Unlocking Value: Environmental Risk Management for Banks with Balance Consulting Inc.

In the intricate world of banking, where every loan and line of credit carries not just financial but environmental risks, the ability to navigate these challenges with precision is paramount. Balance Consulting Inc. (BCI), since its inception in 1996, has positioned itself as a beacon for financial institutions seeking to manage environmental risks associated with their portfolios. Here's how BCI is revolutionizing due diligence and risk management in banking:

 Comprehensive Environmental Due Diligence

When it comes to environmental due diligence, BCI goes beyond the standard ASTM Phase I ESA (1527-21 compliant). We understand that for banks, the identification of Recognized Environmental Conditions (RECs) is crucial but not sufficient. BCI's approach includes:

• Detailed Site Assessments: Utilizing the latest standards, our assessments provide a clear picture of potential liabilities, ensuring banks are not blindsided post-transaction.
• Ongoing Monitoring: For properties with known risks, BCI offers continuous monitoring, adapting to the evolving environmental compliance landscape.

 Risk Mitigation Strategies

BCI doesn't just identify risks; we mitigate them:

• Insurance Underwriting Assistance: We work closely with insurance underwriters to tailor coverage that fits the specific environmental risks of a property, ensuring that even in the face of known issues, there's a financial safety net.
• Turnkey Remediation Management: Should a property require remediation, BCI can manage the entire process from Phase II assessments through cleanup, providing banks with a seamless service that minimizes exposure and maximizes recovery value.

 

Asset Valuation and Foreclosure Services

In distressed scenarios, such as foreclosures, understanding the true value of an asset amidst environmental complexities is crucial:

• Pre-Foreclosure Valuations: BCI offers comprehensive "valuations" that account for environmental liabilities, helping banks make informed decisions about whether to pursue foreclosure or negotiate different terms.
• Post-Foreclosure Asset Management: Our services extend to managing these assets, ensuring that environmental issues do not devalue the bank's holdings further.

 Strategic Advisory for Existing Loans

For banks with existing loans where environmental liabilities might exceed the loan value, BCI provides:

• Risk Assessment Adjustments: We reassess and recalibrate risk models to reflect current environmental conditions, advising on adjustments to loan terms or additional collateral requirements.
• Regulatory Compliance Support: Ensuring that all transactions comply with the latest environmental regulations, avoiding potential legal pitfalls.

 Why Choose BCI?

• Expertise: With over 25 years in the field, BCI's deep understanding of environmental law, finance, and real estate provides banks with a strategic partner.
• Holistic Approach: From due diligence through to post-transaction management, BCI offers a one-stop solution for all environmental risk needs.
• Customization: Every property and loan scenario is unique. BCI tailors its services to fit the precise needs of each banking client, ensuring optimal risk management.

 In today's banking landscape, where environmental considerations are becoming increasingly critical, partnering with an expert like Balance Consulting Inc. isn't just about compliance—it's about strategic foresight, risk reduction, and ultimately, protecting and enhancing asset value. Visit www.balanceconsultinginc.com to learn how BCI can safeguard your bank's investments in a world where environmental risks are as significant as financial ones.

 

Managing Environmental Risk for Banks – BCI’s Comprehensive Approach

When it comes to navigating complex loans and managing properties with hidden environmental liabilities, Balance Consulting Inc. (BCI) is your go-to partner. With over 36 years of experience in the environmental consulting industry and a regional footprint that covers Texas, Louisiana, Arkansas, Mississippi, Alabama, Tennessee, Florida, and Georgia, BCI is well-positioned to help banks mitigate risk and make informed decisions on properties of concern. But what sets us apart, and why should banks look to us for environmental due diligence and risk management?

Top Reasons BCI Stands Out for Environmental Due Diligence in Lending:

1. Depth of Industry Knowledge and Standards Compliance BCI is not just another Phase I Environmental Site Assessment (ESA) provider. As active members of the ASTM E-50 Committee, we ensure that every assessment is aligned with the latest ASTM E1527-21 and All Appropriate Inquiries (AAI) standards, offering clarity and compliance for our clients. Our team understands the recent updates in the Phase I ESA process, such as the refined definitions of Recognized Environmental Conditions (RECs) and the inclusion of emerging contaminants as non-scope considerations. 

