Photo Credit: Bill Portlock/CBF Staff

Financing Clean Water

Polluted runoff is a major source of pollution to the Bay, and it's still growing. While reducing this pollution is necessary for the health of wildlife and humans in the Bay watershed, many local governments struggle to find the funds required for new stormwater management projects.

Reducing polluted runoff from urban and suburban roads, rooftops, and parking lots is an expensive task. Aiming to break down this cost barrier CBF launched an Environmental Impact Bond (EIB) program in 2017. In partnership with Quantified Ventures and with support from The Kresge Foundation and other funders, CBF invited municipalities in Pennsylvania, Maryland, and Virginia to participate in a pilot project to implement natural solutions that reduce urban/suburban runoff that damages local rivers, streams, and the Chesapeake Bay.

This exciting program was developed to help communities in the Chesapeake Bay watershed mitigate the cost and risk of implementing these green infrastructure projects that manage polluted runoff, create local sustainable jobs, and enhance community vitality.

"We understand that reducing polluted runoff is often difficult and expensive and we want to make it easier and more effective for communities in the Bay watershed to meet their clean water goals," said CBF Vice President Kim Coble. "Because some local governments and lenders may be less familiar with implementing natural solutions, these kinds of projects may be seen as riskier and more difficult to finance."

For the pilot project, CBF is helping municipalities take advantage of the EIB, which Quantified Ventures and DC Water pioneered. In 2016, DC Water used an Environmental Impact Bond structure to privately finance and share the risk for implementing natural solutions to manage stormwater runoff into the Potomac River.

An Environmental Impact Bond provides up-front capital for environmental projects. In its most basic form, a municipality or municipal entity (such as a municipal utility) issues Environmental Impact Bonds and sells them to private investors to obtain financing to pay the cost of environmental projects.

The municipal issuer is required to pay interest on the bonds and to repay the principal amount of the bonds on scheduled payment dates.

The EIBs follow a Pay for Success model. After an evaluation period, if the project reduces significantly more pollution than expected, the investor receives a higher rate of return. If the project reduces significantly less pollution than anticipated the investors will receive a lower rate of return.

"In our pilot program, we will coordinate with up to four local jurisdictions' financial advisors toward the creation of an Environmental Impact Bond or loan tailored to their community's financial and environmental needs to implement green infrastructure solutions," said Coble.

The application period for municipalities was September 15-October 31, 2017. CBF will begin working with the selected municipalities in 2018.

What are Environmental Impact Bonds?


We got a look behind the current on Environmental Impact Bonds as part of our biweekly podcast series, Turning the Tide. Listen to DC Water General Manager George Hawkins discuss the ins and outs of distributing drinking water to and collecting wastewater from millions of capital-area residents and visitors and learn about some of the biggest innovative green power and infrastructure projects you've never heard of.

Sidebar Photo: Robert Miller.