Category Archives: Relevant Research

Relevant Research Tools and Frameworks

Determining the Optimal Investment Portfolio for Water Funds

How can a water fund get the biggest bang for its buck? RIOS – the Resource Investment Optimization System – is a new tool designed to help water funds make cost-effective investments in watershed services.  Using RIOS, a water fund manager can utilize existing biophysical, social, and economic data to find the best locations for investment in order to have the highest possible return on investment.  Initial investments made using the RIOS approach have improved the return on investments in Colombia by up to 600%.

According to the Natural Capital Project’s website (the product developer), RIOS is designed to answer three questions:

  • Which set of watershed investments (in which activities, and where) will yield the greatest returns towards multiple objectives?
  • What change in ecosystem services can I expect from these investments?
  • How do the benefits of these investments compare to what would have been achieved under an alternate investment strategy?

Download the RIOS software here (Microsoft Windows 7 required): http://www.naturalcapitalproject.org/RIOS.html

Learn more about how the software was developed and the theoretical documentation here:

http://ncp-dev.stanford.edu/~dataportal/rios_releases/RIOSGuide_Combined_8-22-13.pdf

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The Water Initiative Needs YOU! – Market Research for “Scaling Up Investments in Watershed Services”

Another discussion that came out of last week’s Water Retreat was the need for the Water Initiative and Forest Trends to better understand the worldview of other actors in the water space.  Do water managers, civil engineers, and regulators see the looming water problems in the same way as we do? Or do they have other pressing concerns such as decaying infrastructure, shrinking budgets, and increasing demand? As we seek to scale up investments in watershed services and grow our community of practice, our group needs to understand what drives and motivates other actors in the space, so that we can talk to them in language they understand, to help them with problems that they have.

Over the next few weeks, the Water Initiative team will be conducting a series of interviews with stakeholders in a number of areas in the water sector – from IWS practitioners to development banks to oil and gas companies.  We will be asking them a range of questions to meet four objectives:

  1. Understand what interviewees see as the key issues for water management in their region, industry, or watershed;
  2. Understand to what extent interviewees are familiar with IWS/NI solutions and how they are effective in water management;
  3. Understand what the key barriers for increasing use of IWS/NI solutions to solve water problems are; and
  4. Understand where interviewees get their information from, who they see as key influencers, and what would encourage them to change their current watershed management strategies.

The goal of this exercise is to reach out beyond our circle of friends and see what the rest of the world looks like – so we need your help! Each of you has contacts out there that would be useful to use in answering our questions – and we want to interview them! In the next week, email me with your contacts from our key audiences – or fill out our easy-to-use form.

Who are we looking for?

  • People who could serve as champions for IWS
  • People who may not be involved in or proponents of IWS, but are knowledgeable about decision-making within their sector or region

Please take a few minutes to send us the name and organization of your contacts – so that we can reach our goals for IWS and Forest Trends together.

Relevant Research Tools and Frameworks

Making the Case for IWS – The Role of Monitoring and Evaluation

When setting up investment in watershed services schemes (IWS), whether it be a water fund, a bilateral agreement, or a trading mechanism, it is easy to miss the forest for the trees.  That is, in focusing on the mechanisms for IWS, we confuse the means with the end.  The end goal of each of the Water Initiative’s pilot projects is to produce a benefit – be it increased water quality, higher stream flows, or lower sedimentation rates – for those who pay into the system.  Without the benefit, what argument is there to convince potential payers that natural infrastructure or IWS is worth the cost?

When assessing the feasibility of an IWS solution, what justifies promoting this solution over another? In its Primer for Monitoring Water Funds, The Nature Conservancy (TNC) lays out two criteria:

 

primer thumbnail

  1. It must provide target services and benefits at lower costs than the alternative, and
  2. The downstream benefits to investors must exceed investment costs.

 

If these two criteria are not met, a sound business case for the private investor (and even the public investor) cannot be made.  For example, if planting trees to promote sediment retention costs more than the costs associated with sediment management at the hydropower station, why should the station operator pay for trees?  The new work that Forest Trends is doing to investigate the marginal cost curves associated with green and grey infrastructure will be one factor to convince potential investors of the business case for IWS.

Monitoring and evaluating the impacts of NI activities undertaken as a result of the IWS scheme thus becomes important.  The Primer for Monitoring Water Funds offers a comprehensive discussion of the different types of monitoring needed to effectively prove the effectiveness of IWS solutions.  Ideally, a monitoring scheme would include comprehensive baseline monitoring in target and control watersheds; assessment of the ecosystem functions, services, and benefits; and monitoring of the socio-economic/development impact of interventions.

Source: Global Freshwater Program, The Nature Conservancy. A Primer for Monitoring Water Funds. p. 39.

But what about projects with limited resources? TNC suggests starting with a clear understanding of what outcomes the stakeholders care about and designing monitoring systems that, at a minimum, measure whether or not these outcomes have occurred.  For example, if a water treatment facility pays for activities to reduce agricultural runoff, at a minimum the monitoring plan should include measuring whether nutrient load at the facility decreases in the time period after the intervention. Preferably though, monitoring would combine measuring ecosystem function , services, and benefits, helping to understand how X improvements in the function translate to Y amounts of benefits, which can then be expressed as a dollar figure for the investors.

TNC outlines five areas of monitoring that should be considered during the planning phase:

  1. Tracking the implementation of activities,
  2. Monitoring the impacts of a specific type of management activity at the site level,
  3. Evaluating the impacts of activities at the watershed level,
  4. New and changing environmental conditions and how those will affect the success of interventions, and
  5. External factors that may affect project outcomes.

For our projects at the baseline monitoring stage, the tools and references suggested for each monitoring area in this publication provide a useful starting point for designing a comprehensive plan – a way to avoid reinventing the wheel and collecting data that won’t prove our point down the line. For each monitoring type, it provides sample parameters and testing designs to most effectively prove what we claim: that IWS is effective at producing desired outcomes at a lower price than ‘gray’ alternatives.

Example Monitoring Framework with Parameters. Source: The Nature Conservancy, A Primer or Monitoring Water Funds, p. 44.

Example Monitoring Framework with Parameters.
Source: The Nature Conservancy, A Primer or Monitoring Water Funds, p. 44.

Relevant Research

New Study from CI on Importance of Cloud Forests to Dams Around World

 

The results of a four-year study, published in the journal Ecosystem Services this month, has revealed that cloud forests are responsible for filtering almost half of all surface water in tropical dam watersheds, despite covering just 4.4% of the tropical dam watersheds they inhabit globally. The data, which offers context to the relative productivity and importance of cloud forests to freshwater stores, energy production and biodiversity health, provides land managers and decision makers with critical information, which can be used to evaluate the high economic and ecologic value of cloud forests to healthy, sustainable societies.  The study will also help to define priority areas for conservation within dam watersheds to optimize the natural benefits from cloud forests as well as the performance of dams.

 

Read more at CI…

 

The full paper is available via CI here.