Looking to nature for solutions to the global water crisis — introducing Water Funds
We should look to nature for solutions to the global water crisis. An introduction to nature-based solutions and the Water Fund model.
New York City faced a challenge in the 1990s: the city needed a new water filtration system to serve its nearly 8 million people. But the prospect of spending $6–10 billion on a new water treatment plant, and another $100 million on annual operating costs, was daunting. City officials decided to take a closer look at the source of their water — the Catskill Mountains.
Water from the Catskills flows through almost 200 kilometers of forests, farmlands and towns to reach New York City. When that landscape is healthy, it acts as a natural purifying system, but certain development and agricultural practices can result in impaired water quality. For city officials, reaching out to local farmers and landowners and compensating them to restore and conserve their lands in the watershed, combined with some land acquisition, proved to be significantly cheaper than building and operating a new treatment plant.
New York’s example showed the benefits of public-private partnerships in such situations, and demonstrated that unlocking nature-based solutions can be cheaper and more efficient and produce additional benefits compared to conventional built, “grey” infrastructure. This was the moment of inspiration for water funds.
Given that about 40% of urban source watersheds worldwide have been degraded by human development, resulting in impaired downstream flows, nature-based source water protection can be one of the most effective ways to improve water quality and quantity for urban areas.
A study by The Nature Conservancy (TNC) estimated that four out of five cities could improve water quality using nature-based solutions in their source watersheds, and potentially 1,000 cities globally would see a positive return-on-investment based on reductions in total utility expenditures. Furthermore, these solutions often deliver other forms of value in the longer term, such as terrestrial and freshwater biodiversity conservation, increased agricultural yields, improved community health , well-being and resilience, and carbon sequestration for climate change mitigation.
What are Water Funds?
To address the significant complexities associated with a diverse range of water users and externalities within a mosaic landscape, the Water Fund model creates a governance and management structure that enables stakeholders (cities, downstream communities, companies, etc.) to work collectively. Together they invest in the management of the landscapes where their water is sourced; so that upstream forests, grasslands, and wetlands are protected to continue naturally cleaning and filtering water, and working landscapes such as agricultural fields or animal pasture are managed using sustainable practices to avoid polluting and overusing water.
Downstream water users invest in upstream land and water stewardship, sometimes buying the land outright, sometimes supporting rural communities or land managers change their management practices in ways that protect or restore the land.
Upstream rural communities can benefit from enhanced livelihoods and improvements to health and well-being whilst downstream communities experience improved water quality and, in many cases, fewer disruptions and shortages. Sustained mutual benefits are the hallmark of successful water funds.
A water fund is usually run by a governance board responsible for selecting those nature-based solutions that will most effectively improve water security. They are responsible for distributing funds to these interventions and monitoring the project impacts after implementation, as well as for identifying and implementing mechanisms for the long-term financing of water security programs. As an institutional platform, a water fund is an excellent tool to bridge science, jurisdictional, finance, and implementation gaps.
Water funds are about partnerships
By 2025, at least two-thirds of the world’s population will likely be living in water-stressed areas. The question is therefore — how can we implement these solutions at the scale needed to truly make a dent in global water insecurity?
Although TNC first developed the water fund model, the answer to scale is through partnerships, whether these be utility companies, major corporate firms or government actors.
On the utility side, Veolia is exploring how changing agricultural practices and ecosystem enhancements can ensure a more sustainable water supply. Suez is incorporating wetland restoration into its practices to improve water quality and reduce operating costs. Whilst these are private companies, there are many public agencies adopt a similar vision, actively investing in both green and grey infrastructure to deliver sustainable water to the communities and cities they serve.
Of course, it is agriculture and industry, not domestic use, that represents the vast majority of water consumption. Businesses with high water needs have an enormous interest in ensuring they have stable water supplies and can have an equally enormous impact on global water security.
Consider the example of PepsiCo: all along its supply chain and production processes, PepsiCo depends on reliable water supplies and the company has established an integrated approach to watershed management (including partnerships with TNC to restore watersheds in Latin America and the United States).
To date, more than 100 corporations have invested more than $38 million in water funds. The private sector can be an important first-mover here, whilst efforts continue to get city and state regulators realize the benefits of such solutions.
On top of securing water supplies, approaches like water funds help protect existing ecosystems and restore degraded lands that deliver a range of other functions and benefits, including climate mitigation and adaptation, increased agricultural yields, and improved community health. This goes beyond providing clean water — it’s about making human development fundamentally more sustainable around the world.
Who can set up a Water Fund? Does TNC need to be involved?
Although it is a large international NGO (The Nature Conservancy, with more than 4000 staff worldwide) that has pioneered the Water Funds model, the approach is by no means proprietary. TNC has worked with partners to systematise the approach, preparing, if you will, a ‘recipe’ for water funds. This is freely available for any partner, anywhere in the world, to take up and implement. Naturally there are certain enabling conditions, and water funds are not the correct approach in all contexts, but studies by TNC — and work with partner-led funds — have shown this to be a model with a wide application. TNC has encapsulated the knowledge about water funds in a online ‘living toolbox’, in a set of online training modules and by establishing a global water funds network. Find more details at https://waterfundstoolbox.org/training-network.
Three additional modules in this series cover some key elements of successful Water Funds and lessons learnt. You will find them via the following links:
‘Module B’: FONAG — The first official Water Fund
A comprehensive overview of the FONAG Water Fund in Quito and the successful private-public partnership that resulted in an endowment of over $18 million USD, as well as key takeaways from the 20-year journey of the first Water Fund.
The story of Quito — the first ‘Water Fund’
This short article reviews the success of the Quito Water Fund, now celebrating 20 years. FONAG, as the Water Fund is…
‘Module C’: How the Water Funds model took hold in Kenya
This module explores the first Water Fund in Africa and the value of a Business Case in getting utilities and water companies meaningfully engaged with and ultimately invested in source water protection projects.
How the Water Funds model took hold in Kenya
The Nairobi Upper-Tana Water Fund was the first in Africa, building on model of watershed protection first developed in…
‘Module D’: Insights into two Brazilian Water Funds
Successful Water Funds in Sao Paulo and Rio de Janeiro demonstrate the importance of co-benefits as key drivers of investment in natural infrastructure, as well as how funding has been effectively utilized on the ground to ensure impact and sustainability.