(ANNAPOLIS, MD)—Reducing polluted runoff from urban and suburban roads, rooftops, and parking lots is an expensive task. The Chesapeake Bay Foundation (CBF), in partnership with Quantified Ventures and with support from The Kresge Foundation and other funders, is inviting 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. The application process opened September 15 and closes October 31.
"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 a new financial tool pioneered by Quantified Ventures and DC Water called the Environmental Impact Bond (EIB). 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.
The EIB allowed the utility to raise funds from impact investors Goldman Sachs and the Calvert Foundation to finance projects such as permeable pavement and bioswales—which mimic natural processes, may be more cost-effective than traditional “gray” infrastructure, and can provide additional community benefits such as reducing local flooding, improving climate resiliency, and creating local jobs.
"We think the DC Water example shows promise so we are excited to help CBF test this model around the Bay region at no extra cost to our municipal partners," said Todd Appel of Quantified Ventures. "Polluted runoff is the only major source of pollution that is still increasing, and in some urban and suburban areas is the leading cause of damage to local rivers and streams."
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.
"CBF has been a strong partner with our local government clients in supporting water quality funding, and we applaud CBF’s effort to pilot this idea in diverse localities across the watershed," said Chris Pomeroy, president of the AquaLaw law firm and counsel to the Virginia and Maryland Municipal Stormwater Associations.
For more information, go to www.cbf.org/eib where you can view an earlier recorded webinar about this project, download a brochure, or submit an application.
About the Chesapeake Bay Foundation
With offices in Maryland, Virginia, Pennsylvania, and the District of Columbia and 15 field centers, CBF leads the way in restoring the Bay and its rivers and streams. For more than 50 years, we have created broad understanding of the Bay's poor health, engaged public leaders in making commitments to restore the Chesapeake, and fought successfully to create a new approach to cleanup that features real accountability—the Chesapeake Clean Water Blueprint. For more information, visit www.cbf.org.
About Quantified Ventures
Quantified Ventures is a for-profit impact investing firm that helps clients finance specific and measurable environmental, health, and educational outcomes. Founded by Eric Letsinger, a "tri-sector" executive bringing 25+ years of leadership experience, QV pioneered the first ever Environmental Impact Bond with DC Water in 2016. Based in DC, the entrepreneurial team thrives on fresh thinking, measured risk, and strong coffee. For more information, visit www.quantifiedventures.com.
CBF’s Green Infrastructure Environmental Impact Bond project, assisted by Quantified Ventures, is supported in part by a generous grant from The Kresge Foundation. The Kresge Foundation is a $3.5 billion private, national foundation that works to expand opportunities in America’s cities through grantmaking and social investing in arts and culture, education, environment, health, human services, and community development in Detroit. In 2016, the Board of Trustees approved 474 grants totaling $141.5 million, and made 14 social investment commitments totaling $50.8 million. For more information, visit www.kresge.org.