Investments aligned with this Strategic Goal aim to ensure that rivers and aquifers have enough water to maintain environmental health while also meeting essential human needs. 

The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.


Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

At least one-third of the rivers, lakes, and aquifers on our planet are being over-exploited (10). Altered water flows in freshwater ecosystems are a leading reason freshwater species are imperiled, with the average abundance of populations declining 83% between 1970 and 2014 (16).

The magnitude, frequency, duration, timing, and rate of change of water flow in these habitats derives from a combination of surface water, soil water, and ground water (9). Ensuring that sufficient water flows are available to sustain the health and productivity of freshwater ecosystems while meeting a variety of human uses—often called ‘environmental flows’—requires:

  • managing the volume and timing of humans’ consumptive water use (water that is not returned to its original source after use),
  • designing and operating water infrastructure with the environmental use in mind, and
  • controlling land uses that affect water infiltration (10, 15).

To secure ecologically sustainable river flows, investments can:

  • set limits on consumptive water use in investment catchments, whether acting through government or through communal water systems, such as irrigation districts;
  • protect minimum flows for ecosystems by acquiring enforceable water use rights or through private contract mechanisms (such as water leases and dry-year options), particularly during low-flow periods, and by revising the operating policies of existing or new physical water infrastructure and retrofitting or decommissioning existing infrastructure (including dams, reservoirs, and distribution canals) (3);
  • implement monitoring systems and vulnerability models to furnish evidence for stakeholders to plan new consumptive uses with access to habitat of natural species in mind;
  • develop governance structures, such as River Basin Committees, and multi-stakeholder platforms to empower joint decision-making about the management and allocation of water resources;
  • improve and supply technology for water recycling, reuse, and use reduction, including technical improvements to irrigation efficiency, soil management, water delivery systems, and water productivity (economic returns gained per unit of water use); and
  • incentivize shifts to less water-intensive crops and help reduce farm-to-market crop losses.

What is the scale of the problem?

More than three-quarters of the water that naturally replenishes hydrologic systems around the globe is consumed for human use, damaging freshwater and estuarine ecosystems and leaving many farms, cities, and industries at serious risk of water shortages during droughts (10). Besides leading to the direct loss of aquatic species, water depletion degrades entire ecosystems that provide critically important services on which human societies and economies depend (10). The removal of water from freshwater or estuarine ecosystems can degrade their functional capabilities, greatly diminishing or even destroying the ecosystem services they support (10).


Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Freshwater and terrestrial ecosystems: River ecosystems often require variability in flow quantity, quality, timing, and duration (2). For example, flooding may be needed to maintain fish spawning areas, fish migrations may require specific flows, and ecosystems may need flushing to wash down debris, sediment, or salt (2). Investments to manage flow can help these ecosystems to thrive.

Meanwhile, terrestrial plants rely on water not only from precipitation but also from soil moisture; good land use practices can support the natural rates of water infiltration to be used by plants or to replenish groundwater systems. Animals in forests, woodlands, and grasslands rely year-round on the water in rivers, lakes, wetlands, and springs, especially during dry seasons and drought. Keeping more water in freshwater systems can help these species survive periods with reduced precipitation, periods which will become more frequent in the future due to climate change.

Indigenous communities and tourism: Healthy rivers and their associated ecosystems have intrinsic value and cultural significance to many people, particularly in indigenous cultures (2). This value is often overlooked because it can be difficult to identify and quantify. Lack of water from consumptive use that exceeds the limits of renewable water supplies can also harm the recreation and tourism industries.

Agriculture and fisheries: Avoiding consumptive use of water that exceeds the limits of renewable supplies helps farmers avoid water shortages and the resulting economic loss (2). Furthermore, millions of vulnerable people around the world depend on inland (freshwater) fisheries, and insufficient freshwater inflows can suppress the populations of nearshore and estuarine fish and shellfish (4, 10).

Energy sector: Maintaining the quantity and quality of water flow guarantees energy security in locations that heavily rely on hydropower. Protecting existing resources can also reduce the need to develop new hydropower assets that may have adverse environmental impacts.

What are the geographic attributes of those who are affected?

While necessary flows in freshwater systems support important services for people everywhere, systems in water-stressed regions are especially at risk. Water shortages are much more likely in regions where existing levels of consumptive use are nearing or exceeding the limits of their renewable water supplies (10). Some of the largest rivers in Asia, North America, the Middle East, and Australia are already exploited to near exhaustion, and one-third of the largest aquifers on the planet are being rapidly depleted (10). Over 70% of the net loss in surface waters is concentrated in just five countries in the Middle East and Central Asia (16).

