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Commercial Department: Q&A: Jeff Telego, Environmental Bankers Association: April 2008


Q&A: Jeff Telego, Environmental Bankers Association

Jeff Telego, Executive Co-Director, Environmental Bankers Association

As long as environmental issues such as contamination liability and brownfield redevelopment remain in the commercial mortgage landscape, due diligence likely will be a hot topic among brokers. The EBA works with banks and other financial-institution members to develop consistent environmental-risk-management policies and procedures. Executive Co-Director Jeff Telego tells us about the association and what’s up with environmental risks.

Why did EBA start? It was founded in 1994 in response to heightened sensitivity to environmental issues and lender liability that had been happening since the mid-1980s. Banks were being brought into cleanups as owners and operators and were sued in tort situations. As lending institutions started to develop their own policies and procedures independent of each other, industry members decided to develop a repository of procedures and form a trade association to represent that process.

How are tightened underwriting standards impacting environmental risk management? One of the biggest changes in terms of tightening has been the formalizing of the Phase I environmental-site-assessment ESA process from the All Appropriate Inquiry [Negotiated Rulemaking regulation mandated by the Brownfields Revitalization Act]. The ESA is now more uniform and has raised the standard of care in due diligence.

How are financial institutions responding to property-risk issues such as vapor intrusion? We recently surveyed our members, and on the vapor-intrusion issue, 76 percent of banking members who responded didn’t have formal policies or procedures to deal with vapor intrusion. But 86 percent of them said it was an issue of concern.

Vapor intrusion can affect all sorts of business units, from commercial real estate-secured lending to trust activities. Banks are looking at their underwriting processes to figure out how to best address the issue.

How do lending institutions generally view the prospect of financing redeveloped brownfields? Banks will underwrite these sites if the property, location and economics of the deal are feasible. As long as bankers can “bracket” the risk, understand the technical issues and put in the kind of legal protections and financing to make the deal work, it can be doable. In fact, we have a few members of our trade association who do nothing but brownfield loans.

What is the most important thing for commercial brokers to understand about environmental due diligence? They need to understand that each lender has its own risk tolerance for environmental issues. It will exemplify this tolerance based on its book of business, tiered or performance-based level of environmental due diligence, and the loan size and type, property use, pricing, timing, and exit strategy. Brokers have to help provide the required information to give lenders a reasonable assessment of these elements of the transaction. 


Melinda Young was an associate editor at Scotsman Guide. For questions on this article, call (800) 297-6061 or e-mail

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