Unlocking Private Capital to Finance Natural Infrastructure for Healthy Ecosystems and Resilient Communities
Todd Gartner* and Lizzie Marsters*
World Resources Institute, Washington, DC, USA; Todd.gartner@wri.org; Lizzie.marsters@wri.org
With shrinking city, state, and philanthropic budgets – new financing mechanisms and unique partnerships are essential to increasing investment in land, water, and communities to build resilience, address climate change, and support more inclusive economic growth. The good news is that private capital can help address these funding gaps. And the opportunity to unlock private capital for nature has never looked better. With sustained low interest rates, the cost of borrowing for nature is cheap and the amount of committed investor capital for nature is ever-increasing.
Natural infrastructure - like forests that offer water filtration services, wetlands that serve as flood protection, or coral reefs that protect people and property from storm-impacts - can deliver on investor expectations. They can boost portfolio resilience as an uncorrelated asset to traditional investments, deliver significant cost-savings and/or generate consistent returns, and serve as one of the most cost-effective strategies to mitigating climate change. Despite the suggested alignment between sustainable capital and natural infrastructure, there are too few projects that are investment-ready.
The World Resources Institute’s presentation highlights two proven strategies to successfully access private capital for natural infrastructure, offering insights into the enabling conditions, key actors, and opportunities for replication to make projects bankable. The first case study examines the issuance of the first-ever green bond to protect forests for drinking water by Little Rock’s Central Arkansas Water and will highlight the benefits to municipalities and utilities for issuing ‘green’. The second case study explores the Forest Resilience Bond, a disaster risk-reduction financial instrument that mobilizes private capital for forest restoration treatments. These two projects illustrate paths to achieving conservation outcomes and enhancing community resilience to climate change by accessing private capital. They serve as models to better prepare other natural infrastructure projects for bankability.