Green Building Law Update

Environmental Law and Sustainability for Business

Is There Lead in the Drinking Water of Your Green School?

By Stuart Kaplow on October 7, 2018 Posted in Environmental, Green Building

EPA and the Centers for Disease Control and Prevention agree that there is no known safe level of lead in a child’s blood. Lead is harmful to health, especially for children.

Though most lead exposure occurs when people eat paint chips and inhale dust, the EPA estimates that up to 20% of lead exposure comes from drinking water. Lead enters drinking water through multiple pathways and the largest quantity is through corrosion, that is a dissolving metal caused by a chemical reaction between water and plumbing. The most significant factor in the extent to which lead enters the water is “water age,” that is how long the water stays in pipes.

EPA advises drinking water in schools is particularly important because children spend a significant portion of the day in these facilities and are likely to consume water while they are there.

Against that backdrop, to reduce indoor water consumption, LEED v4 New Construction offers points for further reducing by 25% and up to 50% “fixture and fitting water use from the calculated baseline in WE Prerequisite Indoor Water Use Reduction.” Other green building programs have similar targets.

Very low use at each fixture in bathrooms, coupled with large diameter pipes stipulated by plumbing codes, at a recently tested school this firm is aware of, resulted in an average overall premises water age of 8 days. Water age of 8 days raises concerns with respect to lead, but also with respect to the chemical and microbiological stability of the drinking water. There are externalities associated with water age, including that a disinfectant residual (e.g., a residual level of chlorine) is generally not maintained in the plumbing of a building with a water age over 3 days.

But little of this including lead is regulated.

Lead is regulated in public drinking water supplies under SDWA, a federal law that was initially passed in 1974. SDWA requirements apply to “public water systems.” Schools that are served by a public water system are not subject to SDWA monitoring and treatment requirements because those schools do not meet the definition of a public water system. The vast majority of public water suppliers do not include schools in their sampling plans because regulations only require sampling of single family dwellings.

To address this gap in testing, EPA developed a guidance document, 3Ts Technical Guidance for Reducing Lead in Drinking Water in Schools. EPA advises that schools may have elevated lead concentrations from the plumbing in the facility because the potential for lead to leach into water including because of the water age.

Several states have recently taken action to address concerns regarding lead in drinking water in schools. For example, in 2017 legislation was enacted in Maryland and in 2016, legislation was enacted in New York to require schools to test drinking water for lead contamination. Also in 2016, New Jersey adopted regulations regarding testing for lead in drinking water in public schools statewide, and Rhode Island enacted legislation to provide grants to local governments to conduct lead testing.

But the testing is daunting. There are 1,447 public and 1,397 nonpublic schools in Maryland alone and it will take almost 5 years to test those; which of course does not include addressing any conditions found. But a flaw in the Maryland and New York testing protocol is that they are starting with older schools, under the mistaken impression that aged pipes in pre 1988 schools are the key problem; when in fact newer green schools with water reduction features can have water age issues that results in lead in drinking water.

But the issue is real. As of September 28, 2018, the Maryland Department of the Environment has received the first required lead in water sample results from eight public school systems and 89 nonpublic schools. Of this number, 539 of the 22,327 samples exceeded the state self imposed action level of 20 parts per billion of lead. It should be noted that some think that action level is too high.

This is a tough subject. Have the green building programs not taken into account science in the area of water quality in the quest to reduce the quantity of water used? More and additional research is needed now from the environmental industrial complex to assist in justifying potable water conservation goals without compromising water quality and the public health.

Until there is new and good research. Many are suggesting new to be constructed schools should not exceed minimums for water use reduction required by green building programs.

All schools and day care centers should test for lead in drinking water, now.

And you might want to test the water in your green building for lead.

With Over $3.6 Trillion in Value You Should Pay Attention to GRESB

By Stuart Kaplow on September 30, 2018 Posted in GRESB, LEED

For the uninitiated GRESB assesses the sustainability performance of real estate and infrastructure portfolios worldwide. GRESB is the global environmental, social and governance (ESG) benchmark for real estate assets.

GRESB’s stated “mission is to enhance and protect shareholder value by assessing and empowering sustainability practices in the real asset sector.”

They do that by offering ESG data transparency in scorecards, benchmark reports and portfolio analysis tools.

The bottom line is that ESG data is increasingly used by institutional property investors to make investment decisions. There are meaningful differences between real estate owning companies and GRESB provides ‘actionable data’ within a framework for an assessment of the differences that influence risk and returns.

