Buffalo Sewer Authority Issues Largest-Ever U.S. Environmental Impact Bond

$54 million issuance to accelerate improvements to water quality, job creation, and environmental justice

Media Contacts:
Matt Lindsay, Quantified Ventures. lindsay@quantifiedventures.com, 202.425.1792
Jennette Smith, Partner, Mort Crim Communications, Inc. (MCCI), jsmith@mccicorp.com, 586.292.2905
Carolyn Artman, Account Director, MCCI, cartman@mccicorp.com, 313.269.4729

Related links:
Buffalo Sewer Environmental Impact Bond and Green Bond Issue Details (MSRB EMMA)
Buffalo Sewer Rain Check 2.0 Opportunity Report on opportunities for green infrastructure

Rendering of Downtown Buffalo green infrastructure opportunities (image credit: Buffalo Sewer Authority, Rain Check 2.0 Opportunity Report)

Rendering of green infrastructure cluster at Northland Avenue new development (image credit: Buffalo Sewer Authority, Rain Check 2.0 Opportunity Report)

BUFFALO, NY — The Buffalo Sewer Authority closed on a $54 million Environmental Impact Bond (EIB) last week, the country's largest to date, to finance green infrastructure and stormwater mitigation projects as part of its Rain Check 2.0 initiative. Buffalo Sewer will use the bond proceeds to design and implement green infrastructure to capture stormwater, reduce combined sewer overflows, and enhance community benefits including jobs.

The plans for the EIB came together after The Ralph C. Wilson, Jr. Foundation and the Community Foundation for Greater Buffalo funded Ann Arbor-based Environmental Consulting & Technology, Inc. (ECT) to bring newer models of delivery, including alternative financing options, to the Greater Buffalo region. Morgan Stanley and Quantified Ventures provided underwriting and outcomes-based financing advisory services, respectively, to ensure the issuance met the high standards of Environmental Impact Bonds.

The initiative will better manage stormwater from easements and on public land in key combined sewer overflow (CSO) basins, allow new opportunities for impact-oriented investors to support the greening of Buffalo, reduce stormwater fees for rate payers, and triple the authority’s pace of green infrastructure projects.

Buffalo Sewer’s project goals include installing green stormwater infrastructure (GSI) to manage at least 200 acres of impervious surface through the EIB. Six priority combined sewer overflow basins that are home to 48 percent of Buffalo’s residents are the focus for the green infrastructure investments. The basins were selected based on social and economic equity considerations in addition to stormwater management needs. Green stormwater infrastructure – such as rain gardens, tree plantings, and permeable pavement – is designed to capture and divert stormwater to prevent it from entering the sewer system at peak times. GSI projects reduce the number of combined sewer overflow events, resulting in cleaner local waterways and Lake Erie. With the bond proceeds, Buffalo Sewer’s pace of infrastructure installation is expected to increase from approximately 9.5 acres per year during 2014-2020 to more than 28 acres per year from 2021-2027.

“The City of Buffalo is delighted to successfully bring the bond issuance to a close,” said Mayor Byron W. Brown. “Thus far, along with being the largest EIB in the country, it is also the largest investment any Great Lakes city has made in green stormwater infrastructure, which has proven to be an effective climate resilience measure. The investment also will lead to approximately 700 family-sustaining jobs in our community.”

“Our Rain Check 2.0 program will make Buffalo a greener, healthier, and more equitable city,” said Oluwole “O.J.” McFoy, CEO and General Manager of the Buffalo Sewer Authority. “Green infrastructure provides benefits beyond its ability to manage stormwater, from community beautification and public green space, to workforce development, to public health. This Environmental Impact Bond illustrates our commitment to being data-driven, equitable, forward-thinking, and transparent in how we address stormwater and community resilience.”

Environmental Impact Bonds are characterized by a third-party evaluation of whether key environmental goals were achieved by financed projects, which may influence an issuer’s financing costs through outcomes-based mechanisms.

