From Law to Legacy: Early Wins of Maryland's Conservation Finance Act

By Remey Schneider, Graduate Fellow

In 2022, Maryland enacted the Conservation Finance Act (CFA) with overwhelming bipartisan support in both the Senate and House. This landmark legislation is the first of its kind in the United States to focus on private capital investment in conservation and environmental restoration. It introduced innovative concepts such as "environmental outcomes" in procurement code and made Maryland the first state to define "blue infrastructure" in law. The CFA aims to attract at least $100 million annually in private investment for conservation, prioritizing environmental justice and the right to clean water in multiple state programs and actions. Since its passage, the CFA has already led to notable successes, however, there are still several key provisions not yet implemented by various state agencies. Here is a glimpse at some of the high-level wins seen so far.

Successes of CFA Implementation

The Maryland Department of the Environment (MDE) has made significant strides in implementing the CFA. One of the key initiatives in the bill is offering pay-for-success contracts from state agencies, which ensures that funds are allocated based on achieving specific environmental outcomes. This model has been successfully utilized in MDE through the Susquehanna River Basin Commission Solicitation. Authorized by the CFA, MDE has allocated $25 million to the Susquehanna River Basin Commission. This program funds the generation of environmental outcomes in Maryland and across state lines and is only feasible because of the state’s ability to quantify outcomes. Read more here.

Additionally, the CFA directed MDE to integrate environmental justice (EJ) topics into the Intended Use Plan for the Drinking Water Revolving Loan Fund program. Projects in disadvantaged communities receive loans at 25% of the market rate, with specific funds set aside for lead pipe service replacements. This approach prioritizes utility projects that support sustainable elements like green infrastructure and water and energy efficiency.

The Department of Natural Resources (DNR) has also been instrumental in the CFA's implementation. DNR has incorporated pay-for-success contracting into its FY 2026 Grants Gateway Solicitation, focusing on non-point source pollution reduction projects to improve water quality. The department will prioritize projects with co-benefits by utilizing the “Trust Fund Targeting Map” tool developed by DNR. This encourages holistic environmental improvements across the state and in the Chesapeake Bay. In addition to offering pay-for-success contracts, the department has successfully implemented the following:

• Initiate Blue and Forest Carbon Projects: As required by the CFA, DNR has initiated a carbon demonstration project at Tuckahoe State Park and a thin layer project at Deale Island Wildlife Management Area. These projects aim to enhance carbon sequestration, following established protocols like Verra, and to help DNR better understand the standards needed for developing projects. The department partnered with The Nature Conservancy (TNC) to complete a feasibility study on blue carbon projects across the state.

• Increase access to ecosystem service markets: Thanks to the Conservation Finance Act, landowners with easements, such as under the Rural Legacy Program, are now able to participate in ecosystem service markets they were previously barred from–provided they increase the property’s conservation value. DNR has released guidance on accessing ecosystem service markets that has now led to approved stream restoration and forest mitigation projects on properties in Rural Legacy easements.

Several commissions and task forces have been established or tasked under the CFA to provide strategic guidance to state agencies and local governments. These bodies bring together experts from various fields to ensure a comprehensive and coordinated approach to advancing conservation finance.

• Commission on Environmental Justice & Sustainable Communities (CEJSC): This already-established commission addresses EJ concerns by analyzing and reviewing what impact State laws, regulations, and policies have on the equitable treatment and protection of communities threatened by development or environmental pollution and determines what areas in the State need immediate attention. The CFA tasked the commission with evaluating the feasibility of creating a human right to water, as has been done in California. CEJSC made two recommendations in 2023, for the Maryland Department of Health to report to CEJSC on its role in ensuring safe and clean drinking water in Maryland and for MDE to update the CEJSC on continued efforts to eliminate PFAS in Maryland’s drinking water supply.

• The Green and Blue Infrastructure Policy Advisory Commission: Established by the CFA, this commission continues to advise the Baystat Subcabinet and local officials on ways to facilitate and accelerate the implementation of green and blue infrastructure projects. The commission’s first annual report in 2023 made several recommendations, including: 

• Expanding the use of the EJ Screening Tool 

• Increasing technical assistance to communities with EJ concerns 

• Creating education materials for pay-for-success contracting 

• Calling for more efficient permit processes for green and blue infrastructure

• Prioritizing projects with qualified co-benefits.

• Task Force on State and Local Government Accounting for Natural Capital: This task force explores the ability of state and local governments to integrate the valuation of natural capital into state and local government accounting. The task force issued its final report in September 2023 with the main takeaway that the state needs to allocate funding to a task force to ensure the State and local governments are best equipped to utilize GASB and other accounting standards to help finance more green and blue infrastructure projects in Maryland.

• Study to Determine the Potential for Digital Tools to Contribute to Chesapeake Bay Restoration: The study aimed to explore the potential of digital tools to enhance Chesapeake Bay restoration efforts. It analyzed technologies, including artificial intelligence, blockchain, crowdsourcing platforms, smart sensors, and the internet of things. The findings indicate that these tools can significantly improve water quality monitoring, precision agriculture, wildlife tracking, and resource management. However, successful implementation requires strategic planning, inter-agency collaboration, and an integrated approach to harness the full potential of these technologies for environmental restoration and climate solutions.

Looking Forward to Future Successes

The early successes of the Maryland Conservation Finance Act demonstrate the potential for significant positive impacts on the state's environment. As state agencies adopt pay-for-success contracting and other innovative provisions from the CFA, we can expect even greater achievements in the coming years from other departments in the state. However, there is still much work to be done in order to implement all the provisions of the act. The continued dedication to leveraging private investment and focusing on environmental justice will lead to more groundbreaking projects and significant environmental improvements statewide and within the Chesapeake Bay.