New Partnership Encourages Private Investment In Natural Infrastructure

Posted by Heidi Schwartz

In the wake of 2012’s unparalleled extreme weather events, a green infrastructure financing guide was released by the NatLab consortium—a collaboration between the Natural Resources Defense Council (NRDC) and The Nature Conservancy, and sustainable asset management firm EKO Asset Management Partners.

The report, which was developed in collaboration with the Philadelphia Water Department (PWD) and funded by the Rockefeller Foundation, focuses on Philadelphia’s innovative Green City, Clean Waters program as a model for stimulating investment in natural infrastructure. It demonstrates how local municipalities and state government can potentially drive billions of dollars of private investment to modernize broken, aging stormwater systems and keep stormwater pollution out of waterways. Nearly 10 trillion gallons of polluted runoff—sometimes mixed with raw sewage—are currently dumped into local rivers, lakes, beaches, and drinking water supplies annually.

“Governments across the country must find new and innovative ways to build infrastructure that is resilient to nature’s shocks and stresses, said Dr. Judith Rodin, president of The Rockefeller Foundation.

“Investing in natural solutions or green infrastructure is smart and cost-effective,” said Nature Conservancy President and CEO Mark R. Tercek. “Natural infrastructure appreciates with time and provides many important benefits, including enhancing the quality of life of local neighborhoods and communities.”

NatLab’s new report, Creating Clean Water Cash Flows, and companion report, Greening Vacant Lots, validates the business case for both innovative public policy and private investment in green infrastructure by drawing from lessons from the energy efficiency finance sphere. The report provides in-depth guidance on key strategies that cities can deploy to attract private capital to green infrastructure development on private as well as public land, including: project aggregation, offsite mitigation and credit trading programs, subsidies, private-public partnerships and transformation of vacant lands.

Natural infrastructure—such as porous pavement, green roofs, parks, roadside plantings and rain barrels—addresses stormwater pollution by capturing rain on or near where it falls, preventing the rain from carrying runoff from dirty streets to local waterways and oceans, instead storing the rain or allowing it to naturally filter back into the ground. These sustainable practices not only restore the health of local waterways, but also beautify neighborhoods, cool and cleanse the air, reduce asthma and heat-related illnesses, save on heating/cooling energy costs, boost economies and support American jobs—usually at the same or lower cost than a purely “traditional” gray infrastructure solution.

“We already know green infrastructure solves massive urban stormwater problems, but we need to pick up the pace of implementation by using the full toolkit of public investment, smarter regulations and innovative private financing approaches,” said Larry Levine, a senior attorney in NRDC’s Water Program. “The time is ripe for partners from the private and public sector to work together towards cities that have cleaner water, greener neighborhoods, and decreased tax payer burdens,” added Alisa Valderrama, senior project finance attorney in NRDC’s Center for Market Innovation.

NatLab develops large-scale financing solutions to help cities leverage private capital for green infrastructure investments. NatLab’s work since 2012 has focused on Philadelphia, but the efforts in Philadelphia aim to shed light on a range of strategies that many cities can utilize to help draw from private investment capital to “green” their approach to stormwater management.

“Harnessing natural infrastructure in the transition from gray to green is of enormous interest to investors, including family offices, foundations, endowments, pension funds and other large institutional investors,” said Eron Bloomgarden, partner at EKO Asset Management Partners. “Private capital can play an important role to support this transition.”

Philadelphia, which is expected to deploy an estimated public investment of at least $1.67 billion over the next 25 years in stormwater retrofit projects, is leading the way on green infrastructure in America—developing policies which include innovative fee and credit systems with tremendous potential for stimulating private investment and providing attractive rates of return for project developers. The city’s flagship stormwater billing structure provides a significant discount for non-residential property owners if they manage to keep the first inch of rainfall on their property through green practices, rather than letting the stormwater runoff flow into municipal systems.

“Leveraging public-private partnerships can help transform and green our City water systems in a brilliantly cost-effective way,” said Howard Neukrug, Water Commissioner of PWD. “PWD has long been incubating and testing financial and programmatic approaches to accelerate the pace of green acre development, our community resilience and other community benefits associated with green infrastructure.  We appreciate the Rockefeller Foundation’s support and NatLab’s collaboration with the Philadelphia Water Department in advancing these potentially game-changing tools.”

While Philadelphia is a leader in deploying green infrastructure, cities around the nation are also pursuing significant green infrastructure investments:

  • New York City: $1.6 billion over 20 years
  • Los Angeles: approximately $200 million in the next two years
  • Kansas City, Mo.: $78 million
  • Portland, Ore.: $68 million from 2008-2013
  • Detroit: $50 million over 20 years
  • Cleveland: $42 million
  • Seattle: $24-30 million from 2012-2018