Of course there are strong geographic variations in when and how investors including capital markets engage on ESG. European investors are significantly more engaged than U.S. investors (some speculate publicly associating with United Nations global warming rhetoric results in U.S. investors being less engaged).

But you care because this year 903 property companies, REITs, funds, and developers participated in GRESB’s annual Real Estate Assessment, an increase of 6% over the previous year. The Assessment now covers more than 79,000 assets (.. of which more than 49,000 reported at the asset level versus only company portfolio data) in 64 countries representing over $3.6 Trillion in gross asset value.

A trillion is 1,000 times larger than a billion, so 3,600,000,000,000 in gross asset value is a huge dollar amount. Hence you should be paying attention.

The GRESB listed real estate data covers 207 entities representing 61.2% coverage of the major developed listed real estate indices. This includes 75 of the top 100 largest REITs by market cap. The non-listed real estate dataset covers 666 private entities, representing 75 of IPE’s Top 100 Real Estate Investment Managers (participating with at least one fund).

And you should really care because GRESB data is incredibly valuable not only for institutional investors in real estate on the East and West coasts of North America, but also for banks, brokerages and a host of others interested in risk and returns in a broader breadth of real estate owning entities. GRESB data assessments are guided by what the industry considers to be material issues in the sustainability performance of real asset investments.

Owners participating in the annual Assessment receive comparative business intelligence on where their data stands against their peers, a roadmap with the actions they can take to improve their ESG performance and a communication platform to engage with investors.

Significantly, the 2018 global average GRESB Score increased to 68, up from 63 in 2017. This “strong improvement reflects the industry’s commitment to further integrate best practices related to ESG issues.”

Periodically a new issue emerges as an important consideration for investors in real estate and in response to a string of weather related disasters in 2017, this year resilience was such an issue. This motivated GRESB to introduce a new Resilience Module for both property and infrastructure thus providing nearly 150 resilience related data elements about each company for those investors now interested in resilience.

This law firm works with businesses interests to assess ESG matters including those that can best advantage them with capital markets.

There is no doubt that increasing numbers of investors are taking ESG data into account in their investment decisions, with governance being the most common dataset they consider, and GRESB is the best at offering ESG data transparency in real estate assets through its data scorecards, benchmark reports and portfolio analysis tools.

GRESB B.V., formerly known as the Global Real Estate Sustainability Benchmark, is a private limited company incorporated in the Netherlands that is a wholly owned subsidiary of Green Business Certification Inc., the Washington DC based non-profit entity related to the U.S. Green Building Council, Inc. In concert with USGBC, GRESB B.V. undertakes the day-to-day management of GRESB’s activities. The 30,000 foot view is what USGBC LEED certifies on a building basis, GRESB assesses on a portfolio basis.

You should begin to take advantage of GRESB’s incredibly valuable data.

Net Zero Certification Program Announced by USGBC

By Stuart Kaplow on September 23, 2018 Posted in Green Building, LEED

Much as NASA developed dozens of life changing and useful inventions that benefitted all as it raced to the moon, USGBC may be the catalyst for new, cutting edge technologies in the race to net zero buildings.

There is no doubt that the newly announced LEED net zero certification program is aspirational. LEED has always pushed market transformation. This new program does not mean USGBC is abandoning its long term goal of regenerative LEED building, but rather this has been characterized as a response to intense interest articulated by some of the more activist LEED stakeholders who want to get there now and not wait for the marketplace.

USGBC announced last week that it will be unveiling the Beta version of a new Net Zero Certification program at Greenbuild in November. Based on conversations with senior policy making staffers at USGBC, here is what they plan to announce:

Net zero certification will be awarded to projects that demonstrate any or all of the following: net zero carbon emissions, net zero energy use, net zero water use and net zero waste.

Net Zero Certified will be an enhancement or additional reward for LEED certified buildings.

Projects will have to provide 12 months of performance data across any or all of these categories to GBCI through the LEED Online platform. Projects can see their carbon and resource impact in LEED Online in their analytics section (carbon/resource analytics).

Net Zero Carbon Emissions Certification: Projects must achieve a carbon balance of zero. This will be calculated based on emissions produced from energy used plus emissions produced from transportation minus any offsets recognized by the LEED v4 EA category (both BD+C and O+M).

