Bury Your Head in the Sand and ESG will Go Away

ESG has become such a large component of my law practice that I am now collaborating with a fabulous group attorneys in ESG Legal Solutions, LLC, a new non-law consulting firm. Nancy Hudes and I will be publishing a new blog beginning later this month at www.ESGLegalSolutions.com. And if we can assist you or a client of your in ESG matters, do not hesitate to reach out to me.

The origin of this idiom comes from the widespread misconception that ostriches bury their heads in the sand. Despite that this incorrect myth is two thousand years old, originating in ancient Rome, hiding from danger with the thought that if you cannot see an attacker they cannot see you, has never proved a good strategy.

Businesses cannot ignore or refuse to think about the environmental, social and governance (ESG) space; it is not going away.

While the idea of ESG began in 2004 with a United Nations initiative to influence capital in non-Western markets, in 2021 the legal and political institutions in the United States and the EU are demanding those ideas be implemented by businesses posthaste.

Additionally, investors and also employees, vendors, suppliers, and a host of other stakeholders are now looking for companies to create and implement sustainable policies and practices that respond to environmental and social matters.  Whereas in the past there might have been a single print story seen by Wall Street Journal subscribers, today, there is viral social media that can attack a company with millions of views in hours if not minutes.

Businesses are being pulled into or have in some cases voluntarily dived into the risk and opportunity that is ESG.

A recent study found only 42% of public companies identified having at least one director with expertise in ESG. Yet companies are under pressure to articulate ESG policies and practices, sometimes on what are controversial matters, while boards of directors and c-suites are struggling to navigate in this new space. This is not surprising given the breadth of the ESG landscape.  Many of the ESG topics don’t lend themselves to mathematical reporting of data (.. something companies are good at). The Wall Street Journal recently asked, is there really a balance (not to say a moral equivalency that should have a single spreadsheet) prioritizing an increased number of women employees versus reducing plastic waste? Significantly, many ESG issues lack any clear tie to financial “materiality” such that they have not in the past risen to the bar of an SEC permitted, not to say mandated, disclosure. Other regulations also prohibit ESG disclosures as recently posted about, Labor Department Will Not Enforce Anti ESG Rule.

Some will remember when this topic was characterized as “corporate social responsibility” issues and was treated separate and apart from the business of earning profits. In 1976 when Milton Friedman received the Nobel Prize in economics, matters of climate change and others that now are under the large umbrella of ESG, were topics that could bear on the public good, but were not relevant to maximizing value for shareholders. But, no more.

As public sentiment has changed, public policy is following. Today boards of directors increasingly have oversight obligations including related to climate and other ESG risks, and disclosures of those risks. Those obligations flow from current interpretations of both the federal securities laws and fiduciary duties of loyalty and care rooted in state law.

Under the federal securities laws, the board plays a critical and mandatory role in the existing corporate disclosure process. This increasingly requires directors to think about and consider the impact of climate change and other ESG matters on the financial statements and other corporate disclosures. For example, we have worked with companies for more than a decade reacting to the SEC’s 2010 climate guidance that identifies disclosure obligations.

And since the passage of Sarbanes Oxley in 2002, boards at public companies directly oversee the audit of financial statements which processes must consider and often disclose environmental and other matters.

This is all happening now. This year’s proxy season saw large numbers of environmental and other ESG matters brought to the floor at public company annual meetings. In a much reported example, 65% of shareholders at the United Airlines annual meeting voting in favor of a resolution seeking more information on how the company’s lobbying aligns with the goals of the Paris Agreement. We have worked with public companies and their counsel for years on responding to these matters, but the level of shareholder activism in 2021 is unprecedented.

As we await new federal statutory and regulatory action promised by the Biden Administration, today we provide legal and non-law solutions not only to mitigate ESG risk but also to work with businesses in order to maximize ESG opportunities.

Today, for many of our clients, reputational risk is real in the realm of sustainability, and so is the opportunity for a company to stay relevant by incorporating ESG into management and governance practices. If the organization wants the very best employees (.. think human capital) and to keep its very best customers and attract new customers (.. current and future revenues), in most business sectors, today, actively participating in the ESG space is of import. And yes, much of our work is preparing clients to thrive in the all but certain and fast approaching more prescriptive ESG regulatory framework.

