WATER FUNDS — ONE MECHANISM THROUGH WHICH BUSINESSES CAN ENGAGE COLLECTIVELY TO ADDRESS WATER SECURITY

Water Funds unite the public and private sectors and civil society around the common goal of securing water for communities by protecting natural water systems in a way that promotes sustainable economic development.

The Water Fund model — spearheaded initially by The Nature Conservancy, but now taken up by an increasing number of partners — looks to improve water governance via on-the-ground interventions that benefit both nature and people.

Water funds help to make sense of and manage the significant complexities associated with water risk and nature-based source water protection. The model offers business a template for a collective effort that connects them with multiple groups to manage and finance improvements in water security. For business, this means that, over time, the burden of investing in water security is shared with others.

As the above graphic suggests, Water Funds work with people living upstream to help them manage watersheds, improving the productivity and resilience of their lands. Water security is improved for downstream communities, cities and businesses — this supports social development and reduces economic risks. It also introduces a mechanism for the long-term financing of water security programs.

HOW CAN WATER FUNDS HELP BUSINESS ADDRESS WATER SECURITY?

For corporate water users the interest in addressing water security unilaterally is strong. They can do this by ‘looking within their fence’ at ways to further improve water efficiency or by adjusting supply chains. However, at a certain point, such efforts may be thwarted without collective action at a larger scale. For example, an operation site may still face 'outside the fence' water challenges, such as water pollution or unsustainable water use from other water users in the basin.

Unfortunately, in the past there have only been limited ways for corporate users to engage in multilateral action. Moreover, the scale at which these larger engagements apply — for instance across an entire country — can be so large that generating localized corporate benefit can be challenging.

Fortunately, the Water Fund model allows companies to engage in collective action in such a way that local issues are addressed — and in doing so, pool resources, capacity, money and expertise together with other stakeholders to deliver durable outcomes at the required scale.

Water Funds’ approaches thus lower the cost to each stakeholder, even as they expand the resources to the scale required to address water security within the basin. By creating an effective and durable governance and management structure, Water Funds promote confidence in investors and, thanks to their ambition to work at scale, they tend towards an inclusive approach to water security. Both these factors help deliver tangible long-term gains to water security for individual companies.

Through participation in a Water Fund, companies can thus break down barriers to collective action and attain greater gains in water security than they can achieve by working on their own.

Collectively through partnerships, Water Funds identify and implement means for the long-term financing of water security programs, programs that deploy robust natural solutions that improve water quality and supply, in a way that is adaptive to changes in climate and populations. This helps to restore the health of local watersheds in a way that provides diverse benefits to communities, ecosystems and cities.

Organized on this scale, Water Fund activities ‘pay for themselves.’ For instance, 1 out of every 6 cities can pay for natural solutions through savings in water treatment costs alone. Water Funds also improve the credibility and legitimacy of any actions to address water security, providing corporate partners with an improved legal and social license to operate. Transport yourself to the Upper Tana Nairobi Watershed to learn more about a Water Fund in action.

CHALLENGES IN ENGAGING VIA A WATER FUND APPROACH

Water Funds deployed across the globe demonstrate that corporate partners value the benefits they derive from engagement. However, while Water Funds offer many opportunities, there are some challenges that a company may face. Considering these challenges ahead of time will help a company proactively address these concerns, gaining stronger internal buy-in and reducing obstacles to long-term engagement.

1. Firstly, while Water Funds provide a strong base for stakeholders to improve their water security, they are not a one-size-fits-all tool.

• Water Funds must be adapted to address the local context and policy landscape. There may be specific geographical, social or policy barriers to a Water Fund approach that extend the time it will take for success and which may dilute the benefits that corporate partners can expect.
• TNC thus encourages companies to conduct their own due diligence based on local factors in order to identify what these barriers are. Clearly there is a range of interventions that companies can pursue to address water security; not all interventions require a Water Fund.

2. Companies engaging in Water Funds must prepare for an ongoing campaign to educate decision-makers — both externally and internally — as to what Nature-based Solutions are and how they work.

• Companies should expect that securing participation from other stakeholders and across sectors in the watershed can prove cumbersome. It is natural that companies, water utilities, municipalities and governments all have differing objectives when it comes to water security and a different sense of urgency. Such ‘education’ may also need to take place within a corporate hierarchy, as well.
• Nevertheless, large water users can play a vital signaling role to others. Once early momentum is achieved, visibility of Water Funds at the government level increase and this can have a significant multiplier effect. Impact at scale becomes a possibility and the burden on one single company to promote water security locally is reduced.

3. It can be hard to reach consensus among stakeholders, especially in the early days of a Water Fund when partners are unfamiliar with working together.

• Collective action is never as quick as acting alone. As the old African proverb suggests, “If you want to go fast, go alone. If you want to go far, go together.”
• Nevertheless, the time required for collective action to ‘kick-in’ may make corporates uncomfortable, especially if they are used planning across short timeframes when thinking about recouping investments. This is particularly the case if the engagement is seen through the lens of corporate social responsibility rather than as part of strategic systems thinking.

In sum, it is crucial to effectively communicate throughout the company that collective action and systems-thinking approaches do take time, that behavior change can be slow and to set realistic expectations from the onset.

FINDING OUT MORE, JOINING A COMMUNITY

To date, 43 Water Funds have been developed in 13 countries with another 25 under development. They have proven to be useful tools to achieve collective action within watersheds to promote water security.

Working with partners, TNC’s goal is to reach 50 Water Funds by 2022 and by 2025, we aim to empower 300 early adopters to begin investing in nature-based solutions. TNC research indicates that 1,000 cities could be employing nature-based solutions with a positive return on investment.

Impact at this scale would equate to 70 million people with better water security, 150,000 people having improved livelihoods, 2 million hectares of watersheds protected across Africa, Asia and Latin America. Together, we can amplify corporate action to address water security.

The opportunity is there. Now we just need enlightened thinkers like you to help scale these opportunities. Learn more about how companies are working with TNC to invest in nature and to learn how water shapes our society and economy — and opportunities in your priority areas to address water security — please visit “H20: The Molecule that Made Us” (highlights from a PBC and TNC collaboration) or the CEO Water Mandate’s Water Action Hub.

In case you missed it, see "Water Security and Business" (Part I of III) and "Collective Action to Address Water Security" (Part II of III). 

For more information, please contact water.tnc@gmail.com.