Welch dictum was that GE would not sell contaminated property, even to redevelopers who specialized in remediation - a strategy aimed at minimizing environmental litigation. Well. GE is now the home of "ecoimagination", realizing that many of its products, from light bulbs to turbines for windmills, sell in the green market. GE is, perhaps still reluctantly, proceeding with a half billion dollar PCB cleanup of the Hudson River. GE Capital has a humongous real estate portfolio of primarily apartment buildings, both mortgages and ownership, and is working to improve energy efficiency, led by a sustainability director - one of several former EPA experts and attorneys now working for GE.
[MORE at http://www.vitanuova.net]