Last year, governments and companies invested $9.6 billion in initiatives implementing nature-based solutions to sustain the world’s clean water supplies. According to a new report from Forest Trends’ Ecosystem Marketplace, this funding flowed to more than seven million households and restored and protected a total of 365 million hectares (ha) of land, an area larger than India.
Up from $8.2B in investment tracked in 2011, the researchers say the sector’s continued growth and near-doubling of the hundreds of operational programs reflects governments’ desire to secure water quality and availability with affordable strategies that can complement or replace industrial infrastructure.
State of Watershed Investment 2014 reports that more than 90% of watershed investment came from national public subsidies, including $8.8 billion attributed to Chinese government programs that compensate landowners to restore watersheds in order to address ongoing water pollution and supply challenges. Elsewhere, governments paid farmers, forest managers, and other landowners to adopt water-friendly practices such as removing invasive plants, using less fertilizer, or replanting forests.
The private sector invested another $41 million into watershed health. Particularly active were businesses with obvious exposure to water-related risks, like private water utilities and the food and beverage sector.
“Environmental risk mitigation is clearly driving private investment in watershed health,” says lead report author Genevieve Bennett. “Water companies, for example, are finding it more cost-effective to pay for healthy forests that mitigate fire or flood risks upstream, rather than to face supply disruptions after an extreme event.”
Other risk-exposed businesses such as energy utilities or agricultural producers were less active in 2013, with market participants linking under-investment to continued uncertainty around the water regulations that incentivize or compel restoration payments, as well as a lack of clear information about programs’ return on investment (ROI).
Respondents to Ecosystem Marketplace’s survey reported $6 billion that has already been committed to watershed investment activities through 2020. Leaders in the field are looking to the private sector, climate finance, and the re-allocation of infrastructure spending as future financing channels.