Financing for Natural Infrastructure Projects

Table of Contents

• 1.0 Objective of the Study 10
• 2.0 Background 13
• 2.1 Closing the Infrastructure Gap in Canada 13
• 2.1.1 Overview of the Infrastructure Gap in Canada 13
• 2.1.2 Water-Related Infrastructure Gap in Canada and the Prairies 14
• 2.1.3 How Is Water Infrastructure Typically Funded in Canada? 15
• 2.2. The Role of Natural Infrastructure 17
• 2.2.1 Natural Infrastructure Types and Benefits 17
• 2.2.2 Beneficiaries and Implementing Parties 19
• 2.3. Investing in Natural Infrastructure: Key concepts 20
• 2.3.1 Sources of Capital and Financing Mechanisms Available for Natural Infrastructure 20
• 2.3.2 Factors Influencing Investment Mechanisms for Natural Infrastructure 25
• 3.0 Insights From Private Investors 29
• 3.1 Instruments Considered by Private Investors 29
• 3.1.1 Carbon Credits 29
• 3.1.2 Biodiversity Credits 34
• 3.1.3 Outcome-Based Financing Model 36
• 3.1.4 Natural Asset Companies 42
• 3.1.5 Insurance 44
• 3.2 Lessons Learned From Interviews and Research 48
• 3.3 Applicability to the Canadian Prairies 50
• 4.0 Ethical Considerations of Scaling Up Investments Into Natural Infrastructure 55
• 5.0 Conclusion 57
• References 59
• Appendix A. Water-Related Infrastructure Gap in Canada and the Prairies 75
• Figure 1. Cumulative net investments in water infrastructure in Canada and the Prairies, 2017–2021 14
• Figure 2. Average breakdown of revenue sources of water and wastewater utilities in Canada 16
• Figure 3. Categories and examples of natural infrastructure 19
• Figure 4. Potential sources of capital for natural infrastructure projects 26
• Figure 5. Investing in natural infrastructure through carbon credits 30
• Figure 6. Outcome-based financing model 37
• Figure 7. Natural asset companies [Green arrows represent cash flow] 43
• Figure 8. Insurance mechanism 46
• Table 1. Overview of instruments highlighted by private investors in terms of their applicability to the Canadian Prairie region 51
• Table A1. Depreciation of and investment in water-related infrastructure in Canada and the Canadian Prairies, annual values from 2017 to 2021, CAD million, in constant dollars 75
• Box 1. Natural Infrastructure for Water Solutions Initiative 11
• Box 2. Analysis of grant funding for natural infrastructure in Canada 24