Designing an environmental impact bond for wetland restoration in Louisiana

• Published in: Ecosystem services 2019-02, Vol.35, p.260-276
• Main Authors: Herrera, Diego, Cunniff, Shannon, DuPont, Carolyn, Cohen, Benjamin, Gangi, Dakota, Kar, Devyani, Peyronnin Snider, Natalie, Rojas, Victor, Wyerman, Jim, Norriss, Jessie, Mountenot, Marshall
• Format: Article
• Language: English
• Subjects: Coastal resilience; Environmental Impact Bond; Pay-for-Performance; Wetland restoration
• ISSN: 2212-0416; 2212-0416
• DOI: 10.1016/j.ecoser.2018.12.008

•Environmental Impact Bonds can accelerate wetland restoration investments.•The model aligns public and private incentives around wetland sustainability.•Innovative financing can help reduce coastal flooding risks by restoring wetlands. Coastal regions and deltas around the globe are seeking financing for resilience projects to cope with more frequent extreme events, sea-level rise and land subsidence. Interest is growing in natural infrastructure that generates multiple ecosystem services including flood risk reduction. The growth of the conservation finance market represents an opportunity to support these investments, but there is a need for pilot transactions that align incentives across private and public entities, along with rigorous performance metrics for natural infrastructure linked to resilience outcomes. We test the feasibility of the Environmental Impact Bond (EIB) model to address these challenges. An EIB is a form of Pay-for-Performance debt financing where investors provide upfront capital to implement a project and are repaid according to the degree to which desired environmental outcomes are achieved. We evaluate this concept for wetland restoration projects identified in Louisiana’s Coastal Master Plan by developing a site selection procedure and designing a multi-stakeholder transaction tied to restoration outcomes. Based on our proposed model we conclude that an EIB could be used to accelerate restoration and increase the net benefits of wetland investments, aligning incentives of the investors and payors around metrics of wetland sustainability.