There is no one right answer for each individual company on how to mitigate risks and maximize opportunities with respect to ESG issues. These are complex, evolving and, in some instances, highly charged issues, but businesses must act.

Business leaders cannot bury their heads in the sand because ESG is big and bold and here to stay.

Phase l Environmental Site Assessment Standard Being Revised

The Phase l Environmental Site Assessment Standard E1527-13 will sunset in late 2021, eight years from its approval on November 6, 2013.

This is hugely significant because a Phase l Environmental Site Assessment is conducted in the vast majority of the 5.6 million commercial and industrial real estate transactions in the United States each year, so you need to be aware of the revised standard expected to be issued later this year.

The stated purpose of the ASTM Standard E1527-13 Phase I Environmental Site Assessment process is “to define good commercial and customary practice in the United States of America for conducting an environmental site assessment of a parcel of commercial real estate with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (42 U.S.C. §9601) and petroleum products.” Importantly, the ASTM E1527 is recognized by the U.S. Environmental Protection Agency as satisfying its All Appropriate Inquiry rule to obtain protections from liability under CERCLA, the federal Superfund law.

ASTM first published a standard for Phase I Environmental Site Assessments in 1993, with published revisions in 1994, 1997, 2000, 2005, and 2013, so that the standard is being again revised is not surprising, but some of the changes warrant heightened scrutiny.

The ASTM E50.02 Task Group, after more than a year of work, has balloted a draft revised standard and results are expected as early as next week. The initial draft includes:

What purports to be an only modest change to REC definition is proposed, but this modification to that ultimate defined term risks negatively impacting the value of hundreds of millions of dollars of real estate each year. The new definition would read,

“The term recognized environmental condition means (1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment. A de minimis conditions is not a recognized environmental condition.”

The new definition is explained in an appendix. But that Appendix X4 is not without controversy when it provides guidance that the past closure of a leaking underground storage tank, for example, may not constitute an Historical Recognized Environmental Condition (HREC) unless the environmental professional conducting the Phase l has evaluated the data associated with that closed tank to be sure that the sampling data meets current regulatory standards for unrestricted use and whether there is an open vapor exposure pathway. Some believe this tying the consideration to “current” standards, as opposed to the regulator determination at the time the tank was closed, creates a Faustian bargain for the environmental professional, and will greatly limit the supremely valuable designation of HRECS.

I blogged some weeks ago, PFAS in a Phase l Environmental Site Assessment, and concluded, as does this Task Group, that because PFAS is not a CERCLA nor a RCRA listed hazardous substance, it should not be identified in a Phase l. It is a non-scope matter.

There is also an attempt to clarify by way of examples in Appendix X4, what is a controlled recognized environmental condition (a CREC). There is no doubt that the uninitiated have been confused that a CREC is a subset of a REC, but the examples are problematic in that they stray into the category of HRECs, which are not RECs. CRECs arise from a past release of a hazardous substance that has been address to the satisfaction of regulators, but carry some implementation of controls, like a drinking water restriction. This new text only exacerbates a prior bad word choice.

The proposed change to the shelf life of a Phase l report is curious when currently a report is presumed current when signed and dated as completed and more than 180 days prior to acquisition of a property which may be updated to be valid for up to a year, but what is proposed is 180 days from the day work commences on the Phase l even if that is simply a request for governmental records on a property. It is not clear how this back dating of a dated report is advantageous (to anyone other than environmental professionals who will now have to prepare more reports)?

A potential positive for anyone who has found the word choice in the ultimate conclusion awkward, is the new,

12.7.1 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed no recognized environmental conditions, controlled recognized environmental conditions, or significant data gaps in connection with the subject property”

Time is short for the 350 member Task Group to finalize a draft, for EPA to act to approve the new E1527-21 and for ASTM to then issue it before the end of the year, but that also means time is also short for purchasers of land, their lenders and others to become familiar with a not yet available standard, so it is incumbent upon all to monitor the new standard, not to mention legal counsel, including me. Last August, I blogged, I just read my 1000th Phase l Environmental Site Assessment this year, so we will not only track the final revisions, but report on them in a future post here.

