Phase 2

Step 2.05.03 , Business Case

Purpose

A Water Fund business case analysis compares the benefits that a water fund generates for a particular water fund supporter, with their investments in the Fund.

It's purpose is to assess for a specific investor – current or potential - whether their investment in the Water Fund is financially beneficial for them.

Key Ideas

Business cases are important tools for quantifying and demonstrating the value of a water fund for individual investors. By demonstrating a strong business case, you are better situated to increase investments by existing funders and attract prospective new funders, helping the water fund move its interventions to a larger scale and increasing the fund’s viability and sustainability.

While the exact analytical process may vary slightly case-by-case, a best-practices framework will achieve the following:

  • Business cases will connect the biophysical and economic spheres

    For instance, a business case may connect reforestation of a targeted area is connected to the monetary benefits generated by that activity. To do so, a credible business case analysis must establish and quantify links between water fund activities (also known as ‘interventions’) in the watershed and specific outcomes that generate benefits for the investor whose business case is analyzed.

  • Business cases help demonstrate value

    Business cases are important tools for quantifying and demonstrating the value of a Water Fund for individual investors. By demonstrating a strong business case, you are better situated to increase investments by existing funders and attract prospective new funders, helping the Water Fund move its interventions to a larger scale and increasing the fund’s viability and sustainability.

  • Business cases establish and quantify links between Water Fund interventions

    All credible business cases must establish and quantify links between Water Fund activities (also known as 'interventions') in the watershed and specific outcomes that generate benefits for the investor whose business case is analyzed.

  • Business cases may vary slightly in terms of their analytical processes

    The exact analytical process followed in a business case analysis may vary depending on the local context and needs. A best practices framework is provided below.

MODULE 2: Economic & Financial Analysis

Access the new business case guidance on economic & financial analysis.

Go to Module 2

  • What were the key financial arguments presented in the Nairobi Water Fund Business Case?

    Learn more from Fred Kihara from The Nature Conservancy

  • What types of returns are targeted by Water Funds?

    Learn more from Daniel Shemie from The Nature Conservancy

Camboriu Water Fund: Return on Investment

Visit this webpage on the Camboriú Return on Investment in Watershed Conservation analysis to learn more and download your copy of the study!

Access Website and Study

Examples

One of the best tools for developing a new Business Case will be to review examples from other Water Funds and strategic guidance documents that have been developed by The Nature Conservancy and its partners. The following Business Cases have been highlighted as good examples of how to incorporate the key components that are outlined in other sections and how to effectively present those ideas in a way that can be easily understood and consumed by external audiences.

Africa:

Africa | Report

Nairobi WF Business Case

This study assesses the business case for the creation of the Upper Tana-Nairobi Water Fund to help protect and restore the quality and supply of water to one of Kenya’s most productive and economically important regions. The Upper Tana River basin covers approximately 17,000 km2 and is home to 5.3 million people. The water it provides is of critical importance to the Kenyan economy. It fuels one of the country’s most important agricultural areas, provides half of the country’s hydropower output, and supplies 95% of Nairobi’s water. It is also home to areas of unique biodiversity and iconic national parks. View Nairobi WF Business Case

Latin America:

Latin America | Case Study

Assessing the Return on Investment in Watershed Conservation: Best Practices Approach and Case study for the Rio Camboriu PWS Program

Credible economic assessments of watershed conservation or restoration are almost entirely absent from the literature, leaving the business case for watershed conservation an important yet largely unanswered question. Likewise, those interested in evaluating the business case in their own geography lack the examples and tools to do so in a robust manner. Remedying the situation requires a rigorous analytical framework to assess the return on investment of watershed conservation. The Nature Conservancy—in collaboration with Stanford University, EPAGRI-CIRAM and EMASA—recently conducted such an analysis of a payment for watershed ecosystem services (PWS) program in Santa Catarina State, Brazil. View Assessing the Return on Investment in Watershed Conservation: Best Practices Approach and Case study for the Rio Camboriu PWS Program