Net Zero Energy Use Certification: Projects must achieve a source energy use balance of zero. This will be calculated by energy generated on site plus any offsets recognized by the LEED v4 EA category (both BD+C and O+M) minus source energy consumed.

Net Zero Water Use Certification: Projects must achieve a potable water use balance of zero. This will be calculated by water re-used on site plus any greywater from a municipality or an external site minus potable water consumed.

Net Zero Waste Certification: Any projects achieving GBCI’s TRUE Zero Waste certification at the Platinum level will be awarded Net Zero Waste Certification.

Much of the substantive detail can be already be gleaned from the existing program components to be piggybacked. And such is no doubt a further positive.

What is yet to be seen is how many project owners will pursue certification under this Beta program (not to mention follow up with annual recertification)? In an era when concern over legal liability for building claims is real, not only enforced by the FTC and state attorneys’ generals, but also in consumer class action suits, it is likely unwise to make the claim that a building is net zero energy use or the like, .. what does net zero mean?

USGBC says that their definition of what is net zero is in line with the WorldGBC defined term. “The WorldGBC definition of a net zero carbon building is a building that is highly energy efficient and fully powered from on-site and/or off-site renewable energy sources.”

On the other hand, the U.S. Department of Energy says, “Generally speaking, a zero energy building produces enough renewable energy to meet its own annual energy consumption requirements, thereby reducing the use of nonrenewable energy in the building sector.”

The Merriam-Webster definition (referenced by many building codes for definitions not appearing in the code) of net-zero is “resulting in neither a surplus nor a deficit of something specified when gains and losses are added together.”

And there are ‘real’ definitions in statute, including in California and in legislation pending in Washington DC. A net-zero energy building described in the pending energy code in DC, in by Appendix Z is “a highly energy-efficient building that produces onsite, or procures through the construction of new renewable energy generation, enough energy to meet or exceed the annual energy consumption of its operations.”

Even as some aspire to get to net zero energy (.. of course, trailblazers have already produced a limited number of net zero energy buildings), there is no single or widely acceptable definition of what it is. And this is without delving into the philosophical distinctions between net zero site energy, net zero source energy, net zero energy costs, the definitions above may be similar, but they are not the same.

And those distinctions do not address the marginal social cost of getting from ‘very low energy’ to net zero and whether or not this is sound environmental policy?

Building owners pursuing net zero should proceed with caution and mitigate their risk, including by not making any such representations to consumers and with careful word choice in the commercial arena, .. possibly incorporating words similar to “designed to participate in GBCI Net Zero Energy Use Certification Program” together with the usual disclaimers (often in leases and other contracts) about what a green building is and is not!

Green buildings are the geoengineering solution to many of the environmental issues of the day. USGBC will now be a catalyst for new, cutting edge technologies with the moonshot to net zero buildings.

Greenbuild – The Target Rich Environment for Green People

By Stuart Kaplow on September 16, 2018 Posted in Green Building, LEED

Friends from Lorax Partnerships at Greenbuild

I am often asked, “how can I expand my green building business?” And I have offered the same response for more than a decade – attend the Greenbuild International Conference and Expo (.. yes, you will have to talk with people while you are there).

This year Greenbuild is in Chicago from November 14 thru 16.

I do not claim any particular business marketing expertise. But Greenbuild has been a prime source of new clients for my sustainability and green building law practice (.. okay, this blog is actually our number one source of new clients, but Greenbuild is second)!

I have attending a lot of Greenbuilds. Actually my first U.S. Green Building Council “Green Building Conference” (yes, pre Greenbuild) held in conjunction with the National Institute of Standards in Gaithersburg, Maryland in 1994 had only 450 people in attendance. While attendance in recent years is off a bit from the huge Greenbuild the first time the conference was in Boston in 2008, with 27,995 attendees (.. that was a party!), last year the 24,731 attendees in Boston dwarfed the first Greenbuild in 2002 when a mere 4,189 people gathered in Austin.

Those 24,731 attendees last year were from 96 countries, despite the internationalization of LEED and several worldwide Greenbuild expos including in India, Mexico, Germany and China.

Greenbuild attracts all types of wild things. Last year 28% of those in Boston were from architecture or engineering firms, 15% were utilities, 11% were contractors and builders and 8% were manufacturers, not to mention the very large numbers of professionals offering services and consulting, including, yes, a respectable assemblage of real estate attorneys.

