While climate change threatens the world with more extreme droughts and floods, Latin America responds by fitting water security into a business model, changing the way environmental conservation works.
The Latin American Water Funds Partnership began in 2011 as a way to drive investment to protect the watersheds that supply the region’s major cities. Today, 19 water funds have been developed thanks to the joint efforts of the Inter-American Development Bank (IDB), The Nature Conservancy, FEMSA Foundation and the Global Environment Facility (GEF).
In the years leading up to 2016, the funds were able to leverage more than $120m, benefiting more than 70 million people and positively impacting 1.6m hectares of natural ecosystems through conservation activities, such as the protection of strategic ecosystems, reforestation and sustainable crop management.
Last month, a second stage of the partnership was announced in Bogotá, Colombia, during the 3rd Water Funds Biennial. The goal is to create a total of 40 water funds in the region and secure $500m to invest across a further 4m hectares. This way, it is hoped that water security will be provided for 80 million people.
“When the world’s best minds gather to think about the sustainable development goals, they see that four goals are intimately linked to water,” says Carlos Salazar, CEO of FEMSA. Water issues affect companies and individuals alike, and are essential to guarantee the wellbeing of the population. For FEMSA, water security goes beyond its economic activities. In its mission to create economic and social value through business and institutions, water funds play a strategic and fundamental part. “We realised that it’s no use just to have a sustainable company,” Salazar says. “Sustainability occurs in the communities and in the region.”
For Salazar, the success of the water funds can be explained by four principles: good partnerships, clear objectives, a flawless organisation and strong academic support. “Besides putting in all our efforts, we need to put in all our brains,” says Salazar, emphasising the need for good water science. “This way we can do things in a serious and formal way.”
Latin America was the ideal location to launch the water funds, as the region has more than 30% of the world’s water resources. Despite such abundance, 28 of its main cities suffer hydric stress and poor regions rarely have access to clean water. The poster child for this situation is Quibdó, a small Colombian city of just 100,000 habitants, located in one of the rainiest places in the world. “They have more than 300 rainy days a year, and they receive more water than London or Seattle,” says Pablo Pereira, manager of IDB’s infrastructure and environment sector. “Despite this, thousands of neighbours of the city centre only have eight hours of water access each day.”
Under these circumstances, water funds become something more than a conservation strategy; they are an alternative way of contributing to sustainable development through local solutions. In Monterrey, Mexico, watershed management in the upper San Juan River basin aims to reduce the flood risk that comes with the hurricane seasons. Rio de Janeiro’s water fund has paid the local communities of the Guandu watershed more than $110,000 in the past four years to protect around 7,500 hectares of forests, and to grow new forest in 500 hectares of degraded pasture. In Cali, south-west Colombia, the funds have been used to work with rural communities to improve their livelihoods through sustainable agricultural practices, while reducing erosion and maintaining a base flow for the sugar cane industry located downstream.
“There is no initiative that is comparable to the water funds for moving quickly, scaling up and bringing people together,” says Mark Tercek, president and CEO of The Nature Conservancy. The water funds work with over 200 local partners, including government, academia, companies, and grassroots organisations. Tercek says that disagreements are natural, but the search for common ground is a key element to the success of the water funds.
Another fundamental element of the funds is their financial sustainability. Investors are usually large businesses or government agencies that invest to protect the ecosystem services that the watersheds provide: reducing water treatment costs, lowering the risk of water shortages and guaranteeing supply for users downstream. “These are smart investments that pay for themselves,” says Tercek.
In fact, every dollar invested in the water funds so far was able to leverage a further $6 from local companies and institutions. These results encouraged The Nature Conservancy to export the model to other continents. There is now a fund working in Kenya (launched in 2015) and three new funds are currently being developed in China.
As the success of the project grows, new challenges arise. For instance, the funds are attractive for cities and agricultural districts, but a financial scheme is needed for conservation strategies in poor and isolated rural communities. There are also other environmental issues that cannot go unattended, such as the conservation of soils, forests and marine habitats.
The water funds could become an example of how to address these challenges, by driving investments and creating natural resource governance. But maybe the most important lesson is the collaboration between different stakeholders. On this, Tercek is clear: “We will only be successful if we use the partnership approach.”
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