After a tumultuous year of financial market collapse and insurance corporations seeking government assistance, the brownfield industry might feel uncertain about the future of cleanups, specifically Insurance Fixed-Priced Cleanups (IFCs). But, the outlook is not as grim as you might think.

We’re finding the IFC and risk-transfer market has grown over the last 10 years as more companies are offering these types of programs. Environmental liability transfers backed by insurance have become an integral part of many consulting firms’ business models. Even in a turbulent economy, there are many reasons why the use of IFC’s will continue to grow.

According to the Bureau of National Affairs Inc., the new standards regarding environmental liabilities set by the Financial Accounting Standards Board taking effect this year will increase the visibility of environmental liabilities on businesses’ disclosure books. These new requirements should make public companies with environmental issues more interested than ever to shed liabilities through risk transfer mechanisms. These requirements will also bring a heightened awareness of tax advantages for cleaning up or transferring liabilities; thus, the IFC market has a great outlook.

Operating sustainably is important to corporations and it is important to consumers. More and more companies are completing sustainability reports, tracking their greenhouse gas emissions and reducing their company’s environmental footprint. A sustainable image is easily and quickly improved by reducing environmental liabilities. Plus, it’s difficult for corporations to say they are green when environmental liabilities are on the books.

“We feel sustainability means taking a balanced holistic approach to meeting our economic, environmental and social responsibilities,” Stephen Linnemann, vice president of the Environmental Global Practice, Burns & McDonnell, said. “Integration of these responsibilities into overall business strategies, financial accounting, corporate governance and human relations is imperative to reduce environmental liabilities. Several of our clients are beginning to integrate sustainability into their organization through risk transfer to reduce environmental liabilities.”

Seeking strategic acquisitions
Acquisition opportunities are on the horizon for companies that have weathered the financial storm of 2008. Several company leaders who have been contacted said that they are putting previously planned capital projects on hold in order to increase target acquisitions in 2009. Companies are searching for strategic acquisitions at a time when prices are low. This should be a positive sign for the IFC environment as acquirers seek to purchase assets and shed the liabilities.

Although it is difficult for corporations to justify selling property in a down market, companies that face this task will be able to use IFC’s to generate higher returns from their sales. These sales will create opportunities for purchasers to reposition those properties, and enabling remediation contractors to team with developers to offer solutions to the companies that maximize the value of those properties. And offer solutions to the companies that provide certainty to the environmental risk associated with the property.

In these uncertain times, it’s difficult for anyone to predict the future. However, it would seem that contractors and insurers are working together to a greater degree to offer workable solutions to clients. Times like these separate the strong companies from the weak, the pretenders from the professionals. Engaging the reputable firms with strong financials will put you on solid footing in times when the slope is exceedingly slippery.

Mark Knaack is the business development manager for the Environmental Global Practice at Burns & McDonnell Engineering, Inc.