Water Funds in Latin America

Water Funds Brochure

  • Water Funds Brochure
  • A brief overview of our work on water funds in Latin America
    Download pdf.

RIOS Brochure

  • A summary of the Resource Investment Optimization System (RIOS) software tool for water funds design Download pdf.

Ecosystem Services

    Drinking Water
  • Watersheds are critical to providing safe water to urban centers. Improved land-use practices reduce erosion and nutrient pollution, cleaning water supplies for users downstream. Beyond what flows from the tap, clean water arriving at cities is also used to make bottled drinks such as sodas and beer.
  • Flood Protection
  • Water fund investments in natural capital can slow overland flow of water and increase travel time of water to the river, decreasing the peak magnitude of floods. Reducing peak flow can reduce damage to infrastructure and private property, and reduce risk to human life.
  • Hydropower
  • Erosion control that keeps sediment out of waterways can also keep sediment from settling in reservoirs where it can reduce the production capacity of hydropower facilities, shorten the lifetime of the reservoir, or increase dredge costs.
  • Poverty Alleviation
  • Some water funds have social objectives in addition to biophysical goals of securing water supplies. For example, the World Bank has assessed the potential to use payments from water funds as a means to alleviate rural poverty in Guatemala.

Water Funds in Latin America

© TNC-Northern Tropical Andes (Bridget Besaw and Diego Ochoa)

The Natural Capital project supports water funds across Latin America to represent the interests of multiple stakeholders and maximize the water-related benefits of improved land management. Water Funds gather contributions from water users to finance conservation and to help secure water quality and quantity.

Our work in Latin America aims to create a scientifically rigorous, yet flexible return on investment approach to guide water fund design and fund investments. Based on the lessons and best practices from across the region, we developed a standardized, scientific approach to managing water fund investments that is applicable in any location.

Water Fund Investments in Latin America

updated water funds map

The Natural Capital Project is working with the Latin American Water Funds Partnership (The Nature Conservancy, Inter-American Development Bank, Global Environment Facility and FEMSA Foundation) in the design and development of water funds througout the region, and in the development of RIOS, a science-based software tool to standardize water fund investment design.

In 2011 the Latin American Water Funds Partnership committed to developing 32 new water funds in Latin America over five years, pledging $27 million to restore over seven million acres of watersheds.

Water funds are a finance mechanism for watershed conservation and provision of clean, ample water. Beneficiaries of a watershed make financial contributions to a fund that is used to promote conservation activities including protection, restoration, and best management practices in crop and pasture lands. Water funds work when these activities supply water, and provide purification and regulation services at lower costs than other forms of treatment and flow regulation such as dams and water treatment plants.

Today there are over 30 water funds in operation or in designing stages (map above). 10 additional locations are being evaluated for their potential to initiate funds. Click here for detailed information and updates on individual water funds.

RIOS: Resource Investment Optimization System

Investment portfolio

Some water fund investors are using NatCap's RIOS software to support their funding decisions. RIOS produces a portfolio with investment options ranked by data on an activity's cost, feasibility, and expected effectiveness given the physical setting and current land use near a watershed.

RIOS builds on the experiences of existing water funds to develop a standardized and flexible approach to water fund design and investment. Our approach values the environmental returns on watershed investments through hydrological models while accounting for preferences and requirements of stakeholders.

RIOS was co-designed with users to improve returns from conservation investments based on a combination of biophysical, social and economic data. The tool has been tested in several emerging water funds across Latin America and has proven useful for managers and flexible enough to apply in different environmental, social, and legal contexts. The tools is free and designed for companies, consultants, government agencies or non-government organizations to use in the development of water fund investments. RIOS quantifies returns for some of the most desired water benefits including erosion control, water purification, and flood mitigation. Our goal for RIOS is to provide a standardized approach to water fund design and investment prioritization in contexts throughout the world.

Early Testbeds of Science-based Investing

In order to value water services from the watershed, identify priority sites for investment in the watersheds to secure those services, and set up monitoring programs for these water funds, feasibility and design studies were developed and run with technical support from NASCA Science and Centro Internacional de Agricultura Tropical (CIAT).

InVEST, SWAT (Soil and Water Assessment Tool), and FIESTA (Fog Interception for the Enhancement of Stream flow in Tropical Areas) models were run using data from the watershed in the East Cauca Valley in Colombia, where our approach to science-based investing was first tested. Model results have helped determine critical areas in the watershed for immediate water fund investments. In addition, comparison of model results is helping to inform the use of InVEST for water fund projects throughout the region.

Preliminary Results

  • Built capacity across water funds, and trained technical specialists and fund managers from 16 water funds throughout Latin America. Provide continued scientific counsel to high-level managers and project implementers.
  • Launched RIOS (Resource Investment Optimization System) software tool in 2013, to standardize water funds investment design and maximize ecological returns on investment. The tool has been tested in several emerging water funds and has proven useful for managers and flexible enough to apply in different environmental, social, and legal contexts.
  • Expanding water funds globally: Our goal is to provide a scientific approach to incorporating ecosystem services in water fund design and conservation investment throughout the world. A water fund has recently been established to ensure a continuing supply of clean water to the city of Nairobi, Kenya. NatCap is also working with partners to demonstrate the utility of an ecosystem services approach for Beijing, China.


Application of InVEST`s Sedimentation Retention model for restoration benefits forecast at Cantareira Water Supply System
João Guimarães
The Nature Conservancy - Programa de Conservação da Mata Atlântica e Savanas Centrais

Water funds and payments for ecosystem services: practice learns from theory and theory can learn from practice
Rebecca L. Goldman-Benner, Silvia Benitez, Timothy Boucher, Alejandro Calbache, Gretchen Daily, Peter Kareiva, Timm Kroeger, and Aurelio Ramos
Oryx, 46(1), 55-63 (February 2012)

Climate Adaptation in Colombia: designing an adaptive compensation and rewards program for ecosystem services
César Freddy Suarez, Nicole West, Luis German Naranjo, Ilvia Niño, Nirmal Bhagabati, Carmen Candelo, Amy Rosenthal, and Emily McKenzie
WWF Case Study (2011)

Linking People and Nature through Watershed Conservation in the East Cauca Valley, Colombia
Rebecca L Goldman, Silvia Benitez, Alejandro Calvache, Sarah Davidson, Driss Ennaanay, Emily McKenzie, Heather Tallis
TEEBcase (2010)
Download from naturalcapitalproject.org or www.eea.europa.eu/teeb

Water Funds: Protecting Watersheds for nature and people
Goldman, R.L., Benitez, S., Calvache, A., and Ramos, A.
Not Peer-reviewed: The Nature Conservancy Arlington, VA. (2010)


The Nature Conservancy's Latin American Water Funds Program

Latin American Water Funds Partnership

Inter-American Development Bank (IDB)

FEMSA Foundation

Global Environment Facility

Andes/Amazon ESPA program: Ecosystem Services and Poverty Alleviation

Humboldt Institute

Colombia Ministry of the Environment

Secretaria Nacional de Planificacion y Desarrollo (Ecuador - SENPLADES)

Centro Internacional de Agricultura Tropical (CIAT)


Adrian Vogl, Ph.D.
Senior Scientist