2030 Finance | August 23, 2016

Australia Model: Water-Sharing Investments to Secure Nature’s Needs in Water-Scarce Regions

The team at


Saving just a small amount of the more than 90 percent of water in water-scarce regions around the world that goes to irrigated agriculture can free up a great volume of water for cities, other farmers and nature.

Nature, however, is often last in line when it comes to getting more water, even when farmers use less. Creative financing solutions that leverage existing water markets can help drive balanced water use and support important conservation goals.

Operating within existing water markets, The Nature Conservancy has developed a concept called “Water Sharing Investment Partnerships” (WSIPs) to acquire water-use rights from willing sellers. WSIPs deploy investor capital and other revenue sources to acquire these rights, which can then be reallocated to depleted freshwater ecosystems, or sold or leased to other water users seeking more supplies, thereby generating financial returns for investors.

The approach is explored in a new report, “Water Share,” co-authored by the organization’s Water program and impact investment unit, NatureVest. WSIPs can keep farmers farming and give them an opportunity to increase their revenues by “growing water” in addition to crops. This water can then be moved back into the environment to meet critical conservation needs.

Through structures such as WSIPs, impact investors can help fill the capital gap for the kind of practical, large-scale solutions required to tackle growing environmental challenges. The majority of conservation project funding has traditionally come through philanthropic donations or government grants. Impact investments that crowd in other capital could even provide a catalyst for revolutionary changes in resource management.

Murray-catchment-map_MJCIn Australia, the Murray-Darling Basin Balanced Water Fund had raised approximately AUD$27 million (USD$20.7 million) as of May 2016, with a goal of scaling to AUD$100 million (USD$76 million) within the next four years. The fund was launched in 2015 by The Nature Conservancy and its impact investing unit, NatureVest. The Nature Conservancy is now building off of this success in Australia and its track record of using philanthropic dollars to purchase water on behalf of the environment in North America, to help rebalance water use in stressed basins.

Investor Interest

Interest from the investment community in the water sector has grown in recent years. Top business leaders continue to rank water among their top concerns in the World Economic Forum’s Global Risk Report. But opportunities for impact investment have typically focused on infrastructure solutions for water treatment and delivery, such as pipes and improved utility management. And while infrastructure investments are greatly needed, investments in water security will be even more critical in the coming years.

Water scarcity already affects nearly half of the world’s population, and it’s spreading every year. More than 30 percent of our lakes, rivers and aquifers are being depleted faster than they can be replenished. Scarce supplies are having dire consequences on communities, economies and nature. For instance, water shortages in the Tana River basin of Kenya in 1999-2000 led to a decline in hydropower generation and associated industrial production, resulting in economic losses of over $2 billion.

For a century, we have done everything possible to delay tragedy with supply-side strategies, such as building more reservoirs and aqueducts and drilling deeper wells. These opportunities are quickly waning. In water-stressed regions around the world, there is no more surplus of water within affordable reach. We must shift toward strategies to do more with less.

Market-Based Solutions

Impact investment in water markets can fuel that shift. Water markets— in which water-use rights can be bought and sold and water can be transferred from one user to another – offer a smart and sustainable approach for alleviating water scarcity because they incentivize water conservation on farms and facilitate water sharing to optimize water’s economic potential.

Water markets financially reward those who can find ways to get by with less water by enabling them to trade saved water to other users. This trading lets those needing more water get it without expensive public infrastructure investments or further depletion of freshwater sources. Impact investment dollars can be used to establish a creative financial solution, like a WSIP, to insert nature as a legitimate buyer in a water market.

The opportunity for investor-funded conservation solutions such as WSIPs is immense. Today, at least 37 countries in water-scarce regions, including Latin America, Africa, North America and Asia, have already established water allocation systems based on the issuance of water rights. These countries are potential candidates for impact investment-driven solutions to scarcity. If all regions with existing water rights systems could establish well-functioning water markets, they could collectively generate total annual water sales of US$13.4 billion per year, with total market assets of US$331 billion.

The challenge of global water scarcity presents a great opportunity to work with the impact investment community to fulfill nature’s need for more water and investors’ desires to put their dollars to good work. It is high time to unleash the potential of water markets. Through these creative financial solutions, nature and people can better share the most precious resource on our planet.

[seperator style=”style1″]Disclosure[/seperator]

The Nature Conservancy launched its impact capital strategy in 2010 with support from the Robertson Foundation, and has built a global network with support from the Jeremy and Hannelore Grantham Environmental Trust. In early 2014, with founding sponsorship from JPMorgan Chase & Co., NatureVest was launched as a concerted effort to change the way we invest in nature. Visit NatureVest on the Web at www.naturevesttnc.org.

Photo credit: Discover Murray River.