Executive Summary
In October 2016, the DC Water and Sewer Authority (DC Water) launched an Environmental Impact Bond (EIB) to finance the installation of 20 equivalent impervious acres of green infrastructure in the Rock Creek sewershed of the District of Columbia. With the goal of managing stormwater runoff using a green solution, this project contributes to DC Water’s Combined Sewer Overflow reduction program.
The DC Water EIB breaks important new ground for the pay for success (PFS) field. The project represents the first environmental pay for success project – as it applied a PFS approach to green stormwater infrastructure. Unlike typical PFS projects, the DC Water project used an innovative municipal bond to raise financing. In addition, the DC Water EIB is one of the largest PFS projects in the world – with a total private investment of $25 million.
Beyond the PFS field, the DC Water project represents an innovation for environmentally friendly investments in general. Often, green investments are in the form of conventional government bonds; the only thing that makes them green are that they are financing green projects. The DC Water project creates a green investment with a payout that varies depending on the level of environmental benefits accrued. This novel component of the project, with built in incentives for greater environmental impact, has the potential to be a model for future green investments.
This policy brief discusses the DC Water project components in-depth, and offers lessons learned for the future.
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