And Greenbuild is sustainable. My favorite fact reported by Informa Exhibitions (.. USGBC sold Greenbuild some years ago) is that each participant produced 5.7 lbs. of waste (of which more than 90% was diverted). And if that number does not excite you, Informa tracked and reported the alternative fact that total water footprint of the event was 7,272,158 gallons.

Last year there were 703 exhibitors on the 169,000 square feet Expo Floor. It is all but impossible not to encounter new vendors and innovative suppliers. Educational activities abound with more than 200 formal sessions.

Those 2017 demographics are proof that Greenbuild is the largest green building gathering each year and unquestionably the par excellence opportunity for networking among “green people” and the best place for networking is the Expo Floor.

Greenbuild 2018 in Chicago will be “the” target rich environment for green people this year. It is your chance to not only rub elbows with USGBC CEO Mahesh Ramanujam, the man to know, but also the thousands of others who make a living in the environmental industrial complex.

It is just over 50 days until this once a year opportunity to enlarge your green building business.

For those who will complain that this blog post is shameless promotion, that may be true, but it is also correct that Greenbuild has been a prime source of new clients for my law practice for more than a decade! LEED is still where it is at in green building. It has become all but a spiritual movement, with more than 94,000 registered and certified projects participating in LEED across 165 countries and territories. Every day, 2.4 million square feet of building space certifies to LEED. I won’t promise you will meet your next spouse among one of the more than 14,000 individual USGBC members, but if you want to benefit from that business volume, you should be at Greenbuild.

As a reader of my blog, if you email me before Greenbuild, I will gladly buy you a cup of coffee or other libation at a Chicago watering hole. I made a similar offer last year and had a great time meeting a lot of very fun people for drinks in Boston. I hope to see you in Chicago in November.

ESG, including Advantaged by Green Building, Requires Risk Oversight

By Stuart Kaplow on September 9, 2018 Posted in Environmental, Green Building, Sustainability

Stuart Kaplow ESG Report

Investments by individuals and institutions driven by environmental, social and governance matters continue to remain front and center in the minds of boards of directors, government regulators and the media.

Of course, there is no single or even widely accepted definition of ESG and some have suggested that any analysis of environmental, social and governance information about a company is so broad and fungible that it could include almost any corporate excellence.

We advise companies how best to score with sustainability data, analytics, ratings and indexes for their target audiences (e.g., one of the largest ESG mutual funds puts only a 17% weight on social issues while the leading independent global provider of ESG data weighs social issues at 33%).

Such is problematic for corporate directors, in particular in their risk oversight role as they consider risk management policies to be implemented by the company’s management that are consistent with the board’s strategy and risk appetite. With more than a dozen voluntary initiatives that have gained some traction, but few, if any, laws that support the policies, ESG issues are admittedly more widely considered in the EU than in the U.S. and elsewhere around the globe.

U.S. companies are largely governed in this arena by state laws that largely track the Milton Friedman belief that a company should have no social responsibility to the public because its only proper concern is to increase profits for itself and for its shareholders and that the shareholders in their private capacity are the ones with the social responsibility.

That 1990s popular view might sound controversial today, but there is the April 23, 2018, the U.S. Department of Labor issued Field Assistance Bulletin No. 2018-01, clarifying previous guidance for ERISA covered private sector employee benefit plans regarding proxy voting, shareholder engagement, and economically targeted investments in the context of ESG initiatives. The bulletin advises that directors must “always put first the economic interests of the plan” and make financial performance the main consideration when evaluating investments.

That guidance mandates a balancing and weighting of what is the ‘main consideration.’

All companies should consider, not only who their customers are but also who their investors are, however not all companies should publicize an ESG policy or score to respond to what many see as a fleeting trend.

The issue is not new and has its roots in the 1960s ‘purposed’ investment practices of pension funds managed by trade unions. And then disinvestment by U.S. corporations in the South Africa apartheid regime in the 1970s gave wide media attention and future legitimization to investing based on social goals.

Increasingly in 2018 companies are accentuating “intangible investment valuation” as part of an ESG governance strategy, deaccentuating traditional brick and mortar assets and focusing on intellectual property, which may include environmental and social components, that may or may not be publicly articulated but is aimed at modernizing and making more correct business valuation for stockholders.

