Jalonne L. White-Newsome Share Facebook Twitter LinkedIn Email In 2016, a once-in-a-century rain caused catastrophic flooding in Louisiana, as 6.9 trillion gallons of water fell across the state in just one week, damaging 60,000 homes. In 2014, a historic rainfall overwhelmed the water infrastructure in Detroit, resulting in flooded basements, streets and businesses, and leading to nearly 10 billion gallons of sewer overflows and $1 billion in damages. And in May 2010, a storm unleashed nearly 14 inches of rain in two days on Nashville, killing 11 people and causing more than $2 billion in property damage. These are just a few examples, but the fact is, regardless of where you live, challenges in the water sector affect us all. Our changing climate – exacerbated by emissions of carbon dioxide and other greenhouse gases – drive more frequent and intense flooding events. And history shows that the most severe impacts of storms and flooding are felt among low-income, urban communities in three ways: through the increased health threat of unsafe water; the economic consequences of damaged homes and rising water rates; and the social disruption that can occur due to displacement. So, is there role for capital solutions to address this issue? We think so. Kresge’s vision for a well-run water system Is integrated, nimble and responsive to climate change Manages water supply, storm water, and wastewater in an equitable way Engages low income, and other marginalized communities in large scale water planning Provides multiple benefits to water users – economic, social, and health related Creates the path for a variety of investments – grants, social investments and market-rate investments – to enhance and/or build new physical water infrastructure where the need is greatest Processes and distributes water in an energy efficient manner Embeds climate change considerations into the capital planning processes A failure to invest in the maintenance and expansion of water infrastructure has led to an enormous capital gap. The price of water, as well as sewer and storm water fees, continues to rise for households across the country as utilities need revenue to cover the substantial cost of building and maintaining their water systems. To develop an appropriate investment strategy, we brought together Kresge staff from the Environment Program, Investments team, and Social Investment Practice to consider how we can use the full range of capital tools – high impact grants, program-related investments, and mission-related investments – all consistent with our programmatic objectives. What are those objectives? Kresge’s Environment Program recently introduced a strategy to transform key urban water systems to better address and mitigate the negative effects of climate-induced storms and flooding. The goal of this initiative, called Climate Resilient and Equitable Water Systems (CREWS), is to advance a water-equity agenda that reflects the needs and priorities of low-income communities and supports solutions to address the climate-related impacts on water systems. For cities to build their resilience in the face of climate change, the way we manage our water sources, storm water and waste water is critical. The CREWS hypothesis is that we can achieve healthy, safe and affordable water by advancing a more integrated and equitable approach to water-system management. To help the foundation understand how it could best contribute to moving the field toward a robust, sustainable, more resilient water system, the Kresge working group put out an RFP for a capital scan. We hoped it would help us (and the field) find strategies to address barriers, such as policies, practices, perceptions and assumptions that impede the flow of capital. We also hoped the scan would identify opportunities to test new models, catalyze markets, leverage capital and demonstrate where perceived risk exceeds actual risk. From the water-sector perspective, we also wanted to find deals that would: Enhance the ability and capacity of water-sector leaders and low-income and climate-vulnerable communities to equitably adapt to more extreme storms and flooding. Improve and maintain source water quality. Result in energy savings within water and wastewater management. Provide measurable co-benefits of regulatory compliance, health, community and economic development. Incorporate community voices in decision-making. Encourage cities to begin a conversation that embraces an equitable cost framework. Recommendations The aftermath of Hurricane Sandy in New York. Photo: Pamela Andrade, Flickr, Creative Commons The capital scan recommends the following integrated strategy to tackle storm-driven flooding through a combination of grants and investments by supporting the scale up of green infrastructure and climate planning: Finance: Scale deployments that reduce costs and leverage new flexible financing sources Integrated Planning: Incentivize low-income benefits by engaging both public and private sector in water system planning Aligned contracts: Third-party developers can reduce a city’s O&M and performance risk. Software & Sensors: Measure equity-related impacts, improve planning, and reduce costs through adaptive control. The scan, which will be released in the coming weeks, helped us do several things including formulate our strategy for the initiative, recognize relevant opportunities in which to invest or contribute to building a pipeline of investments, and identify ways to overcome barriers to capital flow for projects that benefit disinvested urban communities. The final product provides a detailed assessment of the problem and opportunity landscape and suggests a few integrated funding strategies. As we consider both the programmatic priorities – the intersection of climate change, water, and equity – as well as the number and quality of investable solutions, Kresge has decided to focus its initial investments on green infrastructure and planning and preparedness solutions to mitigate and adapt to the effects of climate-related storms and flooding. The scan suggests that storms and flooding represent the largest addressable climate-related water threat to low-income communities, while green infrastructure and planning and preparedness are top solutions to flooding with robust investment pipelines and community co-benefits. The scan also contains both strategies that are investable today and others that help us understand how grants might be used to foster the development of nascent markets or encourage innovative transaction structures, broadening the potential investment pipeline in the future. Kresge’s Social Investment Practice is now actively sourcing opportunities for program-related investments that align with these priorities and potential co-investors within the philanthropic community and beyond. And our Environment Program anticipates issuing a request for CREWS grant proposals to support placed-based work later this year. Jalonne White-Newsome is a Senior Program Officer on the Environment Program at The Kresge Foundation. Kim Dempsey is the Deputy Director for Social Investments Practice at The Kresge Foundation.