Terrain Solutions’ personnel attended the Environmental Banker Association (EBA) in Nashville, Tennessee at the beginning of February 2025. There are obvious reasons for attending a conference: potential clients and competitors with which you can compare market concerns. But one can also get a clearer perspective of the client’s concerns regarding environmental issues. Therefore, clients possibly see more types of environmental issues and evaluate responses through the eyes of various environmental consultants.
A few nuggets came out of the three days of discussions that we would like to share:
PFOS/PFAS
Most have heard of, or assessed, these forever chemicals that are found in Teflon and fire-suppression chemicals (and inside most of our bodies, so we hear ). Lending Institutions are now being told that PFOS should also be assessed in areas like wastewater treatment facilities, car wash sumps, oil/gas exploration fields, and dry cleaners.
70 million acres of farmland could additionally have PFOS in soils. 10-30% of the time, PFOS is found in the shallow groundwater as well. The few assessments that were presented at EBA indicated an 8% exceedance of PFOS in tested media above regulatory limits at car washes and 33% at dry cleaners. The PFOS assessment may be something that may have to enter the typical Constituent of Concern (COC) assessment in the future.
CERCLA (Obtaining a BFPP status)
Most lenders are more interested in requiring Phase I ESAs or invasive studies to evaluate business risk, future environmental costs, regulatory involvement, or risk to the bank. The BFPP (Bona Fide Perspective Purchaser) status from the AAI protection standpoint can be obtained from a properly performed Phase I ESA and any required follow-up testing. There is no statute of limitations that runs out for liability to owners or stakeholders – banks are equity partners. Subsequently, there are still poorly prepared Phase I ESAs that are being sent to banks every day. A Reliance letter on an expired or substandard Phase I ESA is no protection at all.
The Environmental assessment real estate loan market is expected to moderately grow in 2025
The amount of distressed loans has increased to 10% from 3% in the past. Capital comes from non-traditional sources (70%) with traditional banks at 30% down from 45% pre-covid. Good news for the Houston market as they predict 4% real estate sales growth. We are also nine out of ten for growth in the US!
NFA
The infamous “No Further Action” letter issued by a lot of State regulators is making lenders nervous. Does the historical issuance of an NFA to a property mean no environmental risk remains? The lenders are warning updating ESAs and even the performance of newer invasive studies may be necessary to make better risk decisions.
Property Resilience
Climate risk evaluation is here to stay regardless of the federal government policy changes. Evaluating risk from fires, flooding, sea-level rise, and hurricanes and storms is now being required by some lenders. Secondary parameters also need to be evaluated such as building code changes and property insurance. Climate change has had an impact on property insurance where some insurance providers are not willing to provide property insurance or the rates have gone up precariously – the lending institutions have taken notice as it puts risk to their collateral.
