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Innovative Financing Of Green Infrastructure


Green infrastructure for stormwater management has a broad range of benefits. Green job opportunities, improved air quality, reduced flooding, increased habitat and green space for communities are some of the commonly listed benefits that green infrastructure has for urban environments. These co-benefits are starting to be evaluated in the financial sector, as demonstrated in a landmark contract between DC Water and financial investors.

DC Water is Washington DC’s water and sewer authority, managing drinking water, wastewater and stormwater for the district. In 2005, DC entered a consent decree with the EPA to reduce CSO by 96% by building out more grey stormwater infrastructure like tunnels. In 2016, DC Water and the EPA modified and extended the consent decree to allow DC to pilot green infrastructure practices in lieu of building underground tunnels.

That’s when DC Water was able to contract with Calvert Foundation and Goldman Sachs for the world’s first Environmental Impact Bond or EIB. The structure of this bond is similar to a Pay-for-Success (PFS) Bond or Social Impact Bond (EIB). The financing mechanisms are a bit complicated but have generated much enthusiasm for investors.

The DC Water EIB is a tax-exempt bond that will allow DC to pilot green infrastructure, create green jobs, and pay back the bond with interest rates dependent on its success. Calvert Foundation and Goldman Sachs are the investors, fronting the capital for DC Water to implement green infrastructure. DC Water must meet the agreed upon goals: install green infrastructure to manage 1.2 inches of rainfall on nearly 500 acres of impervious area. Of the jobs created, 51% must be District residents certified through DC’s Green Jobs Program.

If DC Water meets the agreed-upon goals as expected, they will pay back the $25 million dollar bond at a 3.43% interest. If DC Water outperforms, meaning their green infrastructure has larger CSO reductions than anticipated, Calvert Foundation and Goldman Sachs get a higher return on investment (DC Water pays a higher interest rate). If the green infrastructure doesn’t work or does not meet their expectations, DC will pay back with a smaller return and will likely discontinue future green infrastructure projects and go back to investing in grey infrastructure.

Learn more about DC Water’s consent decree or

the DC Water Environmental Impact Bond.