Some group of investors considering ESG factors will certainly not invest in fossil fuel companies, but there are industries that are more ESG friendly than others, like green building. We are told that millennials and women, who make up increasing percentages of the workforce will drive ESG investing in the future. And such may be the case. I wrote in a recent blog post, The Hottest Environmental Trend is Sustainable Business Practices and such is true today.

However, there is a perspective that investing in a company with a low ESG rating, for example because of historically poor governance (.. maybe a German auto manufacturer) or being a big polluter (.. possibly the coal industry) allow big upsides in stock prices (.. at least one German automaker and coal have outperformed the market in the last 12 months by more than double).

WeWork recently announced an ESG policy to discourage consumption of meat. The meat-free policy applies to direct company purchases as well as to meals purchased by employees and charged to the company. The move was driven by environmental considerations, and that by 2023, the company expects the change to have saved 16.6 billion gallons of water, 445 million pounds of carbon dioxide emissions and 15 million animals. The commitment is bold and strategic, aimed at the target audience of WeWork spaces users and not at stockholders (as the company is not yet publicly traded).

Eradicating meat from the bottom line will not appeal to most U.S. companies as a good ESG policy or otherwise. But then corporate directors must have a different perspective than potential common stock purchasers, today and into the future.

Third party certified green building has been a low hanging fruit ESG corporate practice approved by many boards of directors.

Fair labor practices are another ideal and easy to articulate ESG practice as I recently described in the blog post, Modern Slavery Exists and We Must Stop It Now.

If there is an obvious trend this law firm gleans in working with businesses navigating the complexity of the constantly evolving ESG investment decision making landscape, it is a belief that there is something fundamentally different happening in investing today and that understanding the move toward intangible investment valuation may be the real key to creating sustainable value for stockholders in the future.

Modern Slavery Exists and We Must Stop It Now

By Stuart Kaplow on September 2, 2018 Posted in Green Building, Sustainability

There is a lot of green building going on at BREEAM USA from a pilot program for BREEAM In-Use with multifamily properties to the certification of the first BREEAM USA In-Use office tower, but what is no doubt most impactful is the BRE Ethical Labour Sourcing Standard enabling businesses to commit to eliminating any possibility of modern slavery or human trafficking in their supply chain.

Slavery in construction is not new, but this is not about the slaves who built the Egyptian pyramids in the Middle Kingdom period of 2600 BC.

Today more than 35.8 million people are victims of forced labor around the globe according to estimates by the British government; more than there have been at any time in history. (That shockingly large number does not include forced prison labor, including for example the widely reported Chinese prison labor-derived nails that entered the United States.)

“To truly regard sustainable buildings in a holistic manner, it’s our obligation to start with the supply chain serving the construction industry,” says Barry Giles, CEO of BRE America. “BRE is at the cutting edge of transforming buildings for the future and in creating the Ethical Labor Sourcing Standard, BRE shines at the forefront of sustainability by acting beyond reproach in all aspects of the built environment and genuinely building a better world together.”

The BRE Ethical Labour Sourcing Standard is not simply an intellectual exercise. This law firm has worked with businesses, non real estate and real estate alike, in their disclosures required by the California Transparency in Supply Chains Act of 2010 of their “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.” The new Standard will provide third party benchmarks that all companies, including those in the green buildinethical laborg industrial complex can rely upon when complying with the California law and when simply striving to do the right thing.

While there is no single or widely accepted definition of Environmental, Social and Governance, matters of slavery should be disclosed. Ethical labor is becoming widely considered and articulated in ESG disclosures by clients of this firm.

The BRE Ethical Labour Sourcing Standard can be seen as responding to Great Britain’s Modern Slavery Act 2015, which sets a basic benchmark for ethical business practice in the sourcing of labour and contains significant measures aimed at preventing forced labour and human trafficking. In particular the Act:

Defines clearly the offences of forced labour and trafficking and how others might be considered complicit in these forms of exploitation; and

Establishes reporting requirements for companies relating to efforts to combat forced labour and trafficking – including specific reporting requirements aimed at achieving transparency in the supply chain, not just the UK based business.

Moreover, the new Standard will have direct application with the enactment of the Commonwealth of Australia’s Modern Slavery Act, which was introduced to the Australian Parliament at the end of June, and follows enactment of the New South Wales Government’s Modern Slavery Act 2018.

These modern enactments by government are only a small step. The ideal of social equity can be traced back to the works of Aristotle and while definitions vary and have evolved over thousands of year, most would agree humanity has not done enough, including that despite purporting to address social equity as one third of the sustainability triple bottom line, today’s green building standards have failed miserably in responding to issues of modern slavery on construction sites and building material supply chains.

