The Changing Face of Environmental Risk
Management
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September 2007 | |
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Paul
Livett, Managing Director, and Dan Montagnani, Environmental
Consultancy Director of GroundSure look into the reasons
behind the increasing importance of environmental risk
management in the property sector, and demonstrate the UK's
largest banks are incorporating historical mapping services
into their commercial property lending
systems.
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The
contaminated land industry in the UK continues to evolve at
pace. Brownfield regeneration targets, furore over Soil
Guideline Values, test legal cases surrounding statutory
liability and the next set of guidance and regulations makes
for lively debate.
The industry is now relatively
evolved in comparison to many other areas of environmental
management and in terms of property transactions the term
environmental risk is synonymous with contaminated land. The
Environmental Protection Act 1990 and the Environment Act 1995
set about formalising contaminated land issues and pushing
them up the corporate agenda. More recently the tangible
bottom line impact that costs associated with this can have
for an organisation or even an individual, have further
galvanized the mind. As with any topical risk area the
perception of risk, rather than a material issue, can be
sufficient to impact on a sale price or value and hence affect
a transaction.
Another important factor in the
evolution of the subject area has been the acknowledgement in
wider property circles that non-environmental professionals
involved in a transaction need to be informed on these matters
rather than take the "see no evil, hear no evil, speak no
evil" approach. Both the Law Society and the Royal Institution
of Chartered Surveyors advise their members to comment on
contaminated land in the course of their conveyancing and
valuation procedures, respectively. Contaminated land has gone
from being exclusively a specialist area to one requiring
consideration in a day to day business context.
In the
same way that novel remedial technologies are continually
being applied at one end of the spectrum in order to meet the
requirements set by new legislation and associated increased
costs, novel technologies are also driving forward the front
end of the industry where thousands of reports are
commissioned daily for both residential and commercial
property transactions.
Obtaining reliable professional
opinion in a cost effective and timely fashion is, therefore,
the order of the day.
The front end of the market has
therefore seen a proliferation in desk based risk assessment
reports that provide a robust risk screening mechanism
enabling rapid identification of sites with potential issues.
The significance of the identified risks and / or the means by
which to address these, keys into the traditional Phase 1 / 2
/ 3 approach (assessment / investigation / remediation).
However, early knowledge that this type of work may be
required is invaluable in timely commercial decision making.
Ten years ago a purchaser, his agent or adviser may
have had to make a judgement call on whether or not to engage
Environmental Consultants to commence a Phase 1 report and
invest a not insignificant amount of time and money in the
process. Deciding whether or not to commission a report was in
effect the first part of the risk assessment process.
Commissioning a report unnecessarily was obviously
commercially undesirable whilst not commissioning a report
when one was appropriate, was clearly a failure in the risk
management process. The market has therefore changed from
being reactive to proactive and in so doing improving the way
environmental risk is provisioned for.
A particular
area where this has proved significant is the debt finance
sector. Whilst banks have the option to look at risk in a
different context to their customers and may elect to take a
portfolio or commercial view in certain circumstances,
compliance issues such as the Equator Principals and Basel II
require adequate provisions with regard to environmental risk
in the greater property credit risk process.
Fast and
cost effective desk based risk assessment products would
therefore appear to fit the bill very well with regard to
this. Whilst this is true, products and services of variable
quality, not to mention variable reliance in terms of
Professional Indemnity Insurance, has led to scepticism in
some quarters in particular with regard to the potential for
issues raised unnecessarily, representing obstructions to the
day to day business of the bank.
This is where
GroundSure has redefined the process. GroundSure is the only
company in the UK to provide combined environmental data
management and an environmental risk consultancy
service.
The advantages of this approach are many.
GroundSure has 250 GIS specialists that have been scanning and
digitising every available UK historical Ordnance Survey map
to the highest ever resolutions using the latest technologies.
Edge matching, geo-rectification, automatic date recognition
and the digital capture of maps at 100% resolution, not to
mention the scale of such a task and the robust QA process
required, represents a project of immense scale. Digitisation
comprises the geo-positioning and capture of every single
polygon area of potential land use of concern. GroundSure has
subsequently risk ranked over 16,000 different types of
digitised features of concern which has resulted in the
development on a unique Historical Land-use Database (HLD) of
un-paralleled quality.
The GroundSure HLD drives the
risk algorithms developed for various environmental risk
screening products providing advanced capability to risk rank
any property in the UK in seconds.
The resolution and
quality of the data derived by GroundSure has been
instrumental in the adoption of our reports by major lenders
in the UK. No other provider has access to this level of
quality of data and therefore there is a distinct market
differentiation. The accuracy we are able to deliver means we
do not unnecessarily identify sites as high risk, yet at the
same time there is greater confidence in ultimate
outcome.
Valuers order our reports direct through a web
portal negating the requirements for the bank to be involved
at the outset. Should significant environmental risks be
identified then we are able to discuss the various options
with the valuer, lending team and the bank's customer. In
addition to providing the best environmental risk screening
tools in the UK our consultants understand intimately the
requirements of funders with regard to environmental risk and
frequently advise on commercial as well as more traditional
technical solutions.
Evidently the use and development
of advanced technology in the environmental risk and
contaminated land sector applies equally to the business front
end in day to day transactions and debt finance arrangements
as it does to remediation and clean-up.
For more
information please contact GroundSure on 01273 819500 or email info@groundsure.com
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