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- Green infrastructure utilizes the natural environment to manage stormwater onsite, rather than sending polluted runoff into local waterways. It has significant co-benefits such as beautifying the physical environment and creating jobs.
- The Obama Administration is collaborating with state and local government and private foundations to advance the practice of green infrastructure.
- Green infrastructure is an emerging market for impact investors, and investing in it will help build economically sustainable and resilient communities.
The communities of the future will be smarter about their use of resources. That seems inevitable. More investment is flowing to technologies such as upgraded power grids with smart meters that allow users to better manage their consumption of electricity, and energy-efficient buildings that reduce the cost of operations and improve human health through better air quality. An emerging area that is gaining momentum and deserves the attention of impact investors is green infrastructure for stormwater management. It is a strategy that holds promise as a smarter way to reduce infrastructure development costs, protect human and environmental health, and create jobs.
When most of us think of infrastructure, we think of the built environment: roads, bridges, airports, power plants, cell phone towers, storm drains. For too long, most planners and investors have thought about the natural environment as an impediment to developing infrastructure. Environmental impact studies are often required, along with permits and licenses. Remediation may have to be performed before development can proceed. However, out there on the cutting edge, innovative urban planners, policy-makers, social entrepreneurs and impact investors are advancing the development of natural or green infrastructure (GI).
Green infrastructure generally refers to the use of the natural landscape instead of engineered structures. Applied to stormwater management, GI can be defined as “solutions that manage stormwater onsite through installation of permeable pavement, green roofs, parks, wetland, roadside plantings, rain barrels, and other mechanisms that enhance natural hydrologic functions, such as infiltration into soil and evaporation into the air.”
Traditional, or “gray,” stormwater management systems consist of pipes, storm drains, and concrete storage tanks. Vulnerable coastal cities may build levees and seawalls. These systems are expensive to construct and maintain. Decades of underinvestment has created an estimated funding need of $100 billion over the next 20 years, according to the EPA. The high cost of construction is one challenge with gray infrastructure; another is water quality.
Stormwater runoff, caused by rainwater running off impervious pavement, is a principal cause of urban waterway pollution nationwide. According to the National Resources Defense Council, impervious spaces in the built environment generate 10 trillion gallons of untreated runoff per year. What’s more, many communities have combined sewer systems, whereby sewage and stormwater runoff are captured in a single pipe system. When storms hit, these systems can overflow, sending untreated sewage into rivers, lakes, beaches, and drinking water supplies.
Superstorm Sandy illustrates another compelling reason to incorporate natural infrastructure into urban development: resilience to extreme weather events. Natural infrastructure can help protect coastal communities from storm surges and catastrophic flooding. As climate change increases the likelihood of extreme weather events, we must be prepared for storms powerful enough to destroy whole communities.
Investing in green infrastructure is not without challenges. Traditional infrastructure investing follows a set of conventions and definitions that may not apply to GI. Green stormwater management is a collection of approaches that is dispersed across public and private land, and not a single system residing underground and maintained by one agency. Not all municipalities charge fees, or sufficient fees, to cover the cost of stormwater management, including repayment of debt used to finance GI. There are definitional problems, such as tax-exempt bond rules that require financing of “structures.” Is a tree a structure? How about a rain garden? And, there is a lack of historical data on the performance of GI systems over the long-run, which can make investors uncomfortable.
Despite the obstacles, there are pioneers who are breaking the mold. At the federal level, one innovative solution can be found in the Partnership for Sustainable Communities, a collaboration of the Department of Housing and Urban Development (HUD), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA). Established in June 2009, the Partnership breaks down agency silos and coordinates investments in infrastructure, facilities and services at the community level. To date, the Partnership has invested nearly $4 billion in over 700 communities for projects that integrate affordable housing, transportation, clean water and environmental protection. Green infrastructure is emerging in some cases as the centerpiece of redevelopment strategies.
In the city of Cincinnati, for example, the Partnership invested in GI as part of a revitalization plan for the low-income community of South Fairmount. Like many cities, Cincinnati has a combined sewer system that is easily overwhelmed in wet weather, when untreated stormwater mixes with wastewater and overflows into water bodies or backs up into homes. Along with street and building upgrades in the community, the city invested in rain gardens, reforestation, and restoration of Lick Run, a stream in South Fairmount that was buried as the area developed. Daylighting the stream allowed it to be used again as a natural channel for stormwater runoff.
The Urban Waters Program is another collaborative approach involving thirteen federal agencies that breaks down silos and better targets federal investments. Urban Waters recognizes that revitalizing waterways transforms overlooked assets into treasured centerpieces that help drive urban revival. It also aligns with President Obama’s America’s Great Outdoors initiative, which calls on agencies to support innovative community efforts to provide safe, healthy and accessible outdoor spaces.
At the municipal level, the pioneer operating on a grand scale is the city of Philadelphia. In 2011, it created the Green City, Clean Waters program, a 25-year, $2.5 billion plan to protect and enhance the cities watersheds by managing stormwater with innovative green infrastructure. The city estimates that the use of green infrastructure in lieu of traditional approaches will save $8 billion over the life of the program. This bold initiative is a paradigm shift in approach that treats urban water resources as a key pathway to a sustainable future for the city. Green City, Clean Waters bets that economic and environmental health work in tandem.
Washington, DC is also a city betting that green infrastructure will be an important part of its future. Among other initiatives, it has launched a stormwater credit market, whereby developers and property owners subject to tougher new stormwater management regulations can buy and sell stormwater credits. The program will create a financial incentive and business opportunity for voluntary installation of stormwater retrofits to earn Stormwater Retention Credits that can be sold to regulated sites to meet part of their requirements. The expected result is significantly reduced stormwater pollution flowing into rivers and other water bodies, making them more usable and attractive for residents, businesses and visitors.
These innovations are not happening with public resources alone; private organizations also are seeing the potential of green infrastructure. For example, last week the Rockefeller Foundation announced it will provide seed money for a new RE.invest initiative, a public-private partnership that will help up to eight cities leverage private financing for sustainable storm water and sewer systems. This program will provide local governments an innovative model for working with the private sector to broaden green infrastructure options. The Rockefeller Foundation has also backed projects such as the NatLab, a collaboration of National Resources Defense Council, The Nature Conservancy, and Eko Asset Management Partners, that is designing new financing products for GI. The NatLab is exploring the application of tools such as social impact bonds and other private financing to stimulate more GI development. Nonprofit organizations such as Living Cities, a collaboration of 22 of the world’s largest foundations and financial institutions concerned with urban development, are considering ways it might invest in funds created by NatLab and others.
We live in a time of constrained resources, both financial and environmental. For social innovators, environmentalists, community developers, and policymakers, this is also a time of great opportunity to use the resources we have more wisely to create vibrant communities. For impact investors, green infrastructure is an emerging market. Investing in it will help build economically sustainable communities that are also resilient in the face of change. The wheels of innovation have begun to spin in stormwater management. It’s time to scale this promising solution.