DuPont Resolves PFAS Claims with Delaware

The State of Delaware and E. I. du Pont de Nemours and Company, The Chemours Company, DuPont de Nemours, Inc. and Corteva, Inc. (all “DuPont” related companies), businesses having operated in the State for more than 200 years, announced a sweeping settlement agreement last week.

Under the settlement agreement, the DuPont agreed to pay $50 million for environmental restoration, improvement, sampling and analysis, community environmental justice and equity grants, and other natural resource needs. The Companies will fund up to an additional $25 million if they settle similar claims with other states for more than $50 million. The settlement resolves the DuPont’s responsibility for damages caused by releases of historical compounds within or impacting the State, including per- and polyfluoroalkyl substances (generically referred to as “PFAS”), subject to certain limitations and preservations.

As I described in an earlier blog, PFAS in a Phase I Environmental Site Assessment?, a peer reviewed study cited approvingly by the EPA describes 99.7% of Americans have a detectable PFAS in their blood! The EPA reports, “there is evidence that exposure to PFAS can lead to adverse health outcomes .. studies indicate that PFAS can cause reproductive and developmental, liver and kidney, and immunological effects in laboratory animals, .. and have caused tumors in animal studies.”

And troubling is that after use in making things slippery, nonstick or waterproof, PFAS chemical bonds are so stable and PFAS is very persistent in the environment and in the human body, meaning these chemicals don’t break down, accumulating over time, and as such have been referred to ‘forever chemicals’ making them an emergent environmental catastrophe.

DuPont was and is involved in the development of PFAS and consumer and industrial products made with PFAS.

$50 million might sound like a big number, but in a cost allocation dispute among the DuPont related companies, according to media reports DowDuPont, Inc. agreed in January to pay agreed to pay  Chemours $4 Billion in an arbitration.

And as part of that settlement, the DuPont related companies paid $83 million to resolve nearly 100 cases scheduled for trial in federal court in Ohio. That settlement brings to $753 million the total DuPont damages claim related companies have paid to resolve about 3,600 PFAS suits.

Some have suggested the history of DuPont, from the first gunpowder it made there through the manufacture of Teflon, is the history of Delaware, the first state to ratify the U.S. Constitution, and this ‘sweetheart’ settlement recognizes that. Moreover, while there is today no federal PFAS regulation, this is in advance of any rulemaking by the federal government, something the new Biden Administration has promised. However, many legal commentators observing that President Biden having represented Delaware for 36 years in the U.S. Senate and still calls the state home, is unlikely to implement any environmental policy that does real damage to Delaware’s favorite son, DuPont (including not to Chemours, who much of that liability, possibility more liability than is held by any other company, was transferred to when it was spun off from DuPont in 2015).

The settlement is the first time a Delaware Attorney General has resolved a natural resources damages claim on behalf of the state. These dollars will be used for “purifying drinking water” for all impacted state residents, including more sampling and testing to ascertain the presence of PFAS.

You care about this settlement because despite that the first PFAS case was commenced nearly 20 years ago, the number of cases is today growing exponentially including that new companies that are far downstream from the chemical manufactures are being sued. That type of judicial redress may be more efficacious than new, after the fact laws and regulations (i.e., PFAS is already permeated in nearly every body and every thing). For example, legislating PFAS as a hazardous substance under the Superfund law is not perceived as an efficient public policy.

The settlement agreement is a fascinating read about PFAS contamination.

Everyone should be aware of how pervasive PFAS is in the economy and the environment, and the associated risk associated with this forever chemical, including what will no doubt be emergent litigation as the legal system catches up to the science and balances the equities. And all of this a prime example of the judicial branch of government working well, using existing laws, to make bad corporate actors pay those who have been wronged. Maybe we should let this play out before attempting to enact new federal laws.

