This paper identifies the increasingly urgent need for a lightweight, nimble new approach to public finance, one better equipped to serve the pace and scale of solutions required for communities to solve today's most pressing environmental and economic challenges. We believe that today’s public finance market invisibly guides the nature and scale of projects in the public realm, and that in its current form, it prevents the development and scalability of public project innovations. Adaptive public finance is conceived as a solution to enable innovative public projects to happen faster and with less friction.

In the U.S. alone, public finance connects over $1 billion of investment capital every calendar day to vital public projects, such as schools, parks, roads and libraries. For over two centuries, it has quietly and invisibly guided the nature and scale of public projects built. And while remarkably efficient at connecting capital to a privileged few projects under the right circumstances, today’s market tends to serve large-scale, already-established project patterns, located in already-advantaged communities. It tends to punish projects necessary to adapt to our rapidly changing future: smaller-scale projects, innovative projects, and projects in less economically established communities.

With cutting edge technology, radical transparency, and harnessing the exponential growth of the impact investment movement, the humble municipal bond can and should be recast to power the next generation of public project innovation: projects such as neighborhood-scale microgrids, municipal broadband, affordable modular housing, bike infrastructure, and others required to make our communities and our economy more resilient.

American Resilience: Remembering Our Past

The United States once led the world in ambitious public works. Through its youthful exuberance and the combined effort of America’s brilliant political minds and engineering talent, Americans built visionary, lasting infrastructure, transforming frontiers into economic powerhouses through innovative public projects.

One example of such ingenuity in the face of challenging circumstances is the Hetch Hetchy project, which today supplies water to 2.6 million people in the Bay Area every day, generating clean hydroelectric power in the process.1 It consists of the Hetch Hetchy reservoir, the O’Shaughnessy Dam, and hundreds of miles of tunnels and aqueducts. Conceived after the 1906 San Francisco earthquake, the project was completed in 1923, and sits today as a quiet testament to American innovation in the public realm.2 The population growth and economic activity made possible by this visionary project helped set the stage for Silicon Valley, one of history’s greatest cradles of innovation.

The original municipal bond certificate used to finance the Hetch Hetchy Project.

At that time, such inspiring feats of engineering and collective action exemplified America’s audacious attitude toward the future, and demonstrated the public’s capacity to shape it.

Hetch Hetchy water flow.

New Challenges

Today, faced with rapidly changing environmental and economic circumstances, against a backdrop of rising interest rates, federal budget cuts, and turbulent macroeconomic circumstances, once-vibrant communities face new financing challenges. Rapidly aging infrastructure and growing poverty further strain the physical and social fabrics.

So far, in 2017, the United States has sustained nine weather and climate disaster events with losses exceeding $1 billion each. This does not include the unprecedented Hurricane Harvey, which AccuWeather estimates to total over $190 billion in damage or Hurricane Irma. Since 1980, the United States has suffered 208 such events, totalling over $1.1 trillion in losses, adjusted for inflation.3 A recent report from Moody's estimates that a $1 trillion investment is needed for U.S. water and wastewater infrastructure alone. Our existing array of infrastructure isn’t able to keep up with increasingly common natural disasters, let alone proactively aid us in mitigating their consequences or causes.

We’ll need to summon our ingenuity in order to cope. We’ll need a new era of adaptive, resilient public projects. We’ll need adaptive public finance.

Ineffective Tools

Today’s public finance industry is centralized, though not to the benefit of communities. It is exceptionally efficient for large-scale, aggregate financings, such as a state lumping together hundreds of projects in a multi-billion dollar general obligation offering. The tendency toward aggregation is the direct result of the inefficiencies of smaller scale financings: friction and prohibitive costs in the borrowing process force cities to delay or forgo projects entirely. Communities have no capacity or budget to begin thinking about ambitious, innovative projects like municipal broadband networks or neighborhood-scale microgrids. Understandably so: the uncertainty, complexity, and administrative burden novel projects create make “the deal” more difficult for all parties. But, as a result, public finance severely hinders the kind of public project innovation that will address today’s challenges.

Enter Adaptive Public Finance

We believe that addressing these problems at their root cause starts with rethinking the way today’s public finance system works. In order to make our infrastructure more resilient, adaptive, and innovative, public finance must itself become resilient, adaptive, and innovative.

Our view is that adaptive public finance is:

  1. Available on demand: borrow what’s needed, when needed. No more multi-year delays waiting for the next bundled offering.
  • Highly scalable: execute small projects (e.g. $2M neighborhood microgrid) with the same cost efficiency enjoyed by large deals today.

  • Built for impact: attract skyrocketing demand for impact by isolating and focusing on projects of demonstrably world positive value. Properly configured, the humble municipal bond is the original impact investment. Adaptive public finance unlocks the next generation of innovation in public projects by harnessing the accelerating global demand for impact investing. In recent years, there has already been a global shift towards responsible, “environmental, social, and governance” (ESG) investing. Moody’s estimates that “global green bond issuance will reach another record in 2017, and could even rise to $206 billion, following an increase of 120% to $93.4 billion in 2016.”4 The U.S. Forum for Sustainable Investment reports that, at the start of 2016, impact investments totaled $8.72 trillion globally.5

  • Measurable: set and track impact with key performance indicators intended through use of proceeds. Investors are increasingly concerned with not only the financial return of their investments, but also key performance indicators that credibly measure the intended impact of the underlying projects themselves. In this vein, adaptive finance will emerge at the intersection of economic return and metric-driven success. Combined, these characteristics lend themselves to high repeatability and scalability. To this end, Neighborly is working with impact analysis experts Quantified Ventures to structure, market and underwrite Environmental Impact Bonds, which utilize a Pay for Success model in lending. By tying the return of the bonds to the performance of the projects that they fund, the Environmental Impact Bond aligns incentives between mission-driven investors and the projects that they support.

