Water Funds

Erika Nortemann / The Nature Conservancy
Published: 30 October 2015
Last edited: 10 July 2019
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Water Funds, such as the Bogotà Water Fund in Colombia, are agreements between stakeholders to deploy natural solutions in source watersheds. They often include protected areas. Water Funds provide: - A revenue mechanism to collect and distribute funding from downstream users for watershed conservation - A governance mechanism for joint watershed planning and decision making - An implementation mechanism to carry out conservation and restoration work.


Central America
North America
South America
Scale of implementation
Forest ecosystems
Freshwater ecosystems
Grassland ecosystems
River, stream
Temperate deciduous forest
Temperate evergreen forest
Temperate grassland, savanna, shrubland
Wetland (swamp, marsh, peatland)
Cities and infrastructure
Ecosystem services
Other theme
Pollution (incl. eutrophication and litter)
Lack of access to long-term funding
Lack of technical capacity


Caribbean, Central America, North America and South America
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Water conservation


Water users (e.g., water utilities, bottling companies), the users are also often the largest financial contributors and upstream communities

How do the building blocks interact?

The basic mechanism of a water fund is that water users pay into the fund in exchange for the product they receive — fresh, clean water. The fund, in turn, pays for forest conservation along rivers, streams and lakes, to ensure that the users benefit from safe drinking water. As a foundation, both the essential hydrological ecosystem services that need to be conserved through the water fund mechanism, as well as the beneficiaries, need to be identified (Building blocks 1 & 2). A working group (building block 3) oversees and coordinates preparatory work, such as the setting up of the fund’s legal structure (building block 4), which will lay out responsibilities of all parties. Following that, the strategic plan is prepared, outlining the long-term operations and goals of the fund. Its implementation is overseen by the board of directors (building block 5) and coordinated by a technical secretariat. To ensure that the plan’s implementation is on track, the water fund operates efficiently and meets its defined conservation goals, monitoring protocols must be in place.


There are 20 water funds in operation and 42 water funds in design across the globe located around major urban areas. Water Funds developed in Latin America, and are rapidly spreading to the US and East Africa. Water funds ensure the long-term protection of critical terrestrial and freshwater systems while providing a clean, reliable source of water – the key hydrologic services for the downstream water users. The Bogotà Water Fund is projected to generate more than $40 million USD in 10 years for water conservation of 8.5 million people in the Colombian capital. This mechanism will prevent 2 million tons of sediment entering the watershed basin. The city’s water treatment facility could save up to $4 million every year thanks to the filtering services provided by upstream tropical Andean forests. It provides support to protected areas and buffer zones established in the region, addressing budget constraints that restrict their conservation work.


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Contributed by

Fernando Veiga The Nature Conservancy

Other contributors

Fernando Veiga
The Nature Conservancy
The Nature Conservancy