NbS Triple Win Toolkit: Economics and Finance 97 Model C – Environmental Impact Bond Background Washington, D.C. rests on the banks of two rivers – the Potomac andthe Anacostia – that flow into the Chesapeake Bay. Washington D.C.has a sewer system that mixes stormwater runoff with household sewage. In the case of severe storms or weather events, the combination of runoff and sewages pollutants into the two rivers, damaging aquatic life and limiting recreational use and fishing of the river. Description of model An Environmental Impact Bond (EIB) is a form of debt financing which links the financial returns of the investor to desired and verifiable environmental outcomes from projects 4,5 which are financed by the bond 3. In the case of this project, bond repayments 8 are made from increased water charges from water customers in the surrounding area. An intermediary organisation designs and structures the deal between the private investors, the environmental service provider(s), and the outcome funder 1,2. The intermediary organisation determines the transaction structure, the appropriate outcome metrics and indicators which trigger investor repayments, the size of payments, and thresholds for outcomes that trigger performance payments.Benefits which accrue to water customers include cleanerdrinking water, reduction in floods, and cleaner waterfronts. Return to the investor 8 will generally include the initial investment (principal), interest (or coupon), and a possible performance payment. The level of the performance payment may be fixed (i.e., triggered by achieving a threshold on the outcome metrics) or variable (i.e., depending on the level of impact achieved). An independent evaluator will monitor performance of the project against the metrics and indicators to determine success and the level of payment 6,7. There are generally two types of performance payments: a “success payment” that is shared with investors and possibly other stakeholders if projects are successful or hit certain thresholds, or a “risk share payment” that is paid from investors to the issuer if the project fails to achieve outcomes. This risk share payment can also be called a “claw back.” Further reading: http://cpicfinance.com/wp-content/uploads/2019/01/CPIC-Blueprint-Case-Study-Environmental-Impact-Bond-for-Watershed-Green-Infrastructure-by-Quantified-Ventures.pdf