The largest study of the typology of modern slavery in the U.S. found construction as one of the top 25 industries where slavery takes place today.

Green building has never emphasized the social equity component of the triple bottom line. In response to criticism of that deafening silence in the ratings systems, there is a LEED pilot credit available for Social Equity within the Supply Chain, informed by the BIFMA e3 furniture sustainability standard, although it is rarely pursued, that addresses workers who are involved in the production of materials and products used in the project. Some suggest the pilot credit is an afterthought that attempts to do too much when it not only requires “no child/ forced/ bonded labor” but also “harassment and grievance procedures” and “anti-corruption and bribery” that are simply uniquely American values not practical most places in the world.

The BRE Ethical Labour Sourcing Standard enables a company to examine and assess its own business practices and then if it desires to demonstrate to customers and other stakeholders the company’s commitment to eliminating ant possibility of modern slavery or human trafficking. The Standard provides a framework that is available free of charge. If a company determines, it can then showcase their ethical sourcing credentials after gaining third party Ethical Labour Sourcing verification from BRE Global.

Slavery has existed since ancient times and despite having been outlawed in nearly all countries, contemporary slavery exists. There is no morally defensible reason for not doing everything in our power to end modern slavery. We must examine and assess our own business practices now.

Green Globes New Multifamily Rating Systems Respond to the Market

By Stuart Kaplow on August 26, 2018 Posted in Green Building, Green Globes

On July 11 the Green Building Initiative launched the Green Globes Multifamily for New Construction and Green Globes Multifamily for Existing Buildings.

While certainly there is a market in developers of newly constructed multifamily buildings, spending on multifamily construction was more than $61 Billion in 2017, being 18% of all new residential construction spending, up from just 7% in 1993; the sweet spot of these new green building rating systems is anyone looking for a green building discount on a new loan for an existing multifamily building, where Fannie Mae and Freddie Mac held 37% of all mortgages on multifamily properties in 2017, being more than $467 Billion, according to Federal Reserve data.

These new rating systems will wield a positive force in the world responding to the large multifamily market.

Much of that market opportunity is driven by Fannie Mae and Freddie Mac green financing programs. For example, Fannie Mae offers a lower all-in interest rate on a loan secured by a new purchase or refinancing of a multifamily property with a Fannie Mae recognized green building certification.

We are closing a loan for a client this week and the pricing with Fannie Mae has a discounted interest rate spread from 174 basis points to 158 basis points, which will be, literally, Millions of dollars of savings for that multifamily property owner over the life of the loan.

The two new rating systems are likely best characterized as new multi-family “modules” within the existing Green Globes programs. The Green Globes Multifamily for New Construction rating system is modified from Green Globes for New Construction to take into account the specific and unique needs and sustainability goals of multifamily project types and will be uniquely assessed using the existing 1,000 point scale of seven categories: Project Management, Site, Energy, Water, Materials & Resources, Emissions, and Indoor Environment.

The new rating systems are very broad in eligibility (.. more so than other comparable green building rating systems) when a project must be a building or property with a minimum of 5 units.

GBI is known for swiftness n third party certification. There are two timeframes for certification, non-expedited (i.e., normal) and expedited. Expedited Certification for existing building is 30 to 45 days and new construction is 45 to 60 days. Non-expedited certification for existing building is 90 days and new construction is 4 to 6 months.

The program details are in newly published Technical Reference Manuals available on the GBI website. Of import both Green Globes multifamily programs have energy and water-based requirements in addition to the standard Green Globes requirement of achieving a minimum 35% total score out of all applicable points. The purpose of Minimum Requirements is to realize ‘either’ energy or water consumption savings of 15%. Projects pursuing a Green Globes multifamily certification must identify whether they are targeting energy water, each of which have their own requirements. To see the Minimum Requirements for Green Globes Multifamily New Construction and Existing Buildings, click here.

The Existing Building program will not only be a significant driver of new projects to GBI, but those in the know have described it as having the potential to wield a positive force in the world moving the large multifamily existing building market toward green, something current green building standards have not accomplished.

