As global water challenges increase, two components are critical to making progress in addressing them: partnerships and solutions. That’s solutions with an “s.” Just as no one company or organization can solve the world’s water issues alone, no one solution can fix the enormity of the world’s water challenges. We need solutions, lots of them. Water funds are one relatively new and effective solution making meaningful and lasting impacts.
Water funds are financial instruments designed to protect and preserve water for all users in a given watershed. They work best where there is a clearly defined source water area—the land where rain and snow fall that is used by those living in the source area and downstream in larger communities. As a result, we see most water funds in more mountainous areas, such as the Andean Mountain range across South America.
Typically, investment comes to water funds in three ways:
- Seed funds to create an endowment to ensure the long-term viability of the fund;
- Specific project funding to address one or more issues in the watershed; and
- Sustained funding, such as monthly payments from water tariffs paid by users (business and community) to add to the projects and compensation needs a fund may have.
These investments come from a wide variety of donors across the watershed and even beyond including local water users, businesses and government agencies.
The funds are used toward projects that protect key lands upstream to filter and regulate water supply. Projects may include creation of conservation areas, changes in land use (e.g., prohibiting livestock grazing on river banks, reforestation, removal of invasive plant species), and introduction of more sustainable farming techniques. Sometimes upstream farmers are compensated from the water fund for loss of land use or other changes. All of this helps lead to cleaner and more sustained flows of water, removing dramatic swings in water supply upstream and helping downstream cities avoid costly water treatment and flood damage.
Lessons learned in Latin America are now helping solve water challenges in other parts of the world, such as Nairobi, Kenya, where the Upper Tana-Nairobi Water Fund (the first in Africa) is working to protect the hugely important Tana River. This local fund supports improvements in how lands and waters are managed to benefit Kenyan communities, farmers and businesses throughout the watershed.
Engagement in water funds is important to
Water funds contribute to the work underway to meet
With water the most necessary shared resource, it is imperative that every local user and beneficiary work to be part of any solution. That means the private sector, civil society, governments and communities all have a role to ensure success of any water-related initiative. Water funds are one bold solution. But there are more. Partnerships are key to identifying and implementing solutions—and making them last.
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