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Water Funds

Mainstreaming Biodiversity Workshop Cape Town, October 2013

Fernando Veiga

Water Funds Manager – Latin America

The Nature Conservancy

Freshwater

Photos © Walter H.

Wust

… is vital

© Walter H. Wust

© Walter H. Wust

© Walter H. Wust © Walter H. Wust

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Medium watersheds

Composite risk rankings (Eri-C)

Potential Risk

Low

Medium

High

13 threats, such as

Roads

Railroads

Mining

Cattle-ranching

Population density & growth

Main stresses to Latin America watersheds…

Development Climate change impacts

El Niño effects on water supplies – 120

municipalities with no water in 2010

Worst flood ever in Colombia, 2010

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Investing in the

GREEN INFRAESTRUCTURE

ECOSYSTEMS PROVIDE SERVICES TO THE HUMAN SOCIETIES

Increased evidence that the conservation and restoration of ecosystems is

key to guarantee water security for human needs, and in many cases is

the most cost-effective solution

Mainstreaming biodiversity into the Water sector

and the main water users

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• 14,300 hectares of priority

areas (3% of total area) = 50 %

of sediments abatement =

600,000 tons per year

• US$ 4.9 million/year of potential

reduction in water treatment

and drainage costs (no

considering other potential

benefits as reduction of other

contaminants)

Business case

São Paulo, Brazil

7

0

3

6

9

12

15

18

2006 2007 2008 2009 2010 Promedio

Producción de Caña 5 Riegos Producción de Caña 4 Riegos

Sugar cane harvest (tons millions)

Source: Cenicaña – estimations Asocaña

8,7% decrease in productivity

Loss of $33 millions / year

Loss of $250 / ha / year

Production with 5 cycles Production with 4 cycles

Business case

Cauca Valley, Colombia

Increased pressure on water resources: potential reduction from 5 to 4 irrigation cycles

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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/h

a/a

ño

tonela

das/h

a/a

ño

Cantidad agua

Cantidad de sedimentos

Source: Ciat, 2007 (TNC), Bogota Water Fund

Water quantity

Quantity of sediments (Component of Quality)

Conserved

Area

Uses inside

Protected Area

Outside

Protected Area

m3

/ha

/ye

ar

To

n/h

a/y

ea

r Regulation significant but not quantified

10:1

Savings

USD 4.5M year

Economic rationale

Bogotá, Colombia

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Users

Providers

Quito, Ecuador

Population: 2 million

Condor Bioreserve

& Surrounding farmlands

$

WATER

SERVICES

$ Financial

Fund

Water Funds

Board

Water Fund

ENVIRONMENTAL SERVICES MODEL

Proof of Concept:

Quito Water Fund Páramos:

Páramo absorbs vast

amounts of rainwater

and cloud mist and

slowly releases it,

acting as a natural

water tower

When intact is one of

the more botanically

diverse habitats on

earth with

approximately 4,700

plant species—all

adapted to the

intense ultraviolet

radiation, cold and

wind of high

elevations.

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Proof of Concept:

Quito Water Fund

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Importance

• 2 million residents

• Condor Bioreserve: 2.5 million acres, exceptional

biodiversity, including 760 bird species; 28 rivers

Partners

• EMPAAQ (Quito’s water agency); Quito Electric Company;

USAID; Swiss Development Corporation; Cerveceria National

(beer company); Tesalia Springs Co.

Conservation

Progress

• 85,000 hectares of public lands protected;

• 19,000 hectares of private lands restored and/or best

management practices

© Sergio Pucci/TNC; © Ami Vitale

Fund Progress

• 2000: $21,000 start-up - 2013: $13,000,000 aprox.

• Since 2006, 2% of the water utility revenues

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

Atlantic

Forest

- Originally 122 M ha -

12% of remnants

- Around 120 M people

- 70% Brazilian GDP

- High level of endemism

and biodiversity rates

- Strong restoration

needs. 90% in private

hands

- Perfect place for PES

high Water services

demand (urban &

industrial sectors)

-

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Water users

Income generation

Watershed Committees

(water user fees)

Public funds

Water utilities

Restoration and

conservation

activities

Water ecosystems

services

In Brazil – “Water Producer”

concept - ANA

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Users Providers

Sugar Cane Growers

Cattle-ranching upstream

$

ACCOUNTABILITY

Reporting

$ Fiduciary

fund

Board

WATER FUND

ENVIRONMENTAL SERVICES MODEL

asocaña

Agricultural water users

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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Steps to establish a Water Fund

Pre-feasibility and evaluation

Which ecosystems services?

Where is the area of influence?

Who are the stakeholders?

Design

Feasibility studies:

Environmental

Socio-economic

Institutional

and legal

Negotiation

Institutional arrangement

Partners’ commitment (financial and

technical)

Maturity

Financial sustainability

Consolidation of field activities and monitoring

Operation

Contracts with local stakeholders

Field activities

Fund-raising

Monitoring

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Science-based approach Contribution

to aquifers

Contribution

to flows

Sediments Coverage

Highest priority areas for conservation

Biodiversity connectivity

Sistema

Área 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 56

Río Bolo 2.210 1.414 64 796 36

Río Desbaratado 1.016 772 76 244 24

Río Fraile 2.792 2.345 84 447 16

Río Nima 1.642 1.133 69 509 31

Río Tuluá 13.234 5.426 41 7.808 59

TOTAL 28.020 14.226 13.794Water for life and sustainability

Investment Portfolio

-

Return on Investment

Total budget (US$ millions) Total budget (US$ millions)

Change in Erosion Change in Treatment Cost $

Activity scores

Incorporating climate change

Score

High

Low

Agricultural Suitability

Erosivity

Water yield

Climate Change

Scenario

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Investments

Private and communal lands 1. Conservation agreements

2. Best agricultural and cattle ranching practices (silvopastoril systems)

3. Riparian forests.

4. Reforestation & restauration

5. Income generation/environmental education

Public areas 1. Park guards

2. Implementation of management plan

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Ecuador

Brasil

Brasil

Colombia Colombia

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Peru

Ecuador

Colombia

Colombia

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WATER MONITORING

Water Monitoring Sites

Precipitation

• 3 sites

Flow

• 3 sites

Quality

• 9 sites

• 9 items

Parâmetro Analítico PH Turbidez DBO Cor Coliformes Termotolerantes Oxigênio dissolvido Nitrogênio amoniacal Fósforo Total Temperatura

Community

engagement

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Biodiversity Monitoring

• Importance of riparian areas

•Terrestrial monitoring (páramos and

forests) also showing first encouraging

results

Paulo Petry

Biodiversity Monitoring

- First results showing forest species in

restoration areas

- High potential for implementing the

Community Based Bird Monitoring

Program.

MONITORING

GOING ON

TNC, FEMSA Foundation, IDB and GEF, launched in 2011

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The vision Over the next 5 years $27 million of 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 (ex:

replenishment)

4. Support monitoring initiatives

5. Keep developing the business cases

Goals (also shared with Latin America Conservation Council under

the Water Security strategy):

6. Raise awareness (Where Your Water Comes

From)

7. Support the green infrastructure approach in the

water sector loans (IDB and CAF)

8. Partner water regulators with the aim to include

the watershed conservation costs into the water

tariffs (ADERASA – PE, CR; BR)

Goals (also shared with Latin America Conservation Council under

the Water Security strategy):

Status:

15 in evaluation

14 in design

13 operating

1 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/US)

90,836 ha

126,089 ha

1,449,369 ha

Watersheds which

provide water to 33,74

million people

4,218 families benefited

upstream

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Thanks!

fveiga@tnc.org

www.fondosdeagua.org