2. Specialized Risk Mitigation Strategies for Complex Transactions When a property’s environmental impact exceeds the loan value or when existing loans are at risk due to contamination, BCI steps in to provide strategies that protect the bank’s interests. We are adept at developing customized risk management plans, including proper environmental specialty risk insurance to limit exposure. This allows banks to continue operations and secure their investments, even in high-liability scenarios. 

3. Tailored Solutions for Known Risks For properties with identified environmental risks that may not be deal-breakers but still require careful management, BCI assists in securing the appropriate environmental insurance and regulatory compliance plans. Our comprehensive approach includes not only initial due diligence but also ongoing support, remediation oversight, and value optimization to turn challenges into manageable risks. 

4. Expertise Beyond Phase I: Valuation and Turnkey Services BCI goes beyond just Phase I assessments. We offer extensive Phase II services, asset valuation before foreclosures, and full remediation management. This turnkey approach means we don’t just identify risks — we provide solutions. Our deep experience allows us to manage cleanups and compliance, ensuring the property’s viability and regulatory standing are preserved throughout its lifecycle.

5. Helping Banks with Foreclosures and Asset Management In cases where environmental liabilities are present on foreclosed assets, BCI’s expertise in valuations and risk quantification helps banks make informed decisions on whether to hold, sell, or remediate properties. This guidance reduces uncertainty and potential losses associated with distressed assets.

Smart Due Diligence: Protect Your Bank with the Right Partner

When lending institutions partner with BCI, they gain a trusted advisor that is there not just during the site selection and transaction phases, but throughout the entire property lifecycle. Our work doesn’t end with the initial assessment — we stay engaged to help you manage and mitigate risks as new conditions arise. That’s why so many financial institutions turn to BCI for guidance on even the most complicated properties.

Find out more about how BCI can safeguard your investments and manage environmental risk at www.balanceconsultinginc.com.

Update on Spray Foam in Residential Settings

Spray foam insulation (SPF) is becoming more popular, but it still only represents a fraction of the insulation market in residential homes. Nationally, approximately 90% of U.S. homes are considered under-insulated according to the North American Insulation Manufacturers Association (NAIMA). Most homes rely on traditional insulation types like fiberglass or cellulose, and spray foam is used in fewer cases due to its higher cost and installation complexity​ (Energy One America).

there have been restrictions and prohibitions on the use of certain epoxy derivatives, particularly those containing bisphenol A (BPA) and other related bisphenols, in various countries, primarily in the European Union. These bans are mostly focused on food contact materials due to the potential health risks associated with BPA, including endocrine disruption and toxicity.

Key Findings:

1. European Union: The EU has taken a stringent approach toward restricting BPA and its derivatives in food contact materials. In 2024, the European Commission moved forward with a regulation banning the use of BPA as a monomer in the manufacture of food contact materials. This includes restrictions on its use in plastics, varnishes, coatings, and adhesives. The regulation is expected to be fully enacted by the end of 2024, with transition periods of 18 to 36 months for compliance ​(Epoxy Europe)​(Environmental Defense Fund)​(Food Packaging Forum).
2. Specific Restrictions on Epoxy Derivatives: The EU has already implemented a ban on certain epoxy derivatives like BFDGE (bisphenol-F-diglycidyl ether) and NOGE (novolac glycidyl ether) in food contact materials since 2005. However, BADGE (bisphenol A-diglycidyl ether), which is used in some epoxy-based varnishes and coatings, is still permitted under strict migration limits if BPA is not detectable in the final product​ (EUR-Lex).
3. Other International Regulations: Outside the EU, regulatory actions are less consistent, with BPA-based epoxy resins still widely used in many regions. However, there is growing international pressure and regulatory proposals in countries like Canada and some U.S. states to further restrict or ban BPA-based materials in sensitive applications like food packaging.

