Addressing water security through water funds

On this world water day, we challenge you to consider how nature might provide the solutions to your water challenges. This year’s theme for World Water Day, “Water for Nature: exploring nature-based solutions to the water challenges we face in the 21st century”, highlights the need to consider not only how we can restore damaged ecosystems, but also the value that natural systems can provide. There are many nature-based solutions available to mitigate floods, droughts and water pollution. 

Water management in the 20th century was defined by the construction of large, centralized infrastructure, such as dams, canals and wells (i.e. “gray infrastructure”) to move and manage water resources, with an emphasis on increasing water supply[1]. Gray infrastructure is traditionally the default solution to water challenges. The “soft path” /green infrastructure provides alternative solutions that may bring additional social and environmental benefits.  

Ecosystem services can provide many of these same solutions, while also providing other important co-benefits for people and nature. “Soft path” solutions emphasize decentralized water infrastructure projects, preserving ecosystems and reducing demand for water.[2] There are many examples of soft path and green infrastructure solutions to water problems, including water funds. According to The Nature Conservancy, “Water Funds are organizations that design and enhance financial and governance mechanisms which unite public, private and civil society stakeholders around a common goal to contribute to water security through nature-based solutions and sustainable watershed management.”[3]

Using water funds to restore upstream watersheds can drive improved water quality and availability for downstream users. Water funds provide funding for sourcewater protection activities including, forest protection, reforestation and improved agricultural practices. According to The Nature Conservancy, “water funds provide a mechanism for downstream users to directly or indirectly compensate upstream users for activities that deliver water benefits to the payer. Public and private water users, including businesses, utilities and local governments, invest collectively in conservation of the watersheds from which they source their water.”[3] Water funds are an increasingly popular mechanism to fund nature-based solutions to water challenges, and are being implemented globally

The benefits of these sourcewater protection efforts are wide ranging and can include:

  • Mitigating carbon emissions by restoring and protecting forests
  • Enhancing climate resilience and helping communities adapt to the impacts of climate change
  • Improving human health by reducing transmission of waterborne diseases and improving access to potable water
  • Supporting biodiversity through conservation of native plant and animal species

There are many examples of the successes that water funds have had around the world in small and large communities. The Quito Water Fund (or FONAG) in Quito Ecuador, for example, was started by the Nature Conservancy in 2000 with just $20,000 to distribute to conservation projects in sensitive watersheds that provide Quito’s water. Since then, it has grown to include contributions from the city’s water and electric utility companies and now invests almost one million dollars a year in projects that have protected 33,000 hectares, restored vegetation on 2,500 hectares and educated 43,000 children on the importance of water and conservation of natural resources.[4] This has resulted in increased water security for Ecuador’s capital and proper management of thousands of hectares of farmed and forested land in the Andean mountain range.

Initiating a water fund is a complex process that begins with a feasibility study and development of a strategic plan for the watershed and requires strong partnerships between the private sector, civil society, governments, and communities. To learn more, check out the Water Funds Toolbox.

[1] Ainsfeld, Shimon C. “Water Resources”, Island Press. Washington, D.C., 2010.
[2] Ainsfeld, Shimon C. “Water Resources”, Island Press. Washington, D.C., 2010.
[3] The Nature Conservancy, Water Funds Toolbox, “What is a water fund?”, 2018.

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