Arkansas utility issues innovative green bond to finance watershed protection

“Green bonds can be enticing for investors,” said Doug Shackelford (pictured right), director of public affairs and communications for Central Arkansas Water (CAW). “It opens the door to have that investor support to back those bonds, so we can do the work we need to do in the watershed.”

In mid-October, CAW posted a $30.6 million green bond, certified under the Climate Bonds Initiative, to protect the quality of water in its watershed and finance infrastructure improvements. As the state’s largest water utility, CAW serves nearly 500,000 people in seven counties, including the city of Little Rock. Its main reservoir, Lake Maumelle (pictured below), sits just 10 miles outside of the state capital.

“It’s a beautiful area, but being so close to the city, there are a lot of people who would love to develop the land out there,” Shackelford said. “That can put a risk on the lake.”

AWWA conference gathering sparks idea
In 2018, while attending the American Water Works Association’s Sustainable Water Management Conference in Seattle, CAW officials met with professionals from other environmentally minded organizations, including Cities4Forests, to discuss how the utility could finance watershed protection efforts at Lake Maumelle. That meeting sparked the idea of issuing a green bond.

“There was a lot brainstorming as to how a municipal water utility could partner with outside groups focused on green projects,” he said.

Climate Bonds Initiative, an international organization that certifies green bonds, said CAW’s bond is the first of its kind to acquire and protect forests specifically to secure clean drinking water.

“No other green bond has been issued for watershed projects to protect drinking water,” Shackelford said. “It’s unique, and that’s one of the reasons we’re so proud of it.”

Green bonds are a new but booming financial segment, helping to fund environmentally sustainable projects. Forbes reports that the green bond market is expected to reach $1 trillion in 2021, almost 15 years after the first green bond was issued.

CAW plans to use 35% of the financing to buy 4,500 acres of forestland around Lake Maumelle (pictured right), adding to the 11,500 acres it already owns. The utility is targeting tributaries and other high-priority watershed areas that will serve as a natural filtration system for its source water. The rest of the loan will help pay for infrastructure improvements such as spillway repairs, new generators and pipes, helping to make water delivery more efficient and sustainable.
 
“There are a lot of cost savings that can be found by protecting water before it gets to the treatment plant,” Shackelford said. “Better quality water means less cost for treatment. This will save customers money because we’re buying less chemicals and we’re having to do less treatment.”

He credited creative thinking and productive partnerships in developing this project and said CAW hopes to inspire other utilities to consider similar funding mechanisms.

“Look how something like this can benefit customers and the watershed,” he said. “It helps us to be mindful of the environment and what we’re charged to do as stewards of the environment.”

Additional information about water sustainability and source water protection is available on AWWA’s website.
(Photos courtesy of Central Arkansas Water)