While this post has highlighted (.. the very large) dollar savings available with Green Globes Multifamily for New Construction and Green Globes Multifamily for Existing Buildings, of course the real aim is more sustainable building and in this first month of the programs a surprising number of the inquiries we have received are from property owners seeking to comply with existing laws and mandatory green building requirements, the sweet spot of these new rating systems is a green building discount on a new loan for an existing (refinancing or new purchase) of a multifamily building.

Mission Critical at the Department of Defense now includes Climate

By Stuart Kaplow on August 19, 2018 Posted in Climate Change, Environmental, Federal

On August 13 the President signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019. The $716 billion H.R. 5515, authorizes appropriations for the Department of Defense for procurement of everything from aircraft, missiles, ammunition, shipbuilding and space defense to military installation construction; and is arguably the most significant environmental legislation enacted anywhere this year.

On page 627 of the 1,360 page bill, for the first time there is a section entitled, “INCLUSION OF CONSIDERATION OF ENERGY AND CLIMATE RESILIENCY EFFORTS IN MASTER PLANS FOR MAJOR MILITARY INSTALLATIONS.”

In military speak, ‘‘the term ‘energy and climate resiliency’ means anticipation, preparation for, and adaptation to utility disruptions and changing environmental conditions and the ability to withstand, respond to, and recover rapidly from utility disruptions while ensuring the sustainment of mission-critical operations.’’

There is no doubt this is a significant shift in emphasis.

And in a related matter, the annual Act for the first time contains a “SEC. 2805. UPDATES AND MODIFICATIONS TO DEPARTMENT OF DEFENSE FORM 1391, UNIFIED FACILITIES CRITERIA, AND MILITARY INSTALLATION MASTER PLANS.”

The enactment requires the Secretary of Defense, with respect to any proposed major or minor military construction project to disclose whether a proposed project will be sited within or partially within a 100 year floodplain. For proposed projects that are to be so sited, the Secretary is required to undertake an assessment of flood vulnerability including a review of alternative construction sites. Most dramatically, the Secretary must now mitigate the flood risk of every project within or partially within the 100 year floodplain, including a 2 feet above the base flood elevation for non-mission critical buildings 3 feet above the base flood elevation for mission critical buildings.

.. consider the impact at Naval Station Nolfolk alone, the world’s largest naval base and all but completely below the 100 year flood plain.

Two feet freeboard construction has become an inexpensive response to concerns over rising sea levels on the East coast and the Department of Defense is on the bleeding edge with 3 feet freeboard.

While not surprising, neither of these new provisions were objected to by the President. In a written statement issued after the bill signing, the President raised objections to 52 provisions of the Act, but not to either of these environmental mandates, which are entirely consistent with the President’s view (.. wearing his ex-real estate developer hat) of these response to a changing natural environment. Presidents have used signing statements for more than 100 years to express reservations about bills they signed. The statement can be controversial because it allows presidents to reinterpret legislation, or it can even serve as a line item veto to not enforce provisions they find objectionable. But there was no such objection noted here.

These provisions are hugely important because of the size of the Department of Defense real estate portfolio of over 500,000 properties located on more than 30 million acres of land, which have more acre of wetlands and a greater number of endangered species than any other land owner. With real estate holdings in all 50 states, seven US territories, and 70 foreign countries, with over three billion square feet of built facilities, what the Department of Defense does with its real estate drives the broader built environment (on an all but planetary basis).

Given that large real estate footprint and the positive environmental externalities effecting other real estate, the National Defense Authorization Act for Fiscal Year 2019 is arguably the most significant environmental legislation enacted anywhere this year.

And it is likely you will be specifying 3 foot freeboard on your next building.

SEC Assessment of Climate Change Risks Still Mandated

By Stuart Kaplow on August 12, 2018 Posted in Climate Change, Federal

While I was on the Baltoro glacier making my way down from K2 in Pakistan earlier this month the Securities and Exchange Commission informed Exxon Mobil Corp. that it closed its investigation into whether the company had misled investors about the risks that climate change posed to its business.

The ending of the probe that began under the Obama Administration was viewed as more political than ‘accounting practices’ by many, is no doubt significant to Exxon, but the decision is specific to that case and does not portend any change in policy at the SEC.

SEC rules generally require public companies to disclose, among other things, known trends, events, and uncertainties that are reasonably likely to have a material effect on the company’s financial condition or operating performance in the annual report and other periodic filings. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision.

