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Innovative Financing of Green Infrastructure

5/11/2017

5 Comments

 
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.
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Learn more about DC Water’s consent decree or the DC Water Environmental Impact Bond. 
5 Comments
Ashton W link
1/9/2021 11:00:36 pm

Hi great reading your ppost

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Water Heater Services link
12/8/2021 06:03:17 pm

An essential read for academics of development economics and international finance, as well as practitioners and policy-makers, this book covers topics such as industrial policy, climate governance, carbon markets and capital markets.

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Visit Us link
12/13/2021 02:14:16 pm

The Assembly reiterated that such voluntary mechanisms should be effective, should aim to mobilize resources that are stable and predictable,

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Cross Country Moving Companies link
12/27/2021 03:18:53 pm

Green infrastructure is effective, economical, and enhances community safety and quality of life. It means planting trees and restoring wetlands, rather than building a costly new water treatment plant.

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sutherland tax accounting link
9/29/2022 02:40:04 am

Green infrastructure plans are vital for directing land use and resource management decision-making, but plans cannot be executed without a "how-to-pay" approach. The University of Maryland EFC covers both some recent advancements in the field of green infrastructure financing as well as the essential components of effective green infrastructure financing strategies in this presentation.

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