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Designing an environmental impact bond for wetland restoration in Louisiana

Author

Listed:
  • Herrera, Diego
  • Cunniff, Shannon
  • DuPont, Carolyn
  • Cohen, Benjamin
  • Gangi, Dakota
  • Kar, Devyani
  • Peyronnin Snider, Natalie
  • Rojas, Victor
  • Wyerman, Jim
  • Norriss, Jessie
  • Mountenot, Marshall

Abstract

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.

Suggested Citation

  • Herrera, Diego & Cunniff, Shannon & DuPont, Carolyn & Cohen, Benjamin & Gangi, Dakota & Kar, Devyani & Peyronnin Snider, Natalie & Rojas, Victor & Wyerman, Jim & Norriss, Jessie & Mountenot, Marshall, 2019. "Designing an environmental impact bond for wetland restoration in Louisiana," Ecosystem Services, Elsevier, vol. 35(C), pages 260-276.
    • Handle: RePEc:eee:ecoser:v:35:y:2019:i:c:p:260-276
    DOI: 10.1016/j.ecoser.2018.12.008
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    References listed on IDEAS

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    1. Quatrini, Simone, 2021. "Challenges and opportunities to scale up sustainable finance after the COVID-19 crisis: Lessons and promising innovations from science and practice," Ecosystem Services, Elsevier, vol. 48(C).
    2. Laís Coutinho Zayas Jimenez & Hermano Melo Queiroz & Maurício Roberto Cherubin & Tiago Osório Ferreira, 2022. "Applying the Soil Management Assessment Framework (SMAF) to Assess Mangrove Soil Quality," Sustainability, MDPI, vol. 14(5), pages 1-12, March.

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