Fireworks Cause Air Pollution But

In a literally explosive example of the right balance between environmental protection and people’s desire to celebrate is no environmental regulation, despite that fireworks degrade air quality with particulate matter, in the United States society has decided that the pyrotechnic festivities must go, especially after many were cancelled in the pandemic last year.

Fireworks have a storied history in the United States maybe best described in a July 3, 1776 letter from John Adams to his wife Abigail about the festivities to celebrate Independence Day,

It ought to be solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.”

But that historic passage does not explain the skyrocketing popularity of fireworks, on Independence Day, on New Year’s Eve and for many other celebrations. Today, Americans are exploding almost one pound of fireworks each year for every man, woman and child, up from only just one-tenth of a pound annually in 1976, the bicentennial year.

With that wide public sentiment for fireworks, there is actually almost no environmental regulation for the setting off of millions of little explosions of the more than 99% of fireworks imported from China.

49 states plus DC allow some or all types of consumer fireworks (.. not Massachusetts) and to the one nearly each fireworks control law are regulating for public safety by a state fire marshall for “firework shooters, explosive blasters, explosive manufacturing, and explosive sales.” In many locales individual fireworks displays do not even require a permit.

But fireworks are an undeniable source of fine particulate matter, particles that are less than two and one half microns in diameter. And it is heavy metals that give fireworks their colors, trontium carbonate gives red, sodium nitrate produces yellow, barium chloride gives green, and my favorite copper chloride that produces blue!

However, despite the apparent irrefutable facts, all of this is very temporary and a 2015 NOAA study verifies there is a surge in fine particulate matter on the evening of July 4 (albeit at only 10 of 315 air quality monitoring stations nationwide). Levels drop back down by noon on July 5 (.. so you can breathe today), according to the research. The increases are largest from 9 – 10 p.m. on the holiday.

As result of complex chemical reactions resulting from combustion, the miniscule quantities of metals are largely aerosolized at altitude and dispersed high in the sky having no meaningful effect on people.

And not to let reality get in the way of government action, the Environmental Protection Agency had recently (but apparently no more) offered guidance on fireworks particle pollution on its website,

Most people will have no reaction when exposed to .. .. Some individuals are more sensitive than others, including possibly infants and children, individuals with respiratory conditions or allergies and asthma, ..”

As a practical matter many people who are sensitive to particle pollution heed the EPA recommendation to limit their exposure by watching fireworks from upwind or as far away as possible.

Congress has legislated the treatment of air quality data influenced by exceptional events, which includes fireworks. Each state is required to develop a State Implementation Plan for how they will control air pollution, including particulate matter, within their boundaries that exceed EPA’s particulate matter standards in “nonattainment areas.”. “Wildfires, high winds, volcanoes and fireworks” (.. a list that could only exist in a government regulation or a cognitive ability test for the term that does not belong) each are exempted from being calculated for the purposes of a State Plan under the 2016 Exceptional Events Rule (41 CFR 50.14),

“Fireworks displays. The Administrator shall exclude data from use in determinations of exceedances and violations where a State demonstrates to the Administrator’s satisfaction that emissions from fireworks displays caused a specific air pollution concentration in excess of one or more national ambient air quality standards at a particular air quality monitoring location and otherwise satisfies the requirements of this section. Such data will be treated in the same manner as exceptional events under this rule, provided a State demonstrates that such use of fireworks is significantly integral to traditional national, ethnic, or other cultural events including, but not limited to, July Fourth celebrations that satisfy the requirements of this section.”

To see how this operates, see the Rose Park, Utah Fireworks Exception Event Report, prepared under an earlier version of the rule. Such rational implementation is a good thing because it is clear that fireworks are not a real public health concern.

But, San Diego does regulate fireworks for locations near the coast, requiring expensive permits (.. that have resulted in displays being cancelled) for embers that fall into the ocean, under some Clean Water Act theory, but apparently that overreaching idea has not be replicated elsewhere.

The alternative of regulating exceptional firework displays on Independence Day and New Year’s Eve is no doubt not efficacious if not wrong. Maybe a Disneyland type daily fireworks display might be a truly special exception?