Through this EIB, Buffalo Sewer will be the first municipal issuer in the United States to link a positive incentive to performance. The EIB includes an option to refinance or retire the bond in year seven or later, should it meet or exceed the outcome threshold of 200 new acres of impervious surface area financed and implemented with bond proceeds. This gives Buffalo greater flexibility and potentially lower debt service on the EIB if it meets the 200-acre threshold. If Buffalo Sewer does not meet the threshold by 2028, it may still call the EIB but at a higher price through 2031.

“In real time, the Buffalo Sewer Authority is writing the playbook for other cities to follow in financing and implementing nature-based solutions that effectively manage stormwater to further equity and the local economy,” said Eric Letsinger, CEO of Quantified Ventures. “By committing to the highest levels of transparency and accountability in issuing this Environmental Impact Bond, Buffalo Sewer engineered this novel outcomes-based call feature to incentivize all parties to significantly accelerate the production of green infrastructure in Buffalo.”

“The Buffalo Sewer Authority’s willingness to undertake resiliency projects and measure and report on the outcomes positions the Authority as a leader in the Green and Sustainability Bond marketplace,” said Joe Abramson, Vice President in Public Finance at Morgan Stanley. “Influenced by sustainability-linked bonds in the corporate bond market, this transaction innovatively ties the call date and price to the Authority’s ability to achieve an outcome threshold subject to external verification. The novel structure highlights the Authority’s commitment to a more sustainable and equitable community and helped reduce financing costs to historically favorable levels.”

The commitment to enhanced impact measurement and disclosure differentiates EIBs 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 reporting. As a part of the innovative funding agreement, ECT worked with Quantified Ventures due to its national leadership on innovative outcome-based financing and EIBs. Quantified Ventures and DC Water pioneered the Environmental Impact Bond in 2016 to address stormwater challenges in the nation’s capital.

The EIB includes several specialty advisors and critical foundation support.

“As the nation’s largest Environmental Impact Bond comes online, we deeply appreciate project sponsors that include the Ralph C. Wilson, Jr. Foundation, Community Foundation for Greater Buffalo, and the Great Lakes Protection Fund, for their support. Their support was leveraged to enable a more than a hundred-fold investment in climate-resilient green stormwater infrastructure in the region which is very exciting,” says Sanjiv Sinha, PhD., Chief Sustainability Officer at ECT. “It also establishes Buffalo as nation’s leader in gaining access to impact investors who seek not only financial returns, but also measurable environmental impact.”

“In addition to supporting parks and trails throughout the City of Buffalo and western New York region, the Foundation’s strategic and leveraged investments in green design are also a critical piece in helping to build a healthier and more resilient region,” said Jim Boyle, vice president of programs & communications for the Ralph C. Wilson, Jr. Foundation. “Combined sewer overflow impacts quality of life for all residents in Buffalo, and solving this complex issue requires collaboration and an innovative financing solution. This Environmental Impact Bond brings key stakeholders together, from government to commercial property owners, to implement proven green infrastructure projects throughout the city that will have a wide range of economic, environmental and public health benefits.”

The Buffalo Climate Vulnerability Assessment estimates that the city will face up to four inches of additional annual precipitation by mid-century, increasing the risk of flooding and putting additional strain on Buffalo’s current stormwater infrastructure. Green infrastructure can mitigate the impacts of heavy rainfall events while providing other resilience benefits, such as addressing urban heat island effects. This bond qualifies as both an EIB and a Green Bond, under the International Capital Market Association Green Bond Principles.

For each of the designated basins included in the initiative, Buffalo Sewer conducted an environmental analysis, equity analysis, and site analysis, which is outlined in the Rain Check 2.0 Opportunity Report. A Great Lakes Protection Fund funded report Climate Risks and Opportunities Across the Great Lakes by Resilient Infrastructure Sustainable Communities presents a detailed analyses that clearly shows that cities that do not become fully equitable will always be in a recovery mode.

The Buffalo Sewer Authority was advised by Capital Markets Advisors on the transaction. Barclay Damon LLP served as bond counsel. Arcadis N.V. will serve as the independent, third-party validator that will inspect each green infrastructure project site and perform measurements to determine the achievement of the primary outcome metric.

Additional partner/stakeholder information can be found at: