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City of Hampton fights flooding with issuance of Virginia’s first Environmental Impact Bond

Environment

Hampton to undertake three major flood resilience projects with $12 million in outcome-based financing supported by The Kresge Foundation

The City of Hampton closed on Virginia’s first Environmental Impact Bond on December 2. This creative tool will finance $12 million in nature-based solutions to localized flooding as part of its Resilient Hampton initiative. These bonds allow investors to support innovative projects with measurable and reportable benefits for communities and the environment, and ensure the outcomes of the projects are reported back to the investors. The Chesapeake Bay Foundation and Quantified Ventures, an outcomes-based capital firm based in Washington, DC, provided technical services with respect to developing the three projects, designing the outcome metric, impact measurement, and disclosure aspects of the Environmental Impact Bond.

Hampton’s three critical projects are expected to add more than 8.6 million gallons of storage capacity for stormwater that would otherwise contribute to flooding and polluted runoff in the Newmarket Creek watershed, a key environmental, economic, and transportation corridor.

Hampton has experienced increased flooding frequency and severity in recent years. The Newmarket Creek watershed is central to the City’s water management plans. Through this Environmental Impact Bond, the City of Hampton will predict, measure, and report on the stormwater volume storage capacity added by these projects. The gathered data will inform future public investments in resilience projects that seek to improve quality of life, economic viability, and environmental health for Hampton residents, while also disclosing the measured outcomes to the bond’s investors.

“We are thrilled to further our commitment to innovation, transparency, and storm resilience through the issuance of the first Environmental Impact Bond in the Commonwealth of Virginia,” said Hampton Mayor Donnie Tuck. “We appreciate the many members of the community who have provided input on our Newmarket Creek Water Plan and Resilient Hampton initiatives. The residents of Hampton can look forward to improved storm resilience, cleaner water, and better transportation and recreation infrastructure as a result of these important projects.”

Project rendering courtesy of Moffat & Nichol.

Hampton joins a small but growing number of cities using Environmental Impact Bonds to benefit communities, including Washington, DC, and Atlanta. These are a type of municipal bond that require issuers to predict, measure, and report on the environmental or social outcomes generated by the funded projects. Some Environmental Impact Bonds also connect bond buyers’ financial returns directly to the performance of the funded projects, which allows risk-sharing between the issuer and investors. The requirement for impact measurement and disclosure differentiates Environmental Impact Bonds from traditional Green Bonds, which support specific environmental and climate-related projects, but do not require the same level of rigor in outcome prediction, measurement, and disclosure.

As part of this Environmental Impact Bond, the City of Hampton has committed to having a third-party validator provide a post-construction comparison of the actual stormwater storage capacity created against the predicted 8.6 million gallon capacity increase. This bond qualifies as both an Environmental Impact Bond and a Green Bond, under the International Capital Market Association Green Bond Principles.

This effort was funded by a generous one-to-one challenge grant to CBF from an anonymous donor that was matched in part by The Kresge Foundation’s Environment Program.

“The work this team has done to evangelize the use of impact bonds was not an easy process. We applaud all partners involved in helping the city to fight climate-driven urban flooding through solutions that provide reliable, equitable and innovative water services,” said Jalonne L. White-Newsome, Environment senior program officer with The Kresge Foundation who oversees the Climate Resilient and Equitable Water Systems (CREWS) initiative. “The inequities in our nation’s water systems have a disparate impact on low-income communities and communities of color. The importance of this work is intensified due to the prevailing socioeconomic conditions in the affected neighborhoods. Addressing these challenges will help to safeguard the economic future of Hampton and the general wellbeing of all residents.”

Read the full press release

View high-resolution project renderings and a recording of the December 3 online press event

Read the MSRB Issue Detail and Bond Official Statement

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