In the event there is harm, there is nothing in the non-regulatory scheme that precludes an actual damaged (e.g., embers igniting a roof) party from seeking judicial redress.

This is a good result. Fireworks that were first developed in second century BC in China, have a more than 300 year and proper place in our nation’s celebrations. Fireworks arguably do contribute to air pollution, but only very modestly over a few hours each year. Larger or more environmental regulation of this space would not serve the public good. Is it too much to wish that the regulatory balancing act displayed here, tilting toward no environmental regulation, be repeated in other instances?

EPA and Army Announce Intent to Revise “Water of the United States” Rule

Last week the Environmental Protect Agency and Department of the Army announced the agencies’ intent to initiate new rulemaking that restores the Obama era waters of the United States rule that was in place pre-2015, and before the current Trump era rule.

This proposed rule will impact large swaths of America not only those directing the course of a ship (as its name implies), but will restrict farming, real estate development, road building and other large areas of economic activity across the country (except not in Colorado); so, we should all care.

For those uninitiated in the moving target describing what are “navigable waters of the United States,” defining where those waterways begin and end, has since the enactment of the 1899 Rivers and Harbors Act been the subject of disputes between the federal government and land owners.

The 1899 Rivers and Harbors Act is arguably the oldest federal environmental statute in the United States. The Act makes it criminal to discharge matter of any kind into the navigable waters, or tributaries thereof, of the United States without a permit. The Act also makes it a misdemeanor to excavate, fill, or alter the course, condition, or capacity of any port, harbor, channel, or other areas within the reach of the Act without a permit. The Act also makes it illegal to dam navigable streams without a permit.

Of note, Section 10 states that “All waters subject to the ebb and flow of the tide (tidal action) are navigable waters of the US”.

Appropriating that definition, the Clean Water Act, enacted nearly a century later in 1972, prohibits the discharge of pollutants from a point source to navigable waters unless otherwise authorized under the Act. Navigable waters are identified in the Clean Water Act as “the waters of the United States, including the territorial seas.” Thus, “navigable waters of the United States” is of paramount import in establishing the geographic scope of federal jurisdiction under the Clean Water Act.

The term “navigable waters of the United States” is not defined by the Clean Water Act but has been detailed by EPA and the Army in regulations since the 1970s and jointly implemented in the agencies’ respective programmatic activities.

There has been perversion of what are “navigable waters of the United States” for nearly 100 years including most recently from the 1970s through the 1990s, when federal courts as well as the agencies interpreted an expanded bigger moving upstream scope of Clean Water Act jurisdiction as necessary to and consistent with the Act’s goals of protecting water quality.

It has been nearly 50 years since the Cuyahoga River caught fire spurring the 1972 passage of the Clean Water Act. The law was intended to target big, point source pollution like sewage leaks and oil spills, and the continuing efforts to use a definition of navigable water from the 1899 Rivers and Harbors Act to describe the scope of the Clean Water Act, not only does not well serve the potable water issues of the day, and are not only politicized science, but down right silly. The Obama era rule greatly expanded the areas under jurisdiction, including for example, to cover all land within the 100 year flood plain as a ‘navigable water’ conflating the 1968 flood insurance program intended to protect structures with an environmental resource worthy of protection.

It is suggested the Obama era rule, repealed in 2019, expanded what was a navigable water too far including waterways with a “significant nexus” to navigable waterways and the Trump era contraction in favor of states rights, effective in 2020, was too broad. And nearly all agree this constant unpredictable change, as politics change in the White House, results in uncertainty that does not repair our planet.

Many see this new action as a positive step toward what is properly “navigable waters of the United States” and maybe best characterized as back to the future, but it is suggested this is not a good way to make environmental public policy and that following nearly 100 years without the indispensable definition, Congress should act to create one.

The EPA announcement is here.

Revoking the Migratory Bird Treaty Act Incidental Take Rule, Once Again

Last week, the U.S. Fish and Wildlife Service announced a proposed rule to restore criminal penalties for accidental killing of migratory birds, revoking the January 7, 2021, final regulation that limited the enforcement of the 1918 Migratory Bird Treaty Act.

