11 June 2021

Handbook for Implementation of Nature-based Solutions for Water Security – guidelines for designing an implementation and financing arrangement

— By AgenceLaQuincaillerie

Executive Summary

Handbook for Implementation of Nature-based Solutions for Water Security – guidelines for designing an implementation and financing arrangement 

We are delighted to share with you the Handbook for Implementation of Nature-based Solutions for Water Security. 

Climate impacts challenge our status quo. The frequency of extreme events keeps increasing driven by climate change. The World Bank (2016) indicates that the impacts of Climate Change will be channelled primarily through the water cycle and that water scarcity could cost some regions up to 6% of their GDP. Our experience of COVID-19 is a stark reminder that a shift in our economic development paradigm is urgent. As urged by the GCA (2019), we need three revolutions for a better future: a revolution in understanding, in planning and in finance. 

In this context, Nature-based Solutions (NbS) emerge as important pillars of new models of economic growth, as they enable a win-win between economy and environment while helping us mitigate water and climate risks. Unfortunately, NbS implementation at scale remains limited. In most cases, NbS are still being implemented as pilot projects of limited size and following parallel processes from mainstream procurement practices. This is what we call in our newly published Handbook theimplementation gap. 

With an ambition to close this gap, we have developed a collaborative and inclusive project preparation approach titled Financing Framework for WaterSecurity (FFWS) which aims to set in motion a multisectoral and transdisciplinary process that bridges strategic planning and investment planning phases. 

The primary objective is to guide the development of investable NbS projects by developing a fit for purpose implementation arrangement, including governance, funding, financing and contracting choices. It offers project preparation guidelines, including hands-on formats that project proponents can use iteratively to develop the full business case of NbS, enabling them to go from idea stage towards an investment proposal that can be effectively assessed by potential public and/or private sector investors. 

An essential part of the process of developing the investment case is to design an implementation arrangement that is fit for the transaction and the institutional settingThe handbook for the implementation of NbS for water security presents four types of implementation arrangements for Nature-based Solutions (NBS) for adaptation and water security, these are (1) public procurement contracts (including PPPs), (2) privately driven water stewardship investments, (3) collective investment vehicles, and (4) environmental and/or ecosystem markets. This handbook presents detailed guidelines for the design of fit for purpose implementation arrangements for large scale Ecosystem-Based Adaptation measures as well as pioneering examples around the world of these four types of implementation arrangements. 

A sound Performance-Based Contract (PBC), including a clear allocation of risks, rewards and responsibilities which give fundament to the cash flow and risk profiles of the project, is a minimum requirement for the use of private financing and any innovative financing option that is truly financial sustainable.  One of the important findings of the research has been that PBC contracts and PPPs may be the first step to involve the private sector creativity in developing a business model for investments in natural infrastructure for adaptation and resilience

For whom:

The handbook is aimed at NbS project proponents like NGOs, communities and government agencies wanting to learn about the investor’s perspective, key concepts and tools, and vice versa; investors willing to increase their exposure to NbS, ecosystem conservation or restoration projects for water security.This makes the handbook a comprehensive and first of a kind document that customizes the process of developing a business case to the specificities of NbS investments. 

Between 2016 and 2020 the FFWS has been continuously developed and successfully implemented in seven countries at different scales. Within the project NAIAD, 23 partners from across Europe worked together in its further development for NbS water security projects.  The NAIAD project was funded by the European Union’s Horizon 2020 research and innovation programme. 

As the aim of the handbook is to make it a living document, the authors welcome feedback and are willing to host partnered dialogues and training sessions based on the handbook methods and approaches. For feedback and additional information please contact Monica A. Altamirano. 

The handbook offers: 

  • A step by step guide for developing the NbS business case: how to choose a mode of governance for the project, a funding strategy, a financing strategy and a procurement strategy (Chapter 1) 
  • A project preparation facility toolbox with a compendium of all the analysis grid, checklist, methods to prepare in a collaborative way NbS projects and design a complete project preparation roadmap (chapters 1 and 3); starting with an intake assessment form (Appendix A) and in some cases requiring the development or further detailing of the NbS strategy through a strategic planning process (chapter 2), and including collaborative modelling protocols to guide the design of stakeholder engagement workshops. 
  • An analysis of barriers for public and private investment in NbS, of the specificities of NbS project and the bankability implications of building with nature (Chapter 4). 
  • Illustration and inspiration from three of H2020 NAIAD demo cases in the EU and one demo case in Indonesia from the Water as Leverage programme (Chapter 5), as well from pioneering and successful NbS implementation arrangements worldwide. 
  • More generally, it offers a sound basis for capacity building in developing an investment plan. 

Reference:

Altamirano, M.A., de Rijke, H., Basco Carrera, L., Arellano Jaimerena, B. (2021). Handbook for the Implementation of Nature-based Solutions for Water Security: guidelines for designing an implementation and financing arrangement, DELIVERABLE 7.3: EU Horizon 2020 NAIAD Project, Grant Agreement N°730497 Dissemination. 

[Download the Handbook]

The methodology and main findings in the handbook have been presented in the following webinars in the last months: 

  • NBS Webinar Series: Implications on design, planning, governance and economics. Organized by Fundacion Torcuato Di Tella, Delta Alliance Argentinean Wing, TUDelft and the International Forum on Urbanism (IFOU). These webinars were simultaneously translated in English, Spanish and Chinese.  The Financing Framework for water security was presented during the last webinar on Circular Economy and financing and can be found here. A summary of the whole webinar series in Spanish  and  recordings can be found here  
  • Kleinman Center for Energy Policy, UPenn webinar: The Case for Nature-Based Solutions. The webinar recordings can be found here

Motivation and approach presented in the handbook: Financing Framework for Water Security 

The why we have developed this methodology and main elements of the approach presented in more detail in the handbook have been captured in this discussion paper for the OECD-WWC- The Netherlands roundtable on water financing. 

Altamirano, M. A. (2019). Hybrid (green-gray) water security strategies: a blended finance approach for implementation at scale. Background paper Session 3: Managing water-related risks (flood and drought), improving resilience and adapting to climate change. Fifth meeting of the Roundtable on Financing Water, Regional Meeting Asia Manila, OECD. Available here

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