Designing the fund’s structure and governance
In this stage the water fund’s structure and each stakeholder’s responsibilities are determined. A contract signed by the partners serves to formalize their agreement to unite efforts to carry out watershed conservation activities. It is also a guarantee to third parties wishing to contribute financial resources. Negotiating the contract must comply with fundamental legal requirements and corporate purpose of each partner, and must possibly be overseen by a specialized law firm. The fund’s board of directors will be responsible for overseeing the decision-making process. Therefore, it is crucial to prepare internal guidelines outlining the board’s operations, including e.g. decision-making mechanisms. A voting mechanism should be defined to guarantee the balance between the public and private sector, ensuring that decisions are reached in a consensual, independent and transparent manner. Prior to launch, the strategic plan (Goals; Priority Areas for Conservation; Cost Analysis of the Activities to be Implemented and Design of Financial Flow; Strategic Plan Preparation; Preparing Financial Flow) and fundraising strategy need to be designed.
Solid science and technical studies. Understanding of tradeoffs and willingness to compromise
Creating a water fund does not necessarily mean the creation of a new organization. Although this may be a solution to overcome legal obstacles, it is important to optimize resources and the use of partners’ available technical capacity, in order to avoid creating new legal bodies. The water fund’s investment decisions must be made in consensus and with transparency. The design of the investment plan and of a fundraising strategy must go hand-in-hand. The latter specifies expected incoming funds, to finance priority conservation activities, but also to establish own capital in order to be autonomous in the long term. The creation and operation of a water fund is an adaptive process that requires modifications, adjusting goals and continuous improvement, especially because many financial, social and political issues may vary from the initially approved investment plan.