Managing partner Nick Dilks says the sale of an Appalachia portfolio attracted institutional and strategic buyer interest as infrastructure projects fuel demand for mitigation credits under the US Clean Water Act.
Article by Chris Janiec, via Agri Investor
A competitive sales process for a portfolio of mitigation banking assets underscores the growing depth of buyers for US environmental credits, said Ecosystem Investment Partners managing partner Nick Dilks.
The Appalachia Mitigation Banking Portfolio, exited by EIP earlier this year, attracted six to 12 bids from a group split evenly between financial buyers supported by institutional capital, and operating businesses that viewed the mitigation banks as strategic assets.
“When we started our business 20 years ago, the notion that there would be multiple buyers of institutional quality looking to acquire mitigation banking assets wasn’t even on the radar screen,” Dilks told Agri Investor. “Skip forward 20 years later, it’s great that there’s that option and alternative for us as a manager if we have assets that we want to exit and we want to find an alternative home for, versus just selling down the credits.”
The sale was managed by Forestland broker LandVest Land Investments, which in early 2025 launched a process for the assets that initially included nine mitigation banks spread across West Virginia, Ohio and Kentucky. Dilks said initial investments in the properties drew from the firm’s Fund III and were made on the assumption EIP would own and operate the banks, then sell all of their credits within the life of the fund. He added that the overall development process takes about 10 years, including two or three years to permit a property as a mitigation bank, after which a conservation easement is established and restoration is initiated.
A 2008 rule dictates specific milestones state regulators consider as reflecting success of any restoration effort, which is designed to meet requirements set out by the Clean Water Act. Each mitigation bank is also issued a credit release schedule that can help determine demand for exposure to a project among outside investors coming in at a later stage, Dilks said.
“We might have gotten eight of the nine credit releases successfully completed. For a buyer at that point of the bank asset, they’re looking at something that has substantially been de-risked from a performance standpoint.”
Dilks declined to share any financial details about the transaction but did confirm the sale price was lower than the $82.6 million in projected net revenues in the LandVest listing, which was expected from the sale of remaining credits through 2038 (which included credits from Kentucky assets ultimately excluded by the buyer). Dilks said Appalachia has been the site of less than half of EIP’s overall activity over the past 20 years, but is still a significant market due to its geography and the significant highway and road development that has occurred throughout the region.
He added that such infrastructure development has also contributed to the growing awareness of the mitigation market among natural capital and real asset investors.
“Whereas in the early days people struggled to make that specific connection between, ‘I know you generate all these credits, but who is buying these things?’ Now, people really can see it’s a new Port Authority or a new highway project or a new solar farm and maybe I’m already invested in that too. That does happen.”
Baltimore, Maryland-headquartered EIP closed its fifth fund on $400 million in October and had $1.2 billion in assets under management as of December, according to a March regulatory filing.