November 2011. Women wash clothes in the Ayampe River in Ecuador’s Manabí Province. The Ayampe River has many responsibilities beyond its ecological role. It also supports the life of the communities within its watershed. The Conservancy is working with local partners to develop a water fund to help protect this water source.

Working Group:
Water Security

Nearly one out of every three people on Earth regularly have trouble finding the water they need to survive — a problem that will only get worse as cities grow and the climate warms. Water funds and other investments to protect upstream watersheds and water sources may be part of the solution, but only if made wisely. The Working Group on Water Security will develop the methodologies to guide these investments in nature and maximize the returns.

Photo: Erika Nortemann/TNC | More Info
Photo: Neil Palmer (CIAT)

Working Group Summary

Prioritizing investments in Nature to Meet Urban Water Security Needs in Latin America

The water problems that people living in urban areas face can be summed up succinctly: too little, too much, or too dirty. In fast-growing cities, demand outstrips supply, a problem compounded by the need to irrigate crops and increase food production. At the same time, climate change will likely lead to flooding from more intense storms. Both too little and too much water can complicate the effort to provide clean water for everyone.

The Working Group on Water Security is analyzing how and where investments in natural infrastructure and holistic watershed management can help solve these problems and reduce the need for more costly built infrastructure like dams and reservoirs.

Learn about the Challenge

Photo: Erika Nortemann / TNC

The Challenge

Where Will Water Funds Work Best?

The idea behind a water fund is simple: water users downstream help pay for efforts to conserve natural areas upstream and hence protect the water supply. That was the model for the pioneering water fund program launched in Quito, Ecuador in 2000. Since then, conservationists and their partners in government and business have launched over 30 water funds, primarily in Latin America and expanding to the United States, Africa, Asia and Australia. Water funds create an innovative mechanism to mobilize and scale up investment in natural capital to meet cities’ growing water security needs.

While the idea is compelling and easy to understand, putting it into practice can be far more complicated. Water funds will not work everywhere. Investing in a water fund without a full understanding of the hydrology, economics and climatology of the rivers and forests it is meant to conserve, as well as the institutions involved, runs the risk of diverting time and effort away from other approaches that might be better suited to local conditions. To date, most investments in water funds and related natural infrastructure projects have arisen on an ad hoc basis, since a systematic framework for quantifying and comparing projected returns has not been available. This project will fill the gap.

Read about this Inquiry

The city of Quito, Ecuador as seen from the Dann Carlton Hotel. The Quito Water Fund, also known as FONAG, protects watersheds supplying the capital's 2 million people with 80 percent of their freshwater. The project, which began in 2000, receives monthly contributions from Quito's water and electric companies to produce nearly $1 million each year in disbursements for conservation projects in the surrounding watersheds.

The Inquiry

A Methodology to Identify the Best Cities for Water Funds

The Water Security Working Group will develop and demonstrate a methodology to identify the most promising cities for replicating and scaling up water funds.

The conceptual approach is that the most suitable areas for water fund expansion are where there is the greatest overlap between (i) high risk —

quantified as vulnerability times exposure; and (ii) high opportunity — where biophysical, economic and social characteristics of the region are best suited for natural infrastructure to be effective.

The Working Group will focus on a methodology to compare major and emerging cities across Latin America. In this region, influential decision-makers such as multilateral banks, federal water agencies, and multinational partnerships are positioned to use the deliverables of this project to replicate and scale up investments in water funds over the next 5 to 10 years.

The Working Group will focus on three major components in developing the methodology:

  1. Source water protection:calculating the potential return-on-investment in biophysical and monetary units for natural infrastructure strategies to mitigate risks and help regulate water supply and water quality to meet urban needs.
  2. Flood risk mitigation: analyze extent of current and projected future flood risks on people and urban infrastructure and identify watersheds likely to respond to natural infrastructure interventions to reduce flood peaks in rivers before entering urban areas and stormwater systems.
  3. Institutional enabling conditions:computing indicators summarizing institutional factors that predict the durability of a water fund mechanism, based upon experience from existing funds and other payment for ecosystem services programs.

From these three components, the Working Group will produce a flexible and customizable “dashboard” of information and associated products that will enable key stakeholders to evaluate the strengths and limitations of watershed strategies in major cities throughout Latin America. Stakeholders will also be able to use this information to catalyze water fund expansion where it is most promising and enable replication of the approach to other regions.

Meet the Team

Photo: Erika Nortemann, The Nature Conservancy | More Info

The Team

The Water Security Team