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What is a Water Fund?

What is a Water Fund?

Water funds are a subset of Investments in Watershed Services (IWS) that link downstream beneficiaries to upstream land stewards through a sustainable institutional mechanism.

    Water funds share three primary organizational components:

    a funding mechanism to collect and provide resources for watershed conservation;

    a governance mechanism for joint planning and decision-making; and

    a watershed management mechanism to carry out funded conservation and management activities.

Water funds often seek to adopt a science-based approach to improve the impact and cost effectiveness of watershed interventions.

(Reference: Bremer et al. (2016) "One-size does not fit all: natural infrastructure investments within the Latin America Water Funds Partnership".)


    United States

    Watch and discover how the Rio Grande Water Fund is restoring New Mexico's forests to help keep the Rio Grande River working for people and nature. Our new infographic shows how essential forested lands upstream will ensure a continuous supply of clean water downstream.



    Communities in Brazil are coming together to secure water for themselves and citizens downstream. Watch this video to see how citizens of Rio de Janeiro are working together to do just that.



    Today, 60 percent of Nairobi's residents do not have access to a reliable water supply. Enter the Upper Tana-Nairobi Water Fund.

Water is essential for preserving life on earth. People need water for a wide range of uses, including drinking, hygiene, and irrigation of food production. Water is also a key ingredient in nearly every product. It is used for cleaning, rinsing, and cooling in industrial processes and power generation. It serves as a conduit for waste and transportation. Water quality impacts the real estate market, commercial fishing operations, and the recreation sector. Global water consumption is also doubling every 20 years, and by 2025, at least two-thirds of the world’s population will likely be living in water stressed areas.

Traditional urban water management systems, with their focus on built solutions – like aqueducts, pipes, and drains – can have a devastating effect on the rivers, floodplains, and wetlands that provide people with water and create habitat for wildlife. These “business as usual” solutions are also expensive, degrade over time and will likely be insufficient to deal with the pressures of global urbanization and climate change. The result: an unreliable water system that does not meet the needs of people or nature. But there is another way.

Natural infrastructure solutions such as protecting and restoring forests, wetlands and grasslands, and reducing agricultural runoff in source watersheds have been demonstrated as effective alternatives to these conventional solutions that create ‘win-wins’ for people and nature. The Nature Conservancy (Conservancy) has been helping to secure water for cities for over 15 years by facilitating targeted investments by businesses and governments in source water conservation. In collaboration with its partners, the Conservancy has developed an innovative and replicable financial and governance model – Water Funds – that allows water users to invest collectively in the conservation of key upstream lands. These lands filter and regulate water supply, while simultaneously protecting habitat for plants and wildlife.

Illustration of the Water Fund concept



A Water Fund is managed by a board that is comprised of a diverse set of stakeholders, such as representatives of investors, the public sector, water companies, and local communities both upstream and downstream of proposed conservation strategies. The multi-stakeholder structure has proven to be an effective mechanism for ensuring transparency and accountability in the operation of Water Funds and long-term financial sustainability. The figure below provides an illustration of how a typical Water Fund is governed, distributes funding, and implements conservation strategies in targeted areas of a given watershed.

Water Funds can provide significant benefits to businesses, communities, and the ecosystems they seek to restore or protect. A recent landmark study – the Urban Water Blueprint (UWB)- estimates that of the water utilities surveyed under the study, $890 million of cost-savings could be accrued each year in avoided treatment costs if they invested in all possible watershed conservation activities. The transparent, multi-stakeholder structure of Water Funds can improve relationships with local communities and host governments, leading to more favorable policy and regulatory environments. The protection and restoration of key upstream lands helps to protect critical terrestrial and aquatic biodiversity that supports the integrity of ecosystems and the life they sustain. There is also a rapidly growing market for the green infrastructure solutions that Water Funds support: the same UWB study estimates the global market potential for source water conservation to be an upwards of $18 billion USD.

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