D.C.’s Social Impact Bond Deal Will Fund Infrastructure

Source: Kyle Glazier, Bond Buyer, September 2, 2016

The District of Columbia Water and Sewer Authority plans a first-of-its kind environmental impact bond using a “pay for success” model to finance infrastructure. Investors would be rewarded based on how effectively the new green infrastructure controls stormwater runoff. The authority’s board Thursday approved a $20 million to $30 million private placement of 30-year bonds to finance two green infrastructure projects, one in the Rock Creek and one in the Potomac River sewershed. The bonds will be social impact bonds, a type of obligation combining a performance contract with a contingent loan in which the investors providing the funding are repaid by the government from budgetary savings and societal benefits generated by successful outcomes. … While the handful of previous U.S. social impact bond issuances have focused on homelessness, public health, and other social issues, the DC Water deal will be the first SIB to finance environmental outcomes, with a portion of the payments to the investor contingent on the effectiveness of green infrastructure in managing storm water runoff. …