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FOCUS

nsuring enough financing for global water security

Ensuring that water service and sanitation providers have adequate

finance from public and private sources

Ensuring that water resources and ecosystems services are fund

a sustainable way from public and private sources

Minimising the cost of future infrastructure and services, for instance

by the use of performance-based contracts, as a precondition for 

successful financing of all aspects of water 

Facilitating the financing of both capital investment and O&M fro

both public and private sources for irrigated agriculture

SESSIONS

  MON, 13 APR TUE, 14 APR WED, 15 APR

 

Does Paying the Environment for 

Water Services Really Work?

11h20–13h20

DG 4.1.1 - Room: DIB_B102

Innovative financing for small and

decentralized water and sanitation

operators and actors

11h20–13h20

DG 4.1.3 - Room: DEC_311

Innovative Financing under the 3

(tariffs, taxes and transfers) and

Beyond

17h00–19h00

DG 4.1.4 - Room: DEC_312

WED, 15 APR WED, 15 APR THU, 16 APR THU, 16 APR

Closing the Finance Gap for 

Sustainable Water Management:Opportunities, Models and Targets 

09h00 –11h00

DG 4.1.6 - Room DEC_311

Financing Agricultural Water Use 

14h40–16h40DG 4.1.5 - Room DEC_303

Performance Based Contracting for 

Water Supply and Sanitation09h00–11h00

DG 4.1.2 - Room DIB_B101

Economics and Financing for 

Innovative Investments 17h00–19h00

DG 4.1.Con - Room DIB_B101

DESCRIPTIONS

4.1.1 Does Paying the Environment for Water Services Really Work?

Ecosystems are a form of “natural infrastructure” that provide economic services to society and

help to protect vital economic assets by storing water, regulating its flow and preserving its

quality. If these natural systems are destroyed or impaired their functions have to be replaced

by man-made assets, often at high cost. Empirical studies show it is often more advantageousand cost effective to preserve or restore natural ecosystems (green infrastructure) than to seek

to replace them with costly physical infrastructure such as water and wastewater treatment

facilities.

The challenge for policy-makers is to devise ways of capturing the economic benefits of aquatic

ecosystems in monetary terms, in order to generate finance for preserving these vital assets.

The concept of Payment for Ecosystem Services (PES) is firmly established and there are a

growing number of schemes (e.g. the Latin American “Water Funds”). Through presentation of 

case studies, this session will explore (i) the necessary conditions these schemes to succeed,

(ii) the feasibility of “roll out” to enlarge their scale and impact, and (iii) additional innovative

options to finance environmental services.

Coordinator:

International Union for the Conservation of Nature

(IUCN)

Contributors:

The Nature Conservancy

China Agricultural University, Beijing

Forest Trends

WWF-US

OECD

Costa Rican Water and Sanitation Institute (A

Gold Standard Foundation

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4.1.2 Performance Based Contracting for Water Supply and Sanitation

Performance-based contracting (PBC) is a form of results-based contracting. As implied in PBC,

the financial terms of the contract are linked to the actual performance of the contractor,

specified in monitorable performance indicators. Output-based aid uses a similar approach. The

main aim of PBC is to create incentives for the contractor to achieve cost efficiencies, timely

delivery, or enhanced benefits of other kinds (“maximizing development outcomes and

outputs”).

A number of recent PBC schemes currently exist in the water supply and sanitation sub-sectors

including reduction of non-revenue water. The session will explore both the enabling conditions

required for successful the use PBC as well as the structuring of PBC contracts and assignmentof risk for successful outcomes. This session will contain presentations of case studies by a

variety of stakeholder including operators and regulators assessing the track-record of PBC and

factors accounting for success or failure. Material will also be presented on the scope and

potential of extending PBC into other water sub-sectors such as irrigation and demand-

management.

Coordinator:

International Water Association (IWA)

Co-Coordinator :

SUEZ ENVIRONNEMENT

Contributors:

Manila Water 

Blantyre & Lilongwe Water Boards

K-Water 

SuezVeolia

Miya

 Asian Development Bank

World Bank

OECD

4.1.3 Innovative financing for small and decentralized water and sanitation

operators and actors

Local level actors and small scale water and sanitation operators are increasingly viewed as an

indispensable and valuable players in the rapidly expanding urban and abandoned rural areas

spread in all development settings whereas their mutual collaboration is growing. However,

being limited in an access to sustainable financing, the scope of their action rarely sufficientlyreflects the required financial efficiency and durability of water and sanitation supply. Many

local, regional and national governments and development agencies have introduced various

decentralized programs to extend the reach and offer of the commercial finance or other 

financing solutions to local level stakeholders both, public and private. These efforts gave mixed

results. Given the circumstances this session will focus on the innovative financing and

economic approaches aimed to enhance access to water and sanitation services. A wide range

of different institutional perspectives and practices will be offered to the audience seeking to

trigger a broader discussion and a replication of the best practices.

