The Role of Environmental Risk Management in the Credit Process

By Robbins, Lorne; Bisset, Douglas M. | Journal of Commercial Lending, June 1994 | Go to article overview

The Role of Environmental Risk Management in the Credit Process


Robbins, Lorne, Bisset, Douglas M., Journal of Commercial Lending


It may not have been the lawmakers' intent, but the passage of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) has brought new meaning to the term risk management as far as bank credit officers are concerned. With threats of massive cleanup costs hovering over loan proposals and the vulnerability of businesses to environmental issues converting sound companies to highrisk prospects overnight, banks are spending more and more time training lending personnel on the hows and whys of factoring CERCLA-related subjects into their credit analyses.

Legislators, regulators, and judges have sent the business community a very clear message: This is the only planet we occupy. The net covering those responsible for protecting the planet has been widened, as has the scope of liability for cleanup costs when damage has been determined. And this responsibility extends beyond those who actually caused the environmental damage.

As property owners and as financial advisors to customers, banks are clearly at the top of the list of those to whom others look when billing for environmental repairs. The fact that the cost of environmental repairs can exceed the amount of a loan--sometimes many times over--is justification for establishing internal alarms to monitor risk. The prospect of state or federal government imposing fines as added punishments is another consideration. In addition, there is always the likelihood of more onerous regulations and penalties.

Equally pertinent, banks and other financial institutions face these environmental risks not only as lenders, property owners, managers, and tenants but also indirectly through their agents, receivers, or trustees.

These realities--plus the uncertainty generated by such court cases as Kelley v. EPA (1994), U.S. v. McLamb (1993), U.S. v. Fleet Factors Corp. (1990), U.S. v. Burns (1988), and U.S. v. Cauffman (1984)--create a serious challenge for all those involved in credit and fiduciary decisions.

Financial considerations aside, what can be done to ensure that the customer and the bank are not at risk from an environmental point of view? And how permanent are court decisions and congressional actions that alternately raise and dash bankers' hopes for relief?

From an internal point of view, an equally critical question is, How skilled are a bank's personnel at identifying environmental risk when analyzing a proposed financial arrangement? Even more important, how can financial institutions help their employees acquire the necessary skills to assess environmental risk, and how can a culture be established that commits all personnel to protecting the planet, the borrower, and the financial institution against environmental risk?

Environmental Policies

An integral part of the answer to these questions has to be the formation of an environmental policy, the principles of which are communicated throughout the organization. See the sidebar for Canadian Imperial Bank of Commerce's environmental policy.

A Policy Statement of the Board of Dorectors of Canadian Imperial Bank of

Commerce

Canadian Imperial Bank of Commerce is committed to responsible conduct in all its activities to:

1. Protect and conserve the environment.

2. Safeguard the interests of the corporation, its employees,

customers, and shareholders from unacceptable levels of

environmental risk.

3. Support the principles of sustainable development.

To this end, Canadian Imperial Bank of Commerce will:

Standards

Meet or exceed all environmental standards, regulations, and legal requirements applicable to its operations and to the health and safety of its employees, and where no regulations exist, set its own standards.

Operations

Minimize any environmental impact of its operations by incorporating the concept of sustainable development and following sound environmental practices in design, planning, maintenance, purchasing, and management. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Role of Environmental Risk Management in the Credit Process
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.