“The Migratory Bird Treaty Act is a bedrock environmental law that is critical to protecting migratory birds and restoring declining bird populations,” said Secretary Deb Haaland.

On January 7, the Service published a final rule defining the scope of the MBTA such that an incidental bird take resulting from an otherwise lawful activity, for example a sparrow flying into a solar panel, is not prohibited under the MBTA. That rule made changes to the enforcement of the MBTA to decriminalize incidental take of migratory birds and was widely supported by the solar panel industry and wind turbine businesses, with an effective date of February 8.

In 2013, during the prosecution of Duke Energy for bird deaths by wind turbine, the Fish and Wildlife Service estimated that “wind turbines kill between 140,000 and 500,000 birds a year in accidental collisions.”

And a 2014 study, conducted by scientists from the Smithsonian Institution and the Fish and Wildlife Service, estimated that between 365 million and 988 million birds are killed in the United States every year as a result of building collisions. But that study concluded that building collisions, are second to cats as the greatest threat to birds. But criminalizing housecats bird kills does not make a good public policy.

With the change in Administration earlier this year, the Fish and Wildlife Service extended the effective date of that January 7 decriminalization rule until March 8 and opened a public comment period. Last week, rather than extending the effective date again, the agency instead immediately proposed to revoke the rule.

The Service is now requesting public comment on issues of fact, law and policy raised by that MBTA rule published on January 7. Public comments must be received or postmarked on or before June 7, 2021. The notice will be available at www.regulations.gov, Docket Number: FWS-HQ-MB-2018-0090.

To appreciate the issue, know that concomitantly with this action on March 8, 2021, the Interior Department rescinded a 2017 Solicitor’s Opinion M-37050 on the MBTA that had famously said, “[i]nterpreting the MBTA to apply to incidental or accidental actions hangs the sword of Damocles over a host of otherwise lawful and productive actions, threatening up to six months in jail and a $15,000 penalty for each and every bird injured or killed.”

In a parallel but not directly related action, on August 11, 2020, Judge Valerie Caproni, of the U.S. District Court for the Southern District of New York, struck down that same Interior legal opinion,

It is not only a sin to kill a mockingbird, it is also a crime,”

paraphrasing Harper Lee. “That has been the letter of the law for the past century.”

But when President Wilson signed the MBTA into law in 1918, just 20% of U.S. households had electricity, so Congress never contemplated nor intended this law would apply to electricity generation and transmission; such is a pragmatic, very much non-originalist expansion of the law as enacted.

Which takes the saga to last week and this newly proposed rule. While it is suggested it is all but certain the current Administration will finalize withdrawing the current rule, it is debatable if they will seek to replace it or simply use discretion on a case by case basis in enforcement actions? Such is already sparking a debate, pitting members of the environmental industrial complex against one another and in opposition to business scale renewable energy. The question is if this is good environmental public policy? You may wish to consider if this rule strikes the correct balance between the 1918 era MBTA law and unintended take, including bird deaths associated with modern wind turbines and solar panels, not to mention collision deaths with modern glass office buildings, and comment ..

A Call for Comprehensive and Clearer ESG Disclosures

Last Wednesday, with a Dutch court finding Royal Dutch Shell partially responsible for climate change and ordering it to reduce emissions and two environmental activists being voted to Exxon Mobil board at the annual meeting, made clear how dramatically the landscape is shifting for all businesses in the environmental, social, and governance (ESG) space, as they face increasing pressure not only from environmentalists, but also from elected officials, regulators and even their lenders.

While the idea of ESG began in 2004 with a United Nations initiative to influence capital in non Western markets, in 2021 the legal and political institutions in the United States and the EU are demanding those ideas be implementing with due haste.

However, most of the businesses we work with in ESG matters are calling for better disclosure standards. Okay, many just want a standard, any standard, where there are effectively none today.

We work regularly with public companies and others in response to the rapid rise in the adoption of ESG, assisting businesses to try to enhance performance, pursue sustainable objectives, or both. A key component of our work is to provide counsel and advice in avoiding claims of greenwashing, or misleading communications, real or perceived, by business in their ESG disclosures. To work toward long term solutions, we counsel clients to be active participants in efforts with regulators to help develop useful ESG disclosure guidance in their industry.

