Tag Archives: water funds

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.