environmental risk (2)

3- INDIRECT risk : if aborrower engage in an activity that damages the environment ,then it is profitability and hence it is capacity to repay could be weakened .such borrowers face :
- increasing costs of complying with ever-tightening environmental regulations ;
- fines for non-compliance with legislation ;
- costs for cleaning up apolluted site (and even where asite has been sold ,liability can flow back to the polluter under the legal principle of 'polluter pay s ) ;
- third party common law claims for contamination of nearby properties or water resource ;
- contingent liabilities from environmental warranties or indemnities given on the sale or purchase of land or abusiness ;
- managers being distracted ,production disrupted or the companies sales being damaged through apoor public image as aresult of polluting activities.
alander can gain adegree of protection from including environmental clauses in loan documentation ,Appropriate conditions precedent ,representations and warranties , covenants and events of default can alert lenders to problems at an early stage and trigger the capacity to seek early repayment .Obtaining insurance against clean up costs is another option but it be expensive and hard to find .