In 2021, EU based regulators began to fill the ESG disclosure void, but with the change in political climate in the U.S., there has been little action to date beyond pledges like the one I wrote about in an earlier blog post, Labor Department Will Not Enforce Anti ESG Rule, which anti ESG regulations remain the law of the land.

While this blog usually rails against more and new regulation, I would welcome more comprehensive and clearer ESG regulation.

In large measure, I support comprehensive ESG regulation because I am concerned about a lack of global alignment. If each country (.. not to mention each state) takes a unique and different approach to ESG regulation, ESG disclosure requirements will become misaligned and expensive if even possible to comply with.

Business has moved faster than government ESG disclosure requirements and companies are today struggled with what and how to disclose. Many of our clients strive to report annually on ESG matters that have material impacts on their business.

We encourage clients to use as a guide some published, with some using the EU proposed standards for ESG metrics and others following the FSB Task Force on Climate-Related Financial Disclosures.

And our clients, both public and not public companies, are gathering data (with most, but not all publicly reporting) on diversity of not only leadership but also the employee population as well as on greenhouse gas emissions, and more. While I have advised clients on matters of sustainability for more than a decade, we have been consulted by more clients in the last 10 months that in the preceding 10 years.

ESG disclosure is becoming necessary, including because many see it as financially material in a world grappling with the challenges of climate change and inequality. We remain committed to working with our clients to improve the quality and quantity of their ESG data while mitigating their risk.

Maryland to Commit to World Economic Forum’s One Trillion Trees Initiative Tree Planting

The Maryland legislature has enacted and the Governor is expected to sign legislation that will take effect on June 1, 2021 establishing aggressive state tree planting goals and a host of other initiatives rooted in trees, all in an effort to respond to climate change.

While other significant climate change legislation failed to pass in the just completed session, the Maryland Senate passed this House bill unanimously, finding that that “the restoration of trees remains among the most effective strategies for climate change mitigation.”

House Bill 991 is large and complex when it does many things to cause more trees to be planted.

The bill will create business opportunities for savvy players in the environmental industrial complex, not only when it creates mandated government appropriations through 2031 that will have a net effect of $15 Million a year, but dramatically creating private sector opportunities in forest mitigation banking.

The planting of trees, as has long been required by Maryland law whenever 40,000 square feet is disturbed, was dealt a devastation blow when the Maryland Attorney General recently issued an opinion that the placement of a protective easement on an already existing forest, as opposed to intentionally created or restored forest, does not qualify for “forest mitigation banking.” Significantly, this bill responds modifying the definition of forest mitigation banking to be the intentional restoration, creation, or qualified conservation of forests undertaken expressly for the purpose of providing credits for afforestation or reforestation requirements with enhanced environmental benefits from future activities. “Qualified conservation” is defined as the conservation of all or a part of an existing forest that was approved on or before December 31, 2020, by the appropriate State or local forest conservation program for the purpose of establishing a forest mitigation bank and is encumbered in perpetuity by a restrictive easement, covenant, or another similar mechanism recorded in the county land records to conserve its character as a forest.

As such, the bill retroactively allows forest conservation that was completed in a then qualified forest mitigation bank on or before December 31, 2020, to be used, under both State and local forest conservation programs. However, in the future the bill limits the afforestation or reforestation credit that may be granted for the use of qualified conservation to no more that 50% of the forest area encumbered in perpetuity.

The bill, that may be the single most significant enactment of the session, also establishes a new policy of the State to support and encourage public and private tree planting, with the goal of planting and helping to maintain 5,000,000 sustainable native trees in Maryland by the end of 2031.

The bill provides that it is the intent of the General Assembly that at least 500,000 of those trees be planted in underserved areas. The Governor must formally pledge the State’s commitment to achieving the bill’s tree planting goals through the World Economic Forum’s One Trillion Trees Initiative.

