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Can investing in nature help solve the water crisis in Nairobi?

(Credit: Rocio Egio for Geneva Solutions)

The Tana is Kenya’s longest river. It begins its 1,000 km-journey in the Aberdare mountains before veering south around the massif of Mount Kenya, north of Nairobi, where it supplies 80 per cent of the capital’s water.

The river is the lifeblood of Kenya’s economy, providing half of the country’s hydropower and feeding the region’s agriculture. But it can only give so much.

Over the decades, the city’s rapidly swelling population, together with the effects of climate change, and more recently, the Covid-19 crisis, have put the Tana river and Nairobi’s water infrastructure, already bursting at the seams, under increasing pressure.

Today, 60 per cent of Nairobi’s residents do not have access to a reliable source of clean water. Prolonged periods of drought between its rainy seasons have also forced the government-run Nairobi Water company to put in place a system of rationing since 2017. Residents get three days of water at most per week, collecting it in jerry cans and other containers to last them until their next supply.

Faced with a growing water crisis, conservation groups, working with local authorities and utility companies, looked beyond the city’s borders to the highlands of the Upper Tana river basin for new ways of creating cleaner and more reliable sources of water.

From the farm to the tap

The result was the launch in 2015 of Africa’s first public-private water that finances conservation projects upstream by linking farmers in the rural headlands with water users in the city downstream. Businesses, utility companies, and the general public effectively pay a small fee for their water usage that helps to raise enough funds to pay for activities that keep their river clean.

The steep hillsides flanking the Upper Tana headlands are home to over 300,000 smallholder farmers growing lush plantations including coffee, corn, tea, avocados and bananas. However, the expansion of agriculture over the decades has come at a heavy price.

Crops guzzle water during the dry season when supply is scarce. Natural areas that once stored runoff water have also been removed, washing the top soil into rivers downstream, polluting the water and clogging up the reservoirs, which in turn pushes up costs for the water treatment and utility companies.

By funding reforestation and conservation activities, the Upper Tana-Nairobi Water Fund helps “prevent water problems at the source” that would otherwise cost more to address downstream,  according to The Nature Conservancy (TNC), the US non-governmental organisation (NGO) behind the project.

Now in its sixth year, the project is still a work in progress, but Fred Kihara, director of TNC’s Africa Water Funds, says the results are already starting to show through.

More than 44,700 farmers are now carrying out conservation efforts, including terracing their fields, which helps harvest water for irrigation, planting 3.4 million trees to help prevent soil erosion, and digging over 15,131 water pans. These natural reservoirs are used to store surface runoff and save water during dry seasons, with around 900 million litres of water harvested each year, according to TNC.

Gladys Wangeci Migwi, the owner of a four-acre farm in the Tana river basin, is one of the 8,500 farmers who are now Rainforest Alliance certified and selling their coffee at a premium. She built terraces and planted napier grass to stabilise the soil on her farm — the napier grass was used to feed her cows better, and resulted in an increase in milk production from 10 to 14 litres a cow per day.

They are also seeing the benefits downstream. “The city of Nairobi now has 56 million more litres available every day,” he told Geneva Solutions – an increase of around 10 per cent compared with five years ago. For the citizens of Nairobi, that means more water at the tap. “I am a resident of the city and usually I would get water two days in a week. Now I get water three or three and a half days a week.”

Investing in nature’s own supply chain

One of 43 similar water funds rolled out since 2002 by TNC with local partners, the model is part of a new wave of financial mechanisms that are emerging and leveraging nature-based solutions to help protect water-stressed regions.

Conservationists have been advocating for more attention to be given to nature’s “green infrastructure” to complement traditional “grey infrastructure” – dams, pipe networks and reservoirs – as a crucial way to ensure our future supply of water.

“You can't have reservoirs, public water supply and hydropower, irrigation systems and cities functioning well – not without extra cost – unless you are protecting, restoring, managing and investing in the natural system that provides that water in the first place,” James Dalton, director of the global water programme at the Gland-based International Union for the Conservation of Nature (IUCN) told Geneva Solutions.

According to a UN-backed report released earlier this year, investments in nature need to increase four-fold, from $133bn at current levels to $8.1 trillion by 2050 to tackle the effects of climate change, biodiversity loss and land degradation.