  • Highly replicable: once financed, innovative projects become patterns in an open library for other communities to adapt and execute. Communities can create, reuse, and share open document structures for forward-thinking infrastructure projects such as municipal broadband, which enable low-cost high-speed internet networks, and neighborhood-scale microgrids, which enable community energy efficiency and independence.

How to Get There?

To achieve adaptive public finance, the market must:

  1. Embrace platform technology: critically rethink the centuries old, deal-driven capital formation process driving today’s market. Use technology to empower value creators in the financing process. Connect issuers to investors directly, to the fullest possible extent.
  • Embrace standardization: standard documents and protocols for project financing reduce borrowing costs for issuers and analysis costs for investors, increasing value for both. Standard documents also seamlessly distill and present complex analyses and disclosures to investors and regulators alike.

  • Embrace transparency: open data for every step of the financing life cycle reduces friction between issuers and investors. Open financials attract investors to otherwise opaque opportunities to fund world-positive projects. Neighborly’s Open Book initiative will empower issuers to know exactly how their bonds are allocated. Finally, open disclosures will streamline compliance and simplify regulatory burdens.

  • Embrace simplicity: with more understandable debt issuances, communities can manage budgets more effectively. The more understandable a bond offering is, the more easily investors can conduct analysis; the easier it is for investors to do due diligence, the more investors will be willing to invest.

  • Embrace innovation: public finance tends to lag other financial markets in embracing innovation. By contrast, venture capital tends to lead. As a venture-backed public finance technology company, we often think about what lessons can be applied to public finance from the rapidly evolving world of venture capital. We’ve witnessed venture capital’s adoption of platforms (e.g. AngelList), standards (e.g. SAFE docs), and transparency (e.g. Crunchbase), and believe that the flourishing universe of investors, available capital sources, reduced friction and transaction costs enjoyed by startups (the analogous borrower) can and should be enjoyed by communities borrowing to build public projects, too.

Neighborly and the Adaptive Future of Public Finance

At Neighborly, our mission is to put public finance back into the hands of the public. We believe that public finance can and should be the scaling mechanism for community development and ultimately, city-led innovation. This, we believe, can only occur through the actualization of adaptive public finance. To this end, we’ve devoted our careers to the idea that ultra-efficient access to capital enables communities to build the innovative, ambitious public projects needed to address today’s complex environmental and economic challenges.

We believe that new technologies, standardized document structures, and platforms like ours can and will make municipal finance more adaptive. Modern artificial intelligence and language processing technology will make it possible to build open libraries of financing structures and their accompanying legal documents, reducing friction in raising capital. Streamlined and transparent issuance documents attract investors to high-quality, world-positive impact investments, reduce the hassle and regulatory burden involved with borrowing for issuers, and empower regulators.

Modern financial analysis tools will empower investors to identify quality, world-positive investments faster and more effectively than ever before. By leveraging massive financial markets and legal datasets, advances in machine learning will make credit analysis more accurate and responsive. When credit analysis is more accurate, investors can price investments more effectively, and thus lend more, and more quickly to the most fruitful and impactful projects.

We believe in a future in which communities simply fill out a form, set the high-level specifications of the bonds that they want to issue, and connect instantaneously to a set of prospective direct investors. Transactions done through such a platform will close in hours or minutes, rather than months or weeks, allowing communities to actualize some of society’s most vital public projects. A hybrid platform and marketplace, Neighborly’s goal is to enable each community to responsibly borrow what it needs, when it needs it, starting with its own constituents first, while connecting investors with direct, upstream access to the original impact investment.

Neighborly modernizes public finance, the $1 billion per day market that funds essential public projects like schools, parks, libraries, roads, and next generation infrastructure like neighborhood-scale microgrids. We’re a civic-minded team of technologists and finance professionals united by the belief that public finance can once again be a singularly important force in solving our world’s largest problems at the scale of the community.


[1] “Lawsuit Seeking To Reclaim Hetch Hetchy Valley From SFPUC Dismissed.” CBS San Francisco, CBS, 28 Apr. 2016,

[2] “Hetch Hetchy Water and the Power System.”, Tuolumne County Historical Society,

[3] “Billion-Dollar Weather and Climate Disasters: Overview.” National Climatic Data Center, NOAA, 7 July 2017,

[4] “Moody's: Global Green Bond Issuance Could Rise to USD206B in 2017 after Record in 2016.”, Moody's, 18 Jan. 2017,

[5] Colby, Laura. “Sustainable Investments Surged by Third to $8.7 Trillion in 2016.”, Bloomberg, 14 Nov. 2016,