As the governor’s office prepares to launch a new campaign promoting coastal restoration projects, environmental and financial professionals are asking the state to consider a new strategy to repair wetlands more quickly.
The nonprofit Environmental Defense Fund and investment consultant firm Quantified Ventures released a report this week extolling what is known as environmental impact bonds. One major difference between EIBs and traditional bonds is that under an EIB if financiers and contractors go above and beyond, they can qualify for a bonus payout. That means creating more wetlands or reducing flood risk beyond the minimum requirement could net investors and contractors more money.
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The financing strategy was first used last year by the Washington D.C.-area water and sewer authority to prepare 20 acres for stormwater management. Proponents say Louisiana can use a similar strategy to repair the coast. They worked with state authorities to identify the area around Port Fourchon as a good site to run a pilot program. About $40 million in EIBs could create 585 to 835 acres of marshes.
Louisiana officials found the report helpful and are considering integrating EIBs into the state’s coastal plan, said Megan Terrell, an attorney in the administration of Gov. John Bel Edwards.
“There’s still some homework that we have to do,” Terrell said.
For example, the state could issue a bond to an investment firm — Goldman Sachs and Calvert Impact Capital bought D.C.’s bonds — and Louisiana could repay the principal and interest using money from the Deepwater Horizon spill settlement. But the state wants to find other entities “with skin in the game” to help foot the bill for any bonuses, Terrell said.
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The cost of restoration projects balloons every year as more of the coastline is swallowed by subsidence and sea level rise, said Shannon Cunniff, director of coastal resiliency for the Environmental Defense Fund. Performance-based bonds encourage investors to make money available up front so the state can build projects sooner since they’ll only become more expensive with time, she said.
There is a precedent for offering bonuses to bondholders; such strategies were employed to fund health initiatives following settlements with tobacco companies, said Quantified Ventures Director Carolyn DuPont. While the state will ultimately decide how the program is run, the recent report assumes that 30 percent of projects would qualify for incentive pay.
Charlotte Kaiser of The Nature Conservancy, which bankrolled the report, wrote on their blog that while conservation investing is still a nascent field, the plan advanced by the Environmental Defense Fund has tremendous potential.
Louisiana needs to develop creative funding strategies, and solutions pioneered in Louisiana will have applications around the world, Water Institute CEO Justin Ehrenwerth wrote in an email to The Advocate.
Colin Wellenkamp, executive director of the Mississippi River Cities and Towns Initiative, said it is encouraging to see innovative funding proposals, and he’s curious to see if EIBs can be scaled down and deployed by the municipalities he represents.
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“It brings more investors to the table,”, said Simone Maloz, executive director of the advocacy group Restore or Retreat. “Monied people seem to be very interested in what’s happening in Louisiana,” and EIBs could encourage them to invest.
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Just this week, the governor’s office announced it would begin a new campaign to educate residents about the state’s coastal plan and advocate for popular support.
Not everyone is on board with all aspects of the master plan. Plaquemines Parish authorities have resisted state efforts to build the $1.4 billion Mid-Barataria Sediment Diversion, worried that allowing Mississippi River water to flow into the marshes would damage oyster beds and disrupt the local seafood business.
The state has begun testing the soil without the blessing of local authorities, but the state is working within their legal right, Terrell said at a meeting Wednesday of the Coastal Protection and Restoration Authority Board. Parish authorities know CPRA contractors are out there; it’s not like they’re doing work under the cover of darkness, she added. Once the tests and full environmental review are complete, state authorities will be able to address local concerns.
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Plaquemines officials did not attend Wednesday’s meeting, though a businessman from the area was welcomed onto the board. Johnny Bradberry, the governor’s executive assistant for coastal activities and chairman of the CPRA board, said he is confident his new colleague, Bill Bubrig, will uphold the board’s objectivity and commitment to looking at the coast holistically, rather than parochially.
“We all know there are some issues in Plaquemines Parish,” Bradberry said.