Swamp Money: The Opportunity and Uncertainty of Investing in Wetland Mitigation Banking

Elan L. Spanjer | October 1, 2018

In recent years, the wetland mitigation banking program has emerged as a favored mechanism for protecting the nation’s aquatic resources while allowing for economically beneficial development projects to proceed. Mitigation banks generate wetland credits, which in turn can be sold at a profit to developers who need them to offset wetland impacts. The number of mitigation banks has grown significantly in recent years, and the market has seen an influx of institutional investment. However, investors face significant risks and uncertainty, and many prospective investors lack access to information about wetland credit prices—which are neither reported to the regulatory authorities nor made available to the general public—and are therefore deterred from entering the market. This Note proposes that the market for wetland mitigation credits would be more efficient if bank sponsors were required to report credit price information to regulatory authorities and if this information were made publicly available. Transparency of credit price information would incentivize both greater entry into the wetland mitigation banking market and improved planning on the part of prospective bank sponsors and developers alike. Moreover, by encouraging the establishment of more mitigation banks, regulatory authorities would have greater ability to ensure wetland credits purchased by developers more accurately match the type and functional values of the wetlands impacted.