However limited access to finance is still a big barrier to scaling up investments, with nature-based solutions attracting only roughly one to five per cent of investment in water security globally, according to the UN’s 2018 World Water Development Report. There is also a lack of what investors call “bankable projects”.

Dalton, whose team at the IUCN works on developing nature-based solutions, says the TNC water fund model – though one of the most successful examples – and other similar so-called payment ecosystem services (PES), still present a number of issues, including the fact that they are difficult to scale and attract investment.

“You need seed funding to make it work and you need the right context where you've got parties of stakeholders ready to invest. You also need the ability for people to pay, so a lot of it comes back down to understanding the value of water,” Dalton said.

Kihara acknowledged that attracting investment to establish the fund did present a challenge, to begin with. Luckily, a trip to Latin America to visit an existing project helped convince some of the future Nairobi board members and partners to invest.  Coca-Cola, which owns a large bottling plant downstream and is heavily dependant on water, provided initial seed funding to help establish the project.

In total, over $10m has been raised from local stakeholders and donors for conservation investments and for seeding an endowment fund. Partners include Kenya’s Ministry of Environment, county governments, and businesses in addition to Coca-Cola, including the Nairobi Water and Sewerage Company (NWSC), East African Breweries, a subsidiary of the world’s biggest drinking company, Diageo, and electricity provider KenGen.

TNC estimated that it would need to invest $10m over ten years for the conservation projects to be productive, which would in turn return around $21m in financial benefits for the community and businesses in the long term.

The savings to their business and consumers provided an incentive to invest, he said. “The Nairobi Water company, for example, was spending far too much money in treating the water when it’s dirty. They were also facing the challenge of dams and pipes that were running empty and treatment plants that can only run for a few hours when it’s dry.” The fund’s land conservation methods have since resulted in cost savings of around $250,000 a year for NWSC.

A drop in the ocean

These new mechanisms, like the TNC water fund model, are demonstrating how investing in nature can improve water security and increase the attractiveness of nature-based solutions for investors. However, the sums involved represent just a drop in the ocean to be able to cope with the effects of climate change, says Dalton.

“They need to be scaled up hugely by the investors and this is what initiatives like the Green Climate Fund and those types of multilateral investors need to be looking at,” he adds.  The GCF, the world’s largest climate fund, was established as part of the Paris Agreement to help developing countries invest in climate adaptation and mitigation.

The emphasis, Dalton continues, needs to be not only on climate adaptation but addressing increased demand for freshwater, especially as the world’s population continues to grow. For this, landscape restoration – measures to protect wetlands, grasslands and other ecosystems – is crucial.

A limiting factor, however, is the pipeline of available projects and the complexity involved in getting an initiative to an “investment-ready” phase. Some restoration or conservation projects will only be able to attract grant funding if the investment case can be proven.

“Take peat for example. It’s a muddy, dirty, and occasionally stinky soil that people don’t invest in unless to drain and mine it because it's so valuable as a soil product. But peat has huge amounts of soil biodiversity,” Dalton explains.

Peatlands can store significant quantities of carbon while also providing drinking water and minimising flood risk. The value is in leaving it untouched in the ground. “But that’s very difficult from a business model perspective,” he adds.

Compared with traditional grey infrastructure schemes that have a fixed timeline and clearer maintenance and operating costs, investing in the natural system presents more unknowns. These include social or political changes or unforeseen weather events.

“That's where the business models collapse and I think that's why there are not enough strong examples yet around the world of how to do this,” Dalton says. But he is hopeful of seeing more solutions come onto the market as investors come forward to pilot new approaches, and as addressing climate change becomes increasingly urgent.  This was the case in Cape Town, for example, where after suffering catastrophic droughts, city authorities backed the launch of a TNC water fund in the region in 2018.

The focus for countries, ahead of COP26, is firming up commitments to reducing carbon emissions. “Politically you want to be able to solve the problem through reducing gases and investing in technology to reach net zero-emissions by 2050. But fundamentally, if we're not going to get there, where the impacts are going to be is going to be on water resources.”

For greater investment in water security to happen, there needs to be a wider conversation, not only on reducing greenhouse gas emissions but also on protecting biodiversity and managing water resources through large-scale restoration activities  – something Dalton says is still urgently lacking.

The water we share