The largest declines in freshwater species populations have been in Latin America and the Caribbean (94%), the Indo-Pacific (82%) and sub-Saharan Africa (75%) (16). The Middle East, the western United States, southern Europe, southern Australia, Chile, Argentina, and southern Africa are experiencing the heaviest levels of water depletion; climate models predict substantial decreases in water availability in these regions over the rest of this century (10). Latin America is particularly vulnerable to changes in water availability because it heavily relies on water for its electricity production.


Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Many countries and states manage water under the “beneficial use” doctrine, which strips the rights to use water if that water is not beneficially used (2). Legal and regulatory systems do not recognize in-stream or ecosystem uses as “beneficial,” which perversely prevents water users from maintaining minimum or environmental water flows for rivers and streams (2). Reversing this often requires legislative action (2). Other countries and states do not prohibit the dedication of water use rights to in-stream or ecosystem uses, and a minority of these have water markets to allow trading of use rights.

In addition to formal trading markets, new approaches are being explored that allow private investments to circumvent perverse incentives in regulatory systems and a lack of enabling conditions for formal trading markets. These include water use leases, dry-year option agreements (3), and catchment-level investment plans aimed at cumulative water impacts (17). Without investments made explicitly to secure minimum or environmental flows in rivers or to restrict groundwater extraction, many catchments will likely see their flows divided among competing human uses until remaining water no longer supports critical ecosystem functions. Legal and public policy changes may only occur after such a crisis.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Approximately 35% of catchments around the world are chronically depleted. (10). Irrigation comprises more than 90% of water consumption in water-scarce regions, and non-renewable groundwater supplies 20% of this water (10). Despite this overuse or overallocation of water resources in many places, OECD expects global water demand to increase by 55% by 2050, driven by both demand- and supply-side pressure: economic development, population growth, deteriorating water quality, and climate change (7, 8).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

The amount of change will depend on the level of competition for water use in the catchment, whether uses are regulated, and the health of the ecosystems receiving dedicated water flows (2). With significant competition for consumptive water use in the catchment, enforceable regulation is critical to ensuring that conserved water stays in rivers and streams to maintain ecosystem health. Without this regulation, water risks being redirected instead to another consumptive use elsewhere in the catchment.

Similarly, if the health of ecosystems in the catchment has significantly deteriorated, restoring flows to rivers and streams may be insufficient to return ecosystems to healthy function. For example, in some cases, improving soil, reducing pollution, or protecting and restoring instream habitats may also be needed to restore the health of a river (2).

Governance of water resources is key, as watersheds with river basin committees and enforcement of regulation will receive larger and more sustained impact from investment. Benefits to ecosystems and to the people who rely on them, either directly or indirectly, will last as long as dedicated or otherwise secured flows for rivers and streams in the catchment are maintained, assuming the introduction of no additional negative impacts.


Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

Impact risks that may be associated with investments aligned with this Strategic Goal include:

  • Evidence Risk: Establishing the minimum or environmental flow needed to support ecosystem health in a particular river or a particular catchment can be difficult, which can in turn make measuring impact of an investment challenging (2). Although decision-support tools are improving, as long as knowledge of the aquatic environment remains limited, setting threshold flows for ecosystem health will remain to some extent an expert or political judgment (2). Investors can mitigate these risks by building a strategic portfolio of projects at the catchment level, informed by decision-support tools and the best available information on the minimum or environmental flows needed for ecosystem health in the catchment (this typically requires a water balance model) (11).

  • External Risk: Governance for both surface and groundwater can be challenging wherever administrative boundaries and the relevant scale for water governance do not match (8). Basins, sub-basins, or groundwater sheds often correspond with neither surface watersheds nor political geography. Entrenched weak or contradictory policies, such as underpricing water or subsidizing energy to pump groundwater, can make it politically contentious and costly to improve water allocation (8). Investors can mitigate these risks by evaluating whether subsidies or other incentives (such as uses for electricity or irrigation) in investment regions could encourage over-consumption of water or pollution that degrades water quality (8).

    Involvement in water markets has a range of potential risks, including insider trading, gaming, monopolization, manipulation, inadequate enforcement, and corruption (1). Market mechanisms cannot overcome the need for sound water governance processes, including the resource planning and enforcement that only governments can deliver.

