Water Funds provide a mechanism for the downstream beneficiaries of clean water to pay for investments upstream that are needed to “secure” this resource –in terms of both quality and quantity into the future. These Funds can be established in different ways:

• with public or private resources that are “capitalized” over time, as with an endowment, for example;
• from fees that downstream beneficiaries pay on a regular basis, e.g., each person living in the city pays a small amount as part of their monthly water bill;
• or some combination of these.

There are a variety of institutional structures that can guide the investments and provide local ownership of the process. The investments upstream pay for a various conservation actions that provide a secure source of clean water, such as restoring forests and native vegetation adjacent to streams or reducing water extractions, thereby avoiding expensive future treatment costs.  

The first Water Fund initiated by The Nature Conservancy to be established was in Quito, Ecuador in 2000. Today, the Conservancy is helping establish 13 Water Funds in the Andean region of South America and intends to have 32 funds in operation across Latin America by 2015. The Conservancy has also pioneered a parallel effort in Brazil where it has worked with the government to establish a program that provides funding for improved watershed management, thereby benefiting others who use this resource. Other “Payment for Ecosystem Services” schemes are underway in Brazil and around the world, particularly where watersheds are sources of water for people and urban areas. For example, learn more about New York City’s watershed protection, including recent investments.