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Water FundsLatin American Water Funds Partnership

Experiences from Scaling Up Watershed Conservation

Fernando VeigaRebecca Tharme

The Nature Conservancy

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Investing in Green Infrastructure

Ecosystems provide services to society

Growing evidence that the conservation and restoration of ecosystems are key to guarantee water security for human needs, and in many cases

represent the most cost-effective solutions

Water funds rely on concept of ecosystem servicese.g. erosion abatement; sediment reduction; nutrient filtration;

flow regulation; flood control - clean reliable water sources

Water Funds invest in conserving watersheds to improve or maintain water-related benefits and regulate water-related risks

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Users Providers

Quito EcuadorPopulation 2 million

Condor Bioreserve& Surrounding farmlands

$

WATERSERVICES

$FinancialFund

Water Funds

Board

Water Fund

ECOSYSTEM SERVICES MODEL

WF is a conservation trust fund that finances watershed protection

Water Funds are effective tools for watershed conservation because they:

• Connect suppliers of ecosystem services with beneficiaries, providing direct benefits downstream and improved livelihoods upstream (efficient)

• Mitigate water scarcity and pollution problems at the source rather than end-of-pipe treatments (effective)

• Provide a sustained funding mechanism with a flexible governance structure to allow for adaptive management of risks and opportunities (sustainable)

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• Most important water supply area in Brasil - 50% of São Paulo metropolitan area, 9 Mill people

• Poor land-use practices in sensitive areas undermining system capacity to serve growing demand

• Invest models estimated mean erosion rates and sediment loads – 14 300 ha of priority areas (3% of total area) for water fund investments = 50% of sediments abated= 600 000 tons per year

• US$ 4.9 million/year of potential reduction in water treatment and drainage costs (excl. other potential benefits e.g. contaminants reduction)

Business caseSão Paulo, Brasil

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2006 2007 2008 2009 2010 Promedio 0

3,000,000

6,000,000

9,000,000

12,000,000

15,000,000

18,000,000

Producción de Caña 5 Riegos Producción de Caña 4 Riegos

Sugar cane harvest (million tons)

Source: Sugar Cane Research Centre - Cenicaña – estimations Asocaña

8.7% decrease in productivity

Loss of $33 million / yearLoss of $250 / ha / year

Sugar cane mills are main funders- for water supply assurance

Production with 5 cycles Production with 4 cycles

Business caseCauca Valley, Colombia

- Most important sugar cane production area in country (200 000 ha)- Increased pressure on water resources - potential future reduction from 5 to 4 irrigation cycles with current degradation trends

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0.0

10.0

20.0

30.0

40.0

50.0

Conservado Uso actual (con política ambiental)

Uso fuera parque (sin política ambiental)

m3/

ha/a

ñoto

nela

das/

ha/a

ño

Cantidad agua Cantidad de sedimentos

Sources: CIAT 2007, Bogota Water Fund

Water quantity

Quantity of sediments (Component of Quality)

Conserved Area

Uses inside Protected Area

Outside Protected Area

m3/

ha/

year

Ton

/ha/

year Regulation significant but not quantified

10:1

Reducing sediment loads by 2 Million tons

Projected savings

USD 3.5 M per year in treatment costs

Feasibility Study Economic RationaleBogotá, Colombia

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Proof of ConceptQuito Water Fund

Importance

• 2 million residents• Condor Bioreserve: 2.5 million acres, exceptional

biodiversity, inc. 760 bird spp.; 28 rivers

Partners

• EMPAAQ (Quito’s Water Agency); Quito Electric Company; USAID; Swiss Development Corporation; Cerveceria National (beer company); Tesalia Springs Co. (water bottling company)

Fund Progress

• 2000: $21 000 start-up 2013: ~ $13 000 000• Since 2006, 2% of the water utility revenues

• Annual investments of nearly $2-3 million (leverage)

• Páramo and forest as biodiverse natural water tower• 80% of water for the city of Quito, Ecuador, from three protected

areas and their buffer zones• Conversion with land pressures reducing ability to provide services

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Proof of ConceptQuito Water Fund

Benefits to People

• Permanent support through various programs to communities close to the water sources

• Enrolled 30 500 children in environmental education programs

• Over 200 families engaged in community development projects in rural basins

Conservation Progress

• 85 000 ha of public lands protected• 19 000 ha of private lands restored and/or

under Best Management Practices

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Steps to establish a Water Fund

Pre-feasibility

and Evaluatio

n

Which ecosystem services?

Where is the area of influence?

Who are the

stakeholders?

Design

Feasibility studies:

Environmental

Socio-economic

Institutional

and legal

Negotiation

Institutional

arrangement

Partners’ commitme

nt (financial

and technical)

Maturity

Financial sustainabilit

y

Consolidation of field activities

and monitoring

Operation

Contracts with local

stakeholders

Field activities

Fund-raising

Monitoring

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Science-based approachContribution

to aquifersContribution

to flowsSediments Coverage

Highest priority areas for conservation

Biodiversity connectivity

SistemaÁrea ronda del río

(250 mts cada lado) (Has)

Área en cobertura natural para

conservación (Has)%

Área intervenida para restauración

(Has)%

Río Amaime 7.126 3.135 44 3.991 56Río Bolo 2.210 1.414 64 796 36Río Desbaratado 1.016 772 76 244 24Río Fraile 2.792 2.345 84 447 16Río Nima 1.642 1.133 69 509 31Río Tuluá 13.234 5.426 41 7.808 59

TOTAL 28.020 14.226 13.794Water for life and sustainability

Investment Portfolio

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Investments

Private and communal lands1. Conservation agreements2. Best agricultural and cattle ranching practices (silvopastoral systems)3. Riparian forests4. Reforestation and restoration5. Income generation6. Environmental education

Public areas7. Implementation of management plans8. Park guards

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Peru

Ecuador

Colombia

Brasil

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WATER MONITORING

Water Monitoring Sites

Precipitation• 3 sites

Flow• 3 sites

Quality• 9 sites

• 9 parameters

Parâmetro AnalíticoPHTurbidezDBOCorColiformes TermotolerantesOxigênio dissolvidoNitrogênio amoniacalFósforo TotalTemperaturaCommunity

Engagement

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Biodiversity Monitoring• Importance of riparian areas

• Terrestrial monitoring of páramos and forests also showing first

encouraging results (e.g. forest bird species in restoration areas)

Paulo Petry

Community monitoring4218 families benefited upstream in watershed

Monitoring of multiple water funds ongoing

TNC, FEMSA Foundation, IDB and GEF Launched in 2011

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The vision

Over the next 5 years $27 million in Seed Capital will

support direct investment of $143 million

in 32 Water Funds, leveraging additionally $500 million

providing long-term payments for environmental services

to rural communities, and securing

clean and sufficient water and

effectively conserving 7 million acres

for 50 million people in Latin America

1. Support the establishment and strengthening of the WFs

2. Identify and share best practices

3. Development of regional projects

4. Support monitoring initiatives

5. Keep developing the business cases

6. Raise awareness (Where Does Your Water Come From?)

7. Support the green infrastructure approach in water sector

loans (IDB and CAF)

8. Partner with water regulators with the aim of including the

watershed conservation costs in water tariffs (ADERASA – PE,

CR, BR)

Goals

Status15 in evaluation14 in design13 operating1 mature

Opportunities• Exchange lessons learned• Regional players (public

and private) – reduction of transaction costs

• Diversity and cooperation• Upscale (implementation

channel)• Expand to new

geographies (Africa, USA)

Water Funds as at June 2013

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Thankswww.fondosdeagua.org