  • Unexpected Impact Risk: Water use transactions can change the amount of water available for local agricultural users and communities, creating economic or environmental justice implications for farmworkers, businesses, and residents. Local environmental impacts and tradeoffs must be considered for each transaction (3). Investors can mitigate these risks by ensuring any new water infrastructure projects comprehensively assess options early in the project planning cycle to incorporate environmental and social factors into decision-making (2).

  • Execution Risk: Water markets can invite speculation or mass purchasing by wealthy parties, resulting in limited or no water for the poor, agricultural communities, or ecosystems. Water reuse or recycling can sometimes even worsen water scarcity in a stressed basin by making more water available for consumptive use instead of returning wastewater to its original source after required treatment (10). Investors can mitigate these risks by evaluating whether the regulatory system where the investment is being made accounts for return flows (non-consumptive use) (8) and whether investments may change downstream storage or water availability and create social or economic justice issues, such as changes in the geographic equity of water distribution or water quality (3). Investors should also consider potential impacts of investment projects on customary rights (8).

What are likely consequences of these impact risk factors?

External risks are likely to keep investors from accessing investment opportunities in existing regulatory systems or functional water markets. Evidence, unexpected impact, or execution risks can lead investments to unintentionally contribute to negative environmental, economic, or social harm for stakeholders or environmental functions in the catchment that were not properly evaluated or understood.

Illustrative Investment

The Nature Conservancy of Australia established the Murray–Darling Basin Balanced Water Fund, which, in partnership with Kilter Rural, invests in permanent water rights in the Southern Murray–Darling Basin (6). The fund generates income through the lease of Water Entitlements to irrigators and through the sale of available Water Allocations to irrigation businesses across the basin. When water is scarce and agricultural demand is higher, more water rights are allocated to agriculture. When water is abundant and agricultural demand is lower, more water rights are allocated to wetlands. In dry years, a minimum of 10% of water allocations received by the fund are donated to environmental watering. In wet years, a maximum of 40% is donated. Between 2016 and 2018, the Murray–Darling Basin Balanced Water Fund acquired 8.8 gigalitres of water and helped return 2,500 megalitres to wetlands in the basin covering 55 hectares. The first wetland inundated recorded increases of 800% in aquatic plant diversity, 135% in bird diversity, 250% in bird abundance, and 46% in tree canopy health (12).

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

Linking groundwater use and stress to specific crops using the groundwater footprint in the Central Valley and High Plains aquifer systems, U.S.

Esnault, Laurent, Tom Gleeson, Yoshihide Wada, Jens Heinke, Dieter Gerten, Elizabeth Flanary, Marc F.P. Bierkens, and Ludovicus P.H. van Beek. 2014. “Linking groundwater use and stress to specific crops using the groundwater footprint in the Central Valley and High Plains aquifer systems, U.S.” Water Resources Research, 4953-4973.

A strategy to assess river restoration success

Woolsey, Sharon, Florence Capelli, T. O. M. Gonser, Eduard Hoehn, Markus Hostmann, Berit Junker, Achim Paetzold et al. “A strategy to assess river restoration success.” Freshwater Biology 52, no. 4 (2007): 752-769.

Angling and recreation values of low-flow alleviation in rivers

Willis, K. G., and Guy D. Garrod. “Angling and recreation values of low-flow alleviation in rivers.” Journal of Environmental Management 57, no. 2 (1999): 71-83.

Conservation management of rivers and wetlands under climate change - a synthesis

Kingsford, Richard T. “Conservation management of rivers and wetlands under climate change–a synthesis.” Marine and Freshwater Research 62, no. 3 (2011): 217-222.

Environmental Flows in Water Resources Policies, Plans, and Projects: Case Studies

Hirji, Rafik, and Richard Davis. 2009. “Environmental Flows in Water Resources Policies, Plans, and Projects: Case Studies.” World Bank, Environment Department Papers, Natural Resource Management Series, April: 117-160.

Legitimizing fluvial ecosystems as users of water: an overview

Naiman, Robert J., Stuart E. Bunn, Christer Nilsson, Geoff E. Petts, Gilles Pinay, and Lisa C. Thompson. “Legitimizing fluvial ecosystems as users of water: an overview.” Environmental management 30, no. 4 (2002): 455-467.

River restoration: public attitudes and expectations

Tunstall, Sylvia M., E. C. Penning‐Rowsell, S. M. Tapsell, and S. E. Eden. “River restoration: public attitudes and expectations.” Water and Environment Journal 14, no. 5 (2000): 363-370.

