Cities today face many competing demands. They must ensure enough food and water to sustain growing populations, plan to adapt and mitigate impacts of climate change, and build attractive urban centres. Financing projects in cities to develop their resilience is no easy task. Many banks, financiers and private companies have trouble investing in supportive measures due to the lack of information and potential associated risks. Now, more than ever, we need to rethink the way we invest in urban resilience.

Innovative financing models, like those outlined in IWA’s Principles for Water-Wise Cities, allow cities to remain flexible when changes or disasters occur – fostering more efficient solutions with smaller and more frequent investments. Cities need to consider the importance of integrated services that meet multiple demands with targeted investments in order toprovide options that overcome their lack of financial capacity and bring about new funding opportunities.

Pathways to investing in water quality

Many cities are implementing innovative financing mechanisms. Examples include Philadelphia’s stormwater billing, DC Water and the nation’s first Environmental Impact Bond (EIB), and other cities who have implemented The Nature Conservancy’s water funds.

Water funds are unique in that they enable cities and investors to move away from traditional funding and consider the co-benefits of looking at a wider scale: the basin. We all know water for our cities is supplied from sources further away, and it is critical that we bridge the gaps between upstream and downstream users to create funding mechanisms that consider the quality of the water supply at its source.

Water funds work as an institutional platform developed by cities and conservation practitioners that can bridge governance issues as well as science, jurisdictional, financial and implementation gaps. Resources, both funding and capacity, are then dedicated to taking action towards a common goal to improve water quality.

Realising basin-scale outcomes

Cities depend upon their basin, which supplies them with water, food and energy. The Nature Conservancy (TNC) has found that four out of five cities can reduce sediment and nutrient pollution by a meaningful amount through investing in and implementing forest protection, pastureland reforestation and improved agricultural practices in the basin.

By taking part in basin management through water funds, cities can simultaneously secure resources; reduce flood risks; and enhance economic health. Water-wise communities also enable the implementation of resilience frameworks by connecting people to integrated solutions, highlighting the value of co-benefits, and unlocking flexible and fit-for-purpose investments. Likewise, through water-wise communities we can bring people together from across the basin to realise the role they can play in managing water supply across scales.

Implementing city resilience frameworks will help break down the initial barriers to water funds, which include a lack of common objectives, lack of data and information to support science-based decision-making, and lack of a credible track record to support public and private investments. Urban and basin stakeholders need to identify common objectives for a shared vision, and align water-wise communities for sound decision-making.

Sharing the value of healthy watersheds

TNC has already helped implement 29 successful water funds across the globe, and have witnessed the benefits to local communities and urban areas in sharing the value of healthy watersheds as a result. In Hangzhou, China, the Longwu Water Fund is working with local farmers to identify and apply best management practices in the catchment area that supports a thriving agriculture community in the Zheijang province.

While, in Brazil, the Brazilian National Water Agency and the Guandu Watershed Committee were supported to create a water fund to compensate local landowners for conserving and restoring forests in the headwater catchment of the Guandu River – an important source of water for Rio de Janeiro’s nearly 10 million urban residents.

In Kenya, the Upper Tana-Nairobi Water Fund – the first water fund in Africa – provides Nairobi water users with the opportunity to mitigate water threats. Investing in upstream watershed conservation efforts benefits farmers, businesses and millions of Kenyans who depend on the Tana River for their fresh water.

These examples highlight how critical it is to work across scales and sectors to implement innovative financing mechanisms to improve water quality for all. The work TNC does with partners around the world, and tools such as the IWA Principles for Water-Wise Cities, provide a means to do this. Join us on the journey to water-wise cities.