The DC Water and Sewer Authority (DC Water) issued the nation’s first Environmental Impact Bond (EIB) to fund the initial green infrastructure project in its DC Clean Rivers Project, a $2.6 billion program to control stormwater runoff and improve the District’s water quality, creating a healthier future for District residents. This deal offers a new type of financial instrument to fund environmental capital projects.
The $25 million, tax-exempt EIB was sold in a private placement to the Goldman Sachs Urban Investment Group and Calvert Foundation. The proceeds of the bond will be used to construct green infrastructure practices designed to mimic natural processes to absorb and slow surges of stormwater during periods of heavy rainfall, reducing the incidence and volume of combined sewer overflows (CSOs) that pollute the District’s waterways. CSO reduction has become an increasingly urgent environmental challenge as a result of climate change, which has increased the frequency and severity of intense rainfall events.
The EIB allows DC Water to attract investment in green infrastructure through an innovative financing technique whereby the costs of installing the green infrastructure are paid for by DC Water, but the performance risk of the green infrastructure in managing stormwater runoff is shared amongst DC Water and the investors. As a result, payments on the EIB may vary based on the proven success of the environmental intervention as measured by a rigorous evaluation. By financing this project through the EIB, DC Water seeks to create a model funding mechanism that other municipalities can leverage to advance the use of green infrastructure to address stormwater management in their communities.