Washington DCIn September, DC Water (Washington, D.C.) issued the first Environmental Impact Bond (EIB) in the U.S. DC Water will use the proceeds to fund the initial green infrastructure project in its DC Clean Rivers Project, which a $2.6 billion program to control stormwater runoff and improve the district’s water quality. The EIB offers a new type of financial instrument to fund environmental capital projects. The EIB ties financial payments to environmental outcomes.

“This unique bond offering is the result of DC Water’s relentless commitment to innovate and pursue every available avenue to provide the best service at the best price to our customers and to the greater community we serve,” DC Water CEO and General Manager George S. Hawkins said in a DC Water press release.

The $25 million, tax-exempt EIB 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 that pollute the District’s waterways.

 

A new model

The EIB enables DC Water to attract investment in green infrastructure through an innovative financing technique. 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 among 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.

“This environmental impact bond represents the first time that DC Water has explicitly tied financial payments to environmental outcomes, in this case reducing stormwater runoff to improve the District’s waterways,” said Mark Kim, DC Water’s chief financial officer, in a press release.