The SEC occasionally provides guidance on topics of general interest to the business and investment communities by issuing interpretive releases, which publish the Commission’s views and interpret federal securities laws and SEC regulations. Guidance was published in 2010 by the SEC to provide interpretation for companies on how existing disclosure requirements apply to climate change related matters. My blog post on that 2010 Guidance identifies matters that may be most likely to require climate change related disclosure in companies’ annual filings.

An historical context is relevant because at the time the 2010 Guidance was issued, “cap and trade” legislation was pending in Congress; the Environmental Protection Agency was taking steps to regulate greenhouse gas emissions; and there were efforts to launch an international cap and trade system. However, those Obama period changes did not occur.

Of note, in response to a request from Congressional members, the SEC later issued two reports to Congress in 2012 and 2014 that narrowly examined only variations in climate change related disclosures in select industries. The SEC found that most of those filings included some level of climate related disclosures and reported that there were no notable year-to-year changes.

But today, after announced withdrawal from the Paris Accord, repeal of the power plant rule and with EnergyStar on the ropes, the political climate in Washington DC is very different than it was in 2010.

That observed, public companies must continue to follow the SEC guidance by annually evaluating and considering climate change related matters.

And we continue to assist corporate counsel, both through our law firm and non law subsidiary, in satisfying environmental disclosure obligations under federal and state laws and regulations. But that does not necessarily mean that a determination on a climate-related or other environmental issue triggers a public disclosure. As I recently told Bloomberg, “disclosures that are potentially made associated with climate change are uncertain and speculative when compared to other disclosures made by publicly traded companies.” That is, the majority of public companies we advise, ultimately determine no disclosure is the correct course of conduct.

And as I described in an earlier blog post, data culled from filings of public companies listed on U.S. stock exchanges reveals that in recent years less than 30% of all public companies made a climate change disclosure of any kind.

Again, all are cautioned to not over read that the SEC ended its probe of Exxon, but the current SEC is not pushing companies to make public climate related disclosures.

Jury Awards Millions in Sustainable Hog Case

By Stuart Kaplow on August 5, 2018 Posted in Environmental, Sustainability

Last week a jury in federal court awarded more than $470 million to six people who live from one-third of a mile to one mile away from a hog farm, run by Murphy Brown an affiliate of Smithfield Foods, in a rural patch of Pender County, North Carolina.

The lawsuit is the third to go to verdict of more than two dozen cases pending in North Carolina. In April another federal jury award ten families in Bladen County $50 Million. And then in June a different jury awarded $25 million to a couple in Duplin County.

Of note, the most recent verdict is against two farms that have the largest ‘humanely raised’ hog operations in the state. Hog farms are a multi Billion dollar business in North Carolina, the second largest pork producing state (second to Iowa).

And while there is no doubt that the Fourth Circuit Court of Appeals will review these verdicts, including how statutory damages caps reduce the amounts actually collectible, these cases present a harsh reality of farms being pushed to respond to demand for sustainable agricultural products while battling nuisance claims brought by carpetbagger trial lawyers on behalf of city slickers who have moved to rural farm communities.

Also fascinating are the arguments made at trial. According to a representative of the North Carolina Pork Council who was in the courtroom for closing arguments,

the plaintiffs’ Texas lawyer acknowledged there are no health claims, and no injuries, but he appealed to the grandparents on the jury, a “grandpa should smell like lemon drops, not hog,” he said. Such intangibles are “as valuable as any physical harm.”

Again the millions awarded are to six people who live from one-third of a mile to one mile away from a long-existing hog farm for odor and noise crated by farming.

North Carolina has a right to farm law, but the trial courts have ruled it inapplicable here where the properties were in residential use before the hog farm was created in 1990, despite that the plaintiffs did not live on the properties at that time and only moved there after the hog farm already existed. Such is no doubt fodder for the appellate court and the state legislature is already considering broadening the protection.

Gag orders have kept the parties from saying much, but Smithfield had previously said the lawsuits pose an existential threat to the multi Billion hog business in North Carolina. Right to farm laws have been passed to provide a defense to nuisance suits when non-agricultural uses extended into areas used for agricultural operations, but such may not be enough.

Being a farmer is a noble profession. These case may be among the worst example of plaintiffs’ lawyers run amuck. There is faith that the Fourth Circuit will restore certainty to our food supply and not allow the national movement toward ‘humanely raised’ hogs to be stalled by a handful of plaintiffs who bought houses near existing hog farms, and now complain that grandpa does not smell like lemon drops.