At the 17th annual Parks & Greenspace Conference, Atlanta’s Mayor Keisha Bottoms announced that the City of Atlanta’s Department of Watershed Management (DWM) will issue the first publicly-offered Environmental Impact Bonds. The proceeds from the bond sale will fund approximately $12.9 million worth of green infrastructure projects intended to improve the resilience of neighborhoods on the City’s west side that have been devastated by flooding in recent years.
The English Avenue, Vine City, Mozley Park, Grove Park and Bankhead/Hollowell neighborhoods on Atlanta’s west side have a rich historical legacy and include Martin Luther King’s former house on Sunset Avenue. However, these neighborhoods lie almost entirely within the Proctor Creek watershed which regularly suffers flooding due to the combined effects of severe storms and poor drainage. Now, these neighborhoods are making history again as Atlanta becomes the first City to use this innovative financing tool to scale and build more resilient infrastructure.
These green infrastructure projects will help the neighborhoods near Proctor Creek confront the effects of climate change by improving wastewater and stormwater management and reducing the burden on the combined sewer system. They utilize features of the natural landscape as well as engineered systems and often include bioretention basins, stormwater planters, bump-outs and permeable pavement systems. These projects can be cost-effective alternatives to building traditional “grey” infrastructure and will also create green space in densely populated neighborhoods.
The first-ever public EIB offering is intended to expand the market for these bonds, which were first issued in 2016 by the Washington, DC water authority (DC Water) in a private placement to institutional investors. EIBs reward investors based on a “pay-for-success” approach and payments from the Atlanta projects will depend on the City’s success in achieving environmental and social goals. EIBs link an investor bonus or penalty to how well the underlying project works and they seek to shift some of the risk involved with attempting innovative projects from the municipality that issues the bonds to the investors. The goal is to foster innovative solutions to the challenges posed by climate and social change and investors receive bonus payments if these solutions perform better than initially expected and lower payments if the results fall short. If the projects funded by the DC water bond, for example, lower stormwater runoff by more than 41 percent during their first five years of operation, the investors are promised a $3 million bonus in addition to the 3.43 percent interest rate the bond pays. If runoff is reduced by less than 19 percent, those investors would instead pay a total of $3 million to the issuer.
Atlanta is working with impact advisory firm Quantified Ventures to determine the metrics for analysis and with Neighborly on the structuring, marketing and underwriting of the deal. Both firm's services will be offered at no charge to the City as a result of funding from the Rockefeller Foundation. The Atlanta EIB will be hosted on Neighborly’s online brokerage platform, which is modernizing the municipal bond market, long dominated by institutional lenders, by making it easy for individual investors to participate.
By improving conditions in the Proctor Creek watershed, Atlanta is setting an example for how communities can solve local resilience challenges, fund infrastructure in new ways and further the cause of environmental justice.
For more information on Atlanta winning the EIB Challenge, explore some of the press coverage:
- Atlanta and Baltimore going green with ‘environmental impact bonds’
- Atlanta strengthens its resilience and fights flooding
- Atlanta's Seeing Green
- A New Way to Finance Green City Projects, With a Boost From Foundations
- Atlanta's Department of Watershed Management Wins Environmental Impact Bond Challenge for Green Infrastructure and Resilience Projects on the City's Westside
If you’re a City interested in unlocking new forms of capital for resilience projects, talk to our Public Finance team.
If you’re an investor who wants to invest in world-positive projects, explore our open and upcoming offerings.
Learn more about Environmental Impact Bonds here.