Three ways to increase investment in natural infrastructure, at home and around the world

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17 March 2015

New lessons and thoughts on ways to achieve scale in natural infrastructure investments around the world were shared last month at a panel discussion on National Infrastructure for Improved Water Supplies at the 2014 ACES (A Community on Ecosystem Services) conference on Ecosystem Markets in Washington, DC. Here is a short summary of the presentations and the discussion that followed.

 1. Create Partnerships in the Food-Energy-Water Nexus (an international perspective)

Aaron Reuben, International Union for Conservation of Nature (IUCN)

Agriculture and the energy sector together account for 85% of global water use. The concept of the Food-Energy-Water Nexus holds that you cannot change management practices or resource use in one of these sectors without having a major effect on the others. For example: in India groundwater depletion by farmers has been a major problem for decades. It seems that one province in the west has solved this problem in a non-intuitive way: by connecting farmers to local electricity grids. This lead to farmers switching from diesel groundwater pumps to electric, which in turn lead to better measurement of pumping rates and alignment of incentives to reduce water pumping. The net result has been recharge of depleted groundwater aquifers, increased efficiency in irrigation practices, and cost savings in the energy sector. 

From the perspective of natural infrastructure, the food-energy-water nexus is a natural place to look for investment opportunities. This is because many natural infrastructure approaches have the potential to improve food, energy and water security through one project. For example: farmer-assisted natural regeneration (one forest landscape restoration option) in areas surrounding hydropower facilities could result in improved water flows in rivers (a benefit for the water sector), decreased soil load in reservoirs (a benefit to the energy sector), and improved soil fertility (a benefit to the agricultural sector). Could well-funded hydropower facilities support nearby farmers to better practice agroforestry or natural regeneration? The answer is, of course, yes. If we can harness the resources and disciplinary skills of each sector in the nexus to identify projects that can serve multiple missions (e.g., power generation and food production) we can increase the pace and scale of natural infrastructure investment in places where the need is greatest.

However, cross-sectoral cooperation, visioning, and planning within the food-energy-water nexus requires overcoming obstacles like divergent missions (e.g., a power company’s mission is to produce power, not food), inequalities in resources, and disciplinary miscommunication. For example: the water management sector in many countries may be under-resourced, and is often heavily donor supported, when compared to energy companies. Step one for IUCN has been to bring leaders from these sectors together through multi-stakeholder dialogues in key river basins throughout the world, including the Amu Darya in Central Asia, five river basins across Africa, including the Lake Victoria Basin, the Lower Mekong region in Asia, and five river basins across Latin America. Reports from each of these workshops are available online and will soon be published in a series of synthesis papers covering what we have learned from these dialogues on various aspects of the nexus and on ways to improve collaborative management. The next step is to build on these dialogues to catalyze real partnerships and support the development of strategic investments. We hope to have news on those partnerships to share soon.


2. Map Urban Demand for clean water (a cities perspective)

Rob McDonald, The Nature Conservancy

A new analysis of 2,000 drinking watersheds serving 530 cities worldwide finds that—as cities confront a water supply that is both scarce and polluted— watershed conservation can measurably improve the quality of water resources serving over 700 million people living in the world’s 100 largest cities. 
The “Urban Water Blueprint” released by The Nature Conservancy, in partnership with the C40 Cities Climate Leadership Group and the International Water Association, provides an in-depth analysis of the state of water for over 500 large and medium sized cities, including the 100 largest cities in the world, representing nearly 1 billion people. Collectively, these cities represent $21.8 trillion in economic activity, or 48 percent of global GDP. 
With more than half of humanity now living in cities, the concentration of water demand in urban areas across the globe is causing cities to confront the degradation of water quality in their water sources. The report reveals that this phenomenon is widespread, with two out of every five source watersheds experiencing significant forest loss over the past decade.