 

 

Implications

The bans are largely driven by concerns over long-term health impacts, particularly in sensitive populations. Although epoxy resins are versatile and widely used in construction, coatings, and other industrial applications, these restrictions highlight increasing scrutiny over the safety of chemicals used in everyday products.

If you're working in industries using epoxy resins or considering alternatives for sensitive applications, it would be prudent to monitor these regulatory changes closely, as other countries may follow the EU's lead in the coming years.

 Likely Percentage of Homes with Spray Foam Insulation

There isn’t a single definitive percentage specifically for homes using spray foam insulation, but estimates suggest it is still relatively low compared to traditional insulation methods. A general industry estimate indicates that spray foam might account for only about 10-15% of the U.S. insulation market. This is backed by reports noting that many homes have not been retrofitted with this more expensive option and are instead insulated with fiberglass or other materials ​(Energy One America)​(Bob Vila).

Homes Without Spray Foam

The remaining 85-90% of homes likely use other forms of insulation, such as fiberglass batts, blown-in cellulose, or foam board, which are more common due to lower costs and simpler installation​ (Energy.gov).

The increasing adoption of stricter energy codes and better awareness of spray foam's thermal benefits are driving its usage, particularly in new builds and energy-efficient renovations, but it’s still not widespread in the overall housing stock.

Research on the effects of spray foam insulation (SFI) on individuals with autism is still emerging, but existing studies suggest that those on the autism spectrum may be more vulnerable to chemical sensitivities and environmental exposures. Individuals with autism often experience heightened sensory sensitivities, including odors and airborne chemicals, which can lead to adverse health effects even at lower levels of exposure compared to the general population.

 

 Key Findings:

1. Sensitivity to VOCs and Chemical Emissions: Spray foam insulation contains various chemicals, including isocyanates and polyol blends, which release volatile organic compounds (VOCs) during and after installation. Exposure to these chemicals can cause respiratory, skin, and neurological symptoms, which are particularly concerning for individuals with heightened sensitivities, such as those on the autism spectrum. The EPA has highlighted that there is no recognized safe level of exposure for sensitized individuals, meaning that even minimal exposure could pose a health risk for some people​ (US EPA).
2. High Sensitivity to Fragranced and Chemical Products: A study focused on autistic adults found that 83.7% reported experiencing adverse health effects from exposure to fragranced consumer products, including respiratory issues, headaches, and mucosal symptoms. This suggests that individuals with autism are more likely to have a heightened response to the chemical emissions from products like SFI. Many reported that the severity of their reactions was disabling, leading to limitations in societal and workplace participation​ (SpringerLink).
3. Health Effects from Faulty SFI Installation: Another study linked improper spray foam installation to significant health issues in homeowners, including respiratory irritation, neurological symptoms, and skin reactions. These problems were more pronounced in environments with high VOC levels due to incorrect curing or insufficient ventilation. Autistic individuals, who may already have compromised tolerance to chemical exposures, could be disproportionately affected by such scenarios​ (Scholars@Duke).

Recommendations:

For individuals with autism or heightened chemical sensitivities, it is advisable to:

• Opt for alternative insulation materials with lower emissions.
• Ensure rigorous ventilation during and after SFI installation.
• Conduct thorough air quality assessments before re-occupying the space.

The consensus is that SFI should be approached with caution in sensitive populations, and alternatives or additional safety measures may be necessary to minimize potential health risks.

How often is it used in the walls in Tennessee?

Spray foam insulation is widely used in residential construction across Tennessee, particularly in regions adopting the newer International Energy Conservation Code (IECC) standards. For example, counties like Davidson, Williamson, and Rutherford have transitioned to the 2018 IECC code, which requires a minimum insulation value of R-20 for residential walls. This has led many builders to favor more advanced insulation methods, including spray foam, to meet these requirements efficiently ​(OX Engineered Products).

Professional spray foam contractors, such as ProFoam of Tennessee, have been servicing the state for years, offering spray foam insulation as a primary method for achieving higher energy efficiency and meeting state codes. They report thousands of residential and commercial spray foam projects since 2006 across various Tennessee cities, including Knoxville and Maryville, indicating its prevalent use in walls and roofs for both new and retrofitted homes ​(ProFoam-TN).

