The first loan that uses private capital to finance environmental restoration closed last week – it will provide funds to restore wetlands in New Jersey.
GreenVest LLC, a wetlands mitigation banker, received the loan, which they’ll use to perform advanced wetland restoration. The NJ Turnpike Authority is required to offset wetland damages from an infrastructure project.
The loan reduces GreenVest’s capital costs while providing market rate returns for investors.
Restore Capital and 3Sisters Sustainable Investments, who conceived of the environmental restoration loans, are using the project’s ecosystem market credits as collateral and as a repayment source for the loan. This allows for more private capital funding to be available for environmental restoration work.
They plan to use this innovative financing to support wetlands mitigation, stream restoration, water quality trading, and other ecosystem markets as they emerge. Rather than relying on government subsidies and charity, or expensive private equity, they are financing projects with market rate private loan capital – a much larger, efficient costing and sustainable source of capital.
"We strongly believe using private investment capital and market solutions is key to solving some of the most complex and difficult issues, such as the need to restore our domestic environment. This innovative loan demonstrates how this can be done, and paves the way for large-scale private investments in current and future markets such as Water Quality Trading," notes Ben Bingham, managing director of 3Sisters Sustainable Investments.
"Because of our extensive research and experience in these markets we can provide investment opportunities that are backed by AA or better credit and pay a premium above the market," says John Campagna managing director of Restore Capital. "At the same time we are reducing the cost of capital for environmental restoration projects by 50% or more compared to traditional funding sources."
Restore Capital and 3Sisters Sustainable Investments are in raising money for an investment fund. For now, investors can invest in individual loans:
- Project Type: Wetland Mitigation
- Loan Duration: 6 months to 3 years
- Return: 7% to 12% annualized
- Collateral: Contracts to Purchase Wetland Mitigation credits from projects with Investment Grade public and private entities (AA and up).
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