For a long time, says Amanda Hallauer, a watershed manager in Atlanta’s Department of Watershed Management, Proctor Creek was an integral part of the neighborhoods that surround it. The creek, which runs from downtown Atlanta to the Chattahoochee River, “was healthy and an asset,” Hallauer says. But as the upstream neighborhoods were developed with impervious surfaces, over decades, the downstream neighborhoods suffered the impacts of living alongside an increasingly polluted creek: stream degradation, sewage overflows, brownfields, blight, and disinvestment.

“It’s an environmental justice hot zone as well,” Hallauer says.

In 2013, the Urban Waters Federal Partnership named the Proctor Creek watershed as a priority location, and created partnerships among city, state, and federal governments and institutional organizations to coordinate solutions to environmental problems in the watershed. Now, the Department of Watershed Management is embarking on a series of green infrastructure projects along the creek that are aimed at reducing pollution and improving overall quality of life. To pay for them, the city is turning to a publicly offered environmental impact bond. The $14 million bond was officially released last month. (Atlanta won a grant from the Rockefeller Foundation last year to help design the bond.)

“This was an opportunity that arose that allowed us to borrow money for stormwater management, both in the combined and separate sewer areas, and do some of these restoration projects that traditionally we don’t have funding for,” Hallauer says.

Environmental impact bonds (EIBs), like social impact bonds, are a type of financing that provides different levels of return for investors based on how well the projects funded by the bond perform. If a green infrastructure intervention is more effective than expected, investors get a greater return; if less successful, the return is lower. The financing is particularly useful for innovative projects that might be difficult to fund with traditional bonds, says Benjamin Cohen, director of Quantified Ventures, a firm that helps structure EIBs, including Atlanta’s. The Environmental Defense Fund has recommended EIBs to help pay for wetland restoration work on the Gulf Coast.

Quantified Ventures helped put together the first EIB in the U.S., used for green infrastructure work by DC Water. In that case, the bond was sold to private investors that Quantified Ventures identified. Atlanta’s EIB is being publicly offered. The DC Water bond had three performance tiers with varying risk, but Atlanta’s has two tiers, with only differing levels of upside for investors, Cohen says.

Investors in the bond include firms that are interested in environmental outcomes, but also, in Atlanta’s case, traditional large investment firms looking to diversify the type of risk they carry, Cohen says. Quantified Ventures is also currently helping design environmental impact bonds for Baltimore and for Hampton, Virginia. All are for green infrastructure, with different types of performance metrics.

“The value of using this kind of financing is that it can help hedge the risk of performance if you’re trying out new and innovative and impactful but risky kinds of projects,” Cohen says.

Atlanta is using its $14 million EIB to fund six projects in the Proctor Creek watershed. One project involves installing 10 blocks of vegetated stormwater planters in the public right-of-way to reduce flooding and improve the streetscape. Another, called “Mosquito Hole,” would restore an eroded section of the creek to reduce stagnant water where mosquitoes gather. Others will create bioretention areas in city parks, restore native habitats and establish new wetland areas, and create community greenspace. Since the projects are focused on “water equity,” Hallauer says, the city is also using the work as a chance to pilot a workforce development program that will involve hiring people from the neighborhoods where the projects are being installed.

Hallauer says her department is also tackling gray infrastructure updates with traditional bond financing, but the new green infrastructure work serves a range of goals.

“Particularly in areas where there isn’t as much funding, we’re looking to use green infrastructure, because not only can it manage stormwater, but it provides a lot of additional benefits to communities — environmental, economic and social benefits,” Hallauer says.