This session will guide the audience through cases and successful lessons, which illustrate the

growing importance of local level water and sanitation actors and operators.

This panel intends to raise the global interest and replication of the innovative financing

solutions in water and sanitation at the local level. It will seek a joint endorsement of the needfor a more coherent and result and volume driven decentralized cooperation in water and

sanitation sector.

Coordinator:

United Nations Development Programme (UNDP)

Co-Coordinator :

International Secretariat for Water (ISW) / Solidarity

Water Europe (SWE): Butterfly Effect

Contributors:

European Commissioner for International

Cooperation and Development

World Bank/ Water and Sanitation Program

(WSP)

OECD

Global Water Partnership (GWP)

Water.org

Tremolet Consulting?

4.1.4 Innovative Financing under the 3 Ts (tariffs, taxes and transfers)

and Beyond

It is now commonly prescribed that costs of water and sanitation services should be covered by

a combination of sources, including tariffs, taxes and transfers, referred to collectively as “the

3Ts”. These three sources represent the basis for “sustainable cost recovery” which entails

securing future cash flows and using this revenue stream as the basis for attracting repayable

sources of finance such as loans, bonds and equity to bridge a temporary financing gap and

help smooth out the burden of these investments over a longer period.

However, despite major efforts for explaining key financing concepts to water sector 

professionals, mobilizing investments for the sector is difficult, there is a lack of transparency

with respect to how much financing is currently allocated to the sector, domestic governments

in developing countries remain small contributors of finance to the sector, and sustainability of 

service delivery on the long term is still a big challenge.

This session will present recent work to track the financial flows of the sector and showcase

innovative financial approaches: through land, through facilitating access to local loans and

through bankable business models adapted for the private sector.

Coordinator:

 Agence Francaise de Developpement (AFD)

Contributors:

World Health Organisation

SUEZ

Foreign Trade Bank of Cambodia

Veolia India

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4.1.5 Financing Agricultural Water Use

To meet the food needs of a growing and increasingly urbanized global population with

changing consumption patterns, agriculture will need to make substantial water use

adjustments. The challenge is compounded by land use change and increased competition for 

water resources. How can agricultural water use be financed to address this needed

transformation? The lack of sustainable management and operation and maintenance (MOM)

also continues to impact productivity of large irrigation systems. Agricultural water infrastructure

is degraded and needs rehabilitation and modernization. At the same time, performance is

constrained by inadequate resources, lack of effective beneficiary engagement, and limited

capacity of public agencies. The variable performance of participatory irrigation management for 

large-scale irrigation MOM is well documented, and public private partnership (PPP) is seen asan alternative approach, yet has limited experience. No consensus exists as to the approach or 

sources of financing that will support agricultural water use over the coming decades. The

session will present the inadequacies of traditional financing for agricultural water use,

experiences of PPP in irrigation management, and other options to improve agricultural water 

financing.

Coordinator:

 Asian Development Bank

Contributors:

Centre for Action Research-Barind

World Bank

International Water Management Institute (IW

General of Hydro-Agricultural Infrastructure

National Water Research Center 

 

4.1.6 Closing the Finance Gap for Sustainable Water Management:

Opportunities, Models and Targets

While over 500 billion dollars are already spent annually on water and sanitation, over twice that

has been estimated as necessary to meet the needs of the world’s growing population.

Moreover, sustainable water management requires finance that can be flexibly deployed to

adequately support the maintenance, rehabilitation, and restoration of the infrastructure and

systems that support the entire water cycle ? including not only conventional, built infrastructure

but also critical natural and social systems. Traditional sources of water finance have not yet

come close to meeting these needs.

This session will characterize the finance gap for sustainable water management, considering

the challenge according to not only its quantitative, supply-side measures but also its qualitative

and cost -controlling dimensions. The session will also share innovative financing models and

mechanisms that have generated new and flexible revenue streams, contributed to cost control

and recovery, and driven sustainable water resource management principles throughout the

water cycle. Building on the identification of these needs and effective strategies, participants

will recommend key criteria and indicators to evaluate finance for sustainable water resources

management.

Coordinator:

Forest Trends

Contributors:

OECDUS Army Corps of Engineers

2030 Water Resources Group/IFC

Coca Cola

Moutai

4.1.Con Economics and Financing for Innovative Investments

This Concluding Session will review the highlights of each of the six component Sessions in 4.1

and produce some common messages that can be built on for planning follow-on activities. It

will include comments from a Discussant and the audience. The latter half of the Session will be

devoted to drawing up an Implementation Roadmap for this Topic. Plenty of time will be left for 

audience participation.

 Asian Development Bank (ADB)

International Water Association (IWA)

International Union for the Conservation of 

Nature (IUCN)

United Nations Development Programme (UN

 Agence Francaise de Developpement (AFD)

Forest Trends