There has been exponential growth in ESG — environmental, social and governance — investing over the past few years, and global markets increasingly provide investors with opportunities to generate measurable, beneficial environmental impacts alongside a financial return. It can be difficult for investors who are based in places to find local opportunities that have measurable environmental impacts. If you wanted to maximize the benefits of your investments in the Philadelphia region, how would you invest carbon sequestration?
Conservation investment based on place
William Penn FoundationBeing a place-based funder the Foundation has been exploring ways to create more opportunities for conservation impact investing in our region. The Foundation was established in Watershed Protection ProgramWe used grant-related investments as well as program-related investment to accelerate our work in the Delaware River Watershed.
Program-related investments
Foundations make program-related investments (PRIs), which are investments made to support charitable purposes. They have the explicit understanding that these investments will earn below-market returns, adjusted by risk and mission. A PRI is not a grant but can count towards the foundation’s payout requirement for the year in which a disbursement is made if it meets legal requirements. These are the details By the IRS. PRIs are considered the risk capital for social changes.
Recently the Watershed Protection Program made its first PRI — a loan to the Open Space InstituteTo establish a revolving lending fund for conservation projects within the Delaware River watershed. The Delaware River Watershed Revolving Fund will be officially launched later in the winter. It provides low-cost financing for conservation projects, including those for forest protection, green stormwater infrastructure, trails and environmental centers.
Program-related Investments (PRIs) are foundation investments that support charitable purposes. These investments are made with the understanding that they will earn below market returns, adjusted for risk, and will be used to further their mission.
The Delaware River Basin Foundations’ analysis of financing needs in the Delaware River Basin led to the establishment of the revolving loans fund. The assessment revealed the need to have low-cost, flexible capital due to the likely increase in federal conservation funding as well as the recovery of state funding programmes after COVID-19. All levels of government have public grant programs that provide substantial funding for environmental conservation, including forest protection, sustainable and renewable agriculture, and green stormwater infrastructure. However, these grants are usually reimbursed only after the project has been completed. In the meantime, recipients of these grants will need to find financing for their projects.
For example, Philadelphia Water DepartmentA grant program has been established to support private property owners who want to install green stormwater infrastructure projects. The grants are reimbursed and are geared towards well-capitalized property owners who are able to pay upfront for projects and then be reimbursed later. Greenprint PartnersGreenprint Partners is a mission-driven green construction firm that works with property owners to develop projects in support of these water department grants. Greenprint Partners has bridge financing that allows them to focus on projects in underinvested communities.
Another example is from the watershed North Jersey Resource Conservation and DevelopmentThe New Jersey Highlands Farmland Restoration Fund requested a loan to finance its efforts to restore 1,250 acres. The loan will cover the cost of covering crop seeds and purchasing them for 11 Warren County, NJ farms. Cover crops like winter rye or clover germinate once a main crop harvest is completed. They are effective in preventing winter soil erosion, reducing cropland sediments that enter streams, and can help to improve water quality. The project targets tributaries within an area that is critical for the conservation water and ecological resources.
Other environmental projects such as creating new urban parks, developing regional trails networks, helping environmental centres better serve their communities, or protecting forests to store carbon and preserve water quality would all benefit from low-cost flexible financing.
Amplifying impact
This work can be expanded by the involvement of multiple environmental impact investors located in the region. We look forward to being a part of that. The Delaware River Watershed Revolving Fund, which will be managed by the Open Space Institute, will be in good hands and have the potential for greater impact through additional investment. The William Penn Foundation will continue to support local environmental investment opportunities.
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