The adoption of spray foam in Tennessee is driven by its ability to provide superior thermal performance and air sealing, which is essential for energy code compliance and long-term cost savings. This trend is likely to continue as the state enforces higher insulation standards, making spray foam a common choice for builders and homeowners alike.

Current Legal and Regulatory Status of Spray Foam Insulation

Will Spray Foam Insulation Be Banned?

Currently, spray foam insulation is not banned in the United States, but its use is under increasing scrutiny due to health concerns. Some states, like California, have placed spray foam and its chemical components on their "candidate chemicals" list, which could lead to future regulatory actions. The U.S. Environmental Protection Agency (EPA) and other regulatory bodies continue to evaluate the safety of spray polyurethane foam (SPF) insulation, focusing particularly on isocyanates, which are known respiratory sensitizers and are linked to serious health issues ​(VTDigger).

Where Is It Banned or Restricted?

No outright bans are currently in place, but regions with strict building codes may discourage its use. For example, Canada has highlighted SPF safety concerns, and Vermont has seen local opposition and an increase in lawsuits. The challenges with consistent installation quality and the potential for toxic off-gassing have made it a controversial choice in some areas ​(VTDigger).

How Many Lawsuits Are There?

Lawsuits related to spray foam insulation are widespread and growing. There are currently multiple federal lawsuits in over half a dozen states, with some cases seeking "multidistrict litigation" (MDL) status to consolidate efforts and streamline legal proceedings. This includes class-action lawsuits as well as individual claims against major manufacturers like BASF, Icynene, and Dow Chemical ​(OnderLaw and GreenBuildingAdvisor). Complaints range from off-gassing issues to structural problems, health impacts such as respiratory and neurological damage, and property damage like corroded metal components ​(OnderLaw)​ (Top Class Actions).

Ongoing Litigation and Industry Response

The industry, through associations like the Spray Polyurethane Foam Alliance (SPFA), is attempting to address these issues by offering more comprehensive safety training and certifications for installers. However, there are still reports of substandard installations leading to both acute and chronic health concerns, prompting further legal challenges and regulatory review ​(GreenBuildingAdvisor).

While spray foam insulation is unlikely to be banned nationwide in the near future, continued health complaints, coupled with legal challenges, could result in tighter regulations or voluntary reductions in use.

Spray foam insulation can indeed have a significant impact on a home's marketability and financing options, depending on the circumstances. While some buyers may see it as an attractive feature due to its energy efficiency, others may view it as a liability due to concerns over installation quality, long-term health risks, and structural issues.

Impact on Home Sales

• Buyers' Mixed Perceptions: The presence of spray foam insulation can attract some buyers who appreciate its thermal benefits, while others may be deterred if they have heard negative reports or are concerned about the quality of the installation. For certain buyers, spray foam may enhance the home's appeal, but it will not necessarily increase the home’s resale value. The insulation type is generally not factored into the appraisal value, so it is not considered a direct financial advantage during the sale.
• Mortgage and Lending Issues: The biggest concern often comes from mortgage lenders. Many lenders hesitate to approve mortgages on homes with spray foam insulation, particularly in the roof or attic. This is because improperly installed spray foam can lead to moisture build-up, wood rot, or structural issues, making it difficult for surveyors to fully inspect these areas. As a result, buyers may struggle to secure financing, and sellers might find their pool of potential buyers reduced.

 

• Legal and Documentation Requirements: Some lenders require extensive documentation, including evidence of proper installation, air quality testing, and potentially even removal if issues are identified. In cases where spray foam was not correctly installed or poses a structural risk, it can complicate the sale process significantly, as resolving these issues often requires costly removal and remediation.

Bottom Line

Disclosing spray foam insulation can sometimes detract from a home sale, particularly if buyers or lenders are cautious about its potential risks. If you're selling a home with spray foam insulation, it’s advisable to have detailed records of the installation and possibly consult with a real estate agent experienced in navigating these concerns.