To help achieve these goals, the bill significantly alters the priorities of the state towards tree planting and directs additional resources to a number of existing environmental programs and initiatives, including by way of example, in fiscal 2023, $2.5 million must be transferred from the Wastewater Account of the Bay Restoration Fund to the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund for tree plantings on public and private land, and for fiscal 2024 through 2031, the Governor must include an annual appropriation of $2.5 million in the State budget for tree plantings on public and private land. The bill also establishes a $10 million annual Urban Trees Program, administered by the Chesapeake Bay Trust, for the purpose of making grants to qualified organizations for native tree-planting projects in underserved urban areas. Additionally, the bill establishes a Commission for the Innovation and Advancement of Carbon Markets and Sustainable Tree Plantings charged with developing a plan to achieve the State’s carbon mitigation goals.

People have understood the importance of trees since before the Old Testament admonition, when waging a war against a city “.. you must not destroy its trees,” (Deuteronomy 20:19) which has been interpreted far more broadly than only protecting fruit trees, but to stand for the proposition of not destroying God’s creations.

Today the science tells us there is an opportunity for climate change mitigation through tree planting. In a model for other places, Maryland is repairing the world with planting trees.

Two Creeks, a Marsh and Two Lakes Sue a Florida Real Estate Developer

Two creeks, a marsh and two lakes are plaintiffs in a first of its kind complaint filed last month against a real estate developer and the Florida Department of Environmental Protection.

Wilde Cypress Branch, Boggy Branch, Crosby Island Marsh, Lake Hart and Lake Mary Jane, tributaries of the Kissimmee River are seeking declaratory and injunctive relief that Beachline South Residential, LLC’s proposed “Meridian Parks Remainder” mixed use real estate development violates the water bodies’ own right to exist.

On November 3, 2020, the voters of Orange County overwhelmingly approved a charter amendment by a margin of 89.2%, creating standing for nature, itself, to sue to confront environmental degradation, with that new charter provision, providing in relevant part,

Section 704.1 – Right to Clean Water, Standing and Enforcement.

A. Natural Rights of Orange County Waters and Citizens. (1) The Wekiva River and Econlockhatchee River, portions of which are within the boundaries of Orange County, and all other Waters within the boundaries of Orange County, have a right to exist, Flow, to be protected against Pollution and to maintain a healthy ecosystem. ..

B. Standing, Private Right of Action. Orange County, municipalities within Orange County, any other public agency within Orange County, and all Citizens of Orange County shall have standing to bring an action in their own name or in the name of the Waters to enforce the provisions of this Section of the Charter.

I blogged last year that the movement to empower nature giving it standing sue in its own right (.. as opposed to traditional standing requiring a citizen to be damaged) is the single most impactful trend in environmental law, When Trees Sue for their Own Environmental Preservation.

The idea that nature can have standing is not new. Justice William O. Douglas’ widely quoted dissent in the U.S. Supreme Court case, Sierra Club v. Morton, 405 U.S. 727 (1972) described the doctrine,

public concern for protecting nature’s ecological equilibrium should lead to the conferral of standing upon environmental objects to sue for their own preservation. .. So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries, beaches, ridges, groves of trees, swampland, or even air that feels the destructive pressures of modern technology and modern life.”

That legal doctrine was brought to bear when on January 8, 2021, this defendant Beachline made a permit application to the state Florida, including, requesting authorization to fill in approximately 115 acres of Orange County waters for a construction of a mixed use residential and commercial retail development on approximately 1,923 acres.

The Complaint, among other allegations, avers the “proposed development violates the right to exist of the Crosby Island Marsh, Lake Hart and Lake Mary Jane by cutting off and/or restricting the sufficient flow of clean water into these protected bodies of water.”

The Complaint is an instructive read and the case may be precedent setting. Not only in play is an effort to halt a real estate development, but also the matters of preemption of state law over local charter amendments creating causes of action, and that this appears to be the first case in the United States of nature having standing as a plaintiff.

Thought leaders largely agree there needs to be a better way of protecting the environment than the current dinosaur environmental laws most enacted in the 1970s, and enabling nature to seek judicial redress is a public policy coming to a courtroom near you.