Preventing water from becoming polluted can often be more cost-effective than treatment. The analysis finds that one in four cities would see a positive return on investment from investing in watershed conservation. By using watershed conservation strategies to reduce sediment and nutrients in water sources by 10 percent, cities and water utilities could reduce water treatment costs by an average of 5 percent.

One in three of the largest 100 cities in the world are currently in water stress, and hundreds of millions of urbanites are drawing their water from sources with low quality due to high sediment or nutrient loading. These 100 largest cities also occupy less than one percent of the planet’s land area; however their source watersheds cover over 12%. That’s an area of land roughly the size of Russia – 1.7 billion hectares that collects, filters and transports water to nearly a billion people before reaching man-made infrastructure.

3. Design business case and pipelines for scalable investment (a business perspective)

Todd Gartner, World Resources Institute

Investment in natural infrastructure, including forest restoration, sustainable agricultural management and wetlands protection, is critical to address current and projected stress on urban water systems and corporate assets. Case studies demonstrate that natural infrastructure can be cost effective as either an alternative or as a complement to traditional gray, built infrastructure. However, opportunities for investment in these natural systems are not routinely considered. Opportunities tend to be ignored until a catastrophic event, such as a flood or wildfire, jolts global awareness. The threat of regulation to address excessive pollution, sedimentation, or otherwise can inspire natural system-investment as well, as stakeholders see the potential for higher costs to deliver clean, timely and plentiful water supplies.

To create a pipeline for investment in natural infrastructure, tools are needed to prioritize projects that enable municipalities, utilities, companies, and financial institutions to proactively recognize opportunities as well as risks. Making the business case from an economic perspective and mapping to identify appropriate locations are important first steps. It is also essential to recognize whether enabling conditions exist for successful projects at a large enough scale to deliver ecological benefits and acceptable returns on investment.

WRI and partnersave developed and deployed several tools that can be used in a combined approach to evaluate the feasibility and benefits of natural infrastructure investments from various perspectives. These include:

  • Green-Gray Analysis - a method for comparing the costs and benefits of alternative scenarios that involve the use of natural and/or gray infrastructure to achieve a specific outcome.
  • Global Forest for Water mapping tool - building on the Global Forest Watch platform for monitoring deforestation, the Aqueduct water risk mapping tool, and a global map of forest restoration opportunities, this mapping tool (under development), will enable users to identify overlap between opportunities for conservation or restoration of forests and areas that are important for the quality of urban water supplies, and the regular flow of water downstream.
  • diagnostic framework for the analysis of enabling conditions that are either present or missing (e.g., property rights, and the appropriate institutional capacities)
  • Aqueduct Global Flood Analyzer – an open-access online platform that allows users to quantify and monetize river flood risks worldwide. The Analyzer estimate current and future potential affected GDP, affected population, and urban damage from river floods for every state, country, and major river basin in the world.

These tools are designed to be used in concert to inform strategy development for creating investment-ready projects. 

What Needs to Happen Now?

James Dalton, IUCN Water Programme

From these and other compelling cases from the ACES Conference it is clear that there are partnerships in place to better manage and invest in natural infrastructure for multiple services. The momentum, tools, and interest suggests we are approaching a point where we really need to better understand how ecosystems respond under stress and how this affects the services they provide. (That was the topic of the conference where we shared our ideas this past fall). Good science will remain at the heart of this approach, but economic tools also need to improve to cope with the ‘appreciation’ of natural assets over time – a direct reverse to the ‘depreciation’ methods used to calculate the value of built infrastructure over time. Someone once told me that the difference between short term and long term thinking comes down to one word: elections. Natural infrastructure is a long term solution that can work in tandem with built infrastructure, but it isn’t going to deliver immediate returns, nor employ thousands of workers to construct. A wetland may not deliver political wins right away. What natural infrastructure will do is help us to achieve multiple objectives through cost-effective approaches that should ensure that we have clean, green, healthy river basins for the future.

This blog was originally posted on the IUCN website. To read the original blog, click here.