The challenge of providing environmental flow rules to sustain river ecosystems

Arthington, Angela H., Stuart E. Bunn, N. LeRoy Poff, and Robert J. Naiman. “The challenge of providing environmental flow rules to sustain river ecosystems.” Ecological applications 16, no. 4 (2006): 1311-1318.

The Natural Flow Regime

Poff, N. LeRoy, J. David Allan, Mark B. Bain, James R. Karr, Karen L. Prestegaard, Brian D. Richter, Richard E. Sparks, and Julie C. Stromberg. “The natural flow regime.” BioScience 47, no. 11 (1997): 769-784.

Assessing societal impacts when planning restoration of large alluvial rivers: a case study of the Sacramento River Project, California

Golet, Gregory H., Michael D. Roberts, Eric W. Larsen, Ryan A. Luster, Ron Unger, Gregg Werner, and Gregory G. White. “Assessing societal impacts when planning restoration of large alluvial rivers: A case study of the Sacramento River project, California.” Environmental management 37, no. 6 (2006): 862-879.

Ecologically sustainable water management: managing river flows for ecological integrity

Richter, Brian D., Ruth Mathews, David L. Harrison, and Robert Wigington. “Ecologically sustainable water management: managing river flows for ecological integrity.” Ecological applications 13, no. 1 (2003): 206-224.

Effects of climate-induced increases in summer drought on riparian plant species: a meta-analysis

Garssen, Annemarie G., Jos TA Verhoeven, and Merel B. Soons. “Effects of climate‐induced increases in summer drought on riparian plant species: a meta‐analysis.” Freshwater biology 59, no. 5 (2014): 1052-1063.

Flow - the essentials of environmental flows

Dyson, Megan, Ger Bergkamp, and John Scanlon. “Flow: the essentials of environmental flows.” IUCN, Gland, Switzerland and Cambridge, UK (2003): 20-87.

Global hidden harvest of freshwater fish reveleased by household surveys

Fluet-Chouinard, Etienne, Simon Funge-Smith, and Peter B. McIntyre. “Global hidden harvest of freshwater fish revealed by household surveys.” Proceedings of the National Academy of Sciences 115, no. 29 (2018): 7623-7628.

Measuring the total economic value of restoring ecosystem services in an impaired river basin: results from a contingent valuation survey

Loomis, John, Paula Kent, Liz Strange, Kurt Fausch, and Alan Covich. “Measuring the total economic value of restoring ecosystem services in an impaired river basin: results from a contingent valuation survey.” Ecological economics 33, no. 1 (2000): 103-117.

Meeting ecological and societal needs for freshwater

Baron, Jill S., N. LeRoy Poff, Paul L. Angermeier, Clifford N. Dahm, Peter H. Gleick, Nelson G. Hairston Jr, Robert B. Jackson, Carol A. Johnston, Brian D. Richter, and Alan D. Steinman. “Meeting ecological and societal needs for freshwater.” Ecological Applications 12, no. 5 (2002): 1247-1260.

People and the river: Perception and use of Chicago waterways for recreation

Gobster, Paul H., and Lynne M. Westphal. “People and the river: perception and use of Chicago waterways for recreation.” Chicago Rivers Demonstr. Proj. Rep. Milwaukee, WI: US Department of the Interior, National Park Service, Rivers, Trails, and Conservation Assistance Program. 192 p. (1998).

Prescribing flood regimes to sustain riparian ecosystems along meandering rivers

Richter, Brian D., and Holly E. Richter. “Prescribing flood regimes to sustain riparian ecosystems along meandering rivers.” Conservation Biology 14, no. 5 (2000): 1467-1478.

Reservoir management to balance ecosystems and human needs: incorporating the paradigm of the ecological flow regime

Suen, Jian‐Ping, and J. Wayland Eheart. “Reservoir management to balance ecosystem and human needs: Incorporating the paradigm of the ecological flow regime.” Water resources research 42, no. 3 (2006).

Rivers for Life: Managing Water for People and Nature

Rivers for Life: Managing Water for People and Nature (2003), by Sandra Postel and Brian Richter. Island Press, Washington D.C.

The Amazon basin in transition

Davidson, Eric A., Alessandro C. de Araújo, Paulo Artaxo, Jennifer K. Balch, I. Foster Brown, Mercedes MC Bustamante, Michael T. Coe et al. “The Amazon basin in transition.” Nature 481, no. 7381 (2012): 321.

Water share: using water markets and impact investment to drive sustainability

Richter, B. “Water Share: Using water markets and impact investment to drive sustainability.” The Nature Conservancy, Washington, DC (2016).

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.