89697 A quarterly journal on public-private partnerships AMBASSADOR OF THE SEA: Jean-Michel Cousteau’s case for sustainable fisheries In this issue A TURNING POINT FOR TREES: Can the Amazon’s forests be saved? RESTORING CARTAGENA’S COAST: A mixed-capital model revitalizes land and sea IMPACT INVESTING: The Rockefeller Foundation dips its toe into oceans AGAINST “A VISION OF PERFECTION”: John Briscoe argues for incremental solutions NATURAL RESOURCES ppps ISSUE 14 July 2014 Issue #14 – July 2014 A quarterly journal on public-private partnerships World Bank Public-Private Partnerships 1818 H Street, NW • Washington, D.C. 20433, USA ifc.org/handshake • handshake@ifc.org Editorial Tanya Scobie Oliveira • Alison Buckholtz Art & Design Jeanine Delay & Victoria Adams-Kotsch Digital Strategy Jeanine Delay Disclaimer This journal was commissioned by the World Bank Group Public-Private Partnerships. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent, the views of the World Bank or its Executive Directors, or the countries they represent. The World Bank does not guarantee the accuracy of the data in this publication and accepts no responsibility for any consequences of its use. Cover photo © 1001nights/istock, Myanmar Fishers Nature doesn’t require much from people. But since leaving it In this issue untouched to flourish on its own is rarely an option anymore, the next best thing is thoughtful management that preserves natural resources and distributes the bounty fairly. Public-private partner- ships (PPPs) can do this. This issue of Handshake focuses on natural resource PPPs that are making a difference. In Cartagena, Colombia, we profile a hybrid public-private agency that has standardized water service to resi- dents while restoring the coast—and in the process, contributed to political stabilization. Around Africa’s Lake Victoria, an environmen- tal management initiative with the potential to reduce the pollution and resource footprint of industrial activities demonstrates how to include commercial ventures in conservation. Original articles from the FAO and The Rockefeller Foundation outline how Payments for Ecosystem Services, or PES, brings PPPs’ benefits directly to farmers, fishers, and those who maintain forests. We also draw inspiration from the thoughtfulness of conservation- ists who know the path forward depends on partnerships. From 2014 Stockholm Water Laureate John Briscoe, who has spent his career making sure taps are turned on, to science correspondent M. Sanjayan, whose call to action came in the rainy forest of Sierra Leone, to Jean-Michel Cousteau, who founded the Ocean Futures Society to carry on his family’s stewardship of the sea, the inter- views in Handshake give voice to the ways people are connected to nature, and how our survival depends on the continuation of this connection. Laurence Carter, Tanya Scobie Oliveira, Senior Director Editor Photo © Johnny Lye/istock, Amazon River, Brazil PUBLIC-PRIVATE PARTNERSHIPS | 1 Features Water Nature’s price tag | 20 The peoples’ waterway | 22 Getting to the source | 26 Restoring Cartagena’s coast | 28 Oceans Taking the bait on impact investing | 34 48 Our living resource | 42 Forestry Seeds to trees | 48 Forest fairy tales | 50 From idea to initiative | 56 Offsets Net positive impact | 58 Conservation trust funds | 64 22 In this issue 2 | WORLD BANK GROUP Columns Agriculture Cultivating channels for investment | 66 PERSPECTIVE Insights & opinions Agri-nomics | 70 Talking trade-offs | 06 COMPASS Surveying the PPP landscape The cost of conservation | 10 INSIDE INFRASTRUCTURE Commentary on current events How not to spend it | 14 LEGALEASE Law & legislation, decoded 38 Leveraging the law | 60 Interviews John Briscoe: Water wheel of fortune | 16 Luis Alfonso Pinzón Corcho: Behind the scenes | 32 Jean-Michel Cousteau: Ambassador of the sea | 38 M. Sanjayan: Beyond the “just so” story | 44 Marcus V. Alves: A turning point for trees | 52 PUBLIC-PRIVATE PARTNERSHIPS | 3 Contributors 34 44 66 Bernardete Neves M. Sanjayan Cristina Rumbaitis del Rio Mahomed Bashir Ilan Dunsky is an Investment Officer in IFC Advisory Services is a Partner at Dentons Canada LLP and a member in Public-Private Partnerships, based in Rio de of its Infrastructure and Public-Private Partnerships Janeiro, Brazil. practice group. Ruben Brekelmans Steve Gretzinger is a consultant with the Public-Private Infrastruc- is a Senior Forestry Specialist in the World Bank’s ture Advisory Facility (PPIAF). Sustainable Business Advisory, based in Nicaragua. Elvira Broeks Nagaraja Rao Harshadeep is a Junior Professional Associate in the World is a Senior Environmental Specialist at the World Bank’s Global Water Practice. Bank. Tuukka Castrén Valerie Hickey is a Senior Forestry Specialist in the World is the World Bank’s Senior Biodiversity Specialist Bank Agriculture and Environmental Services and acting Practice Manager in the Environ- Department. ment and Natural Resources Management Global Practice. Jeff Delmon is a Senior PPP Specialist in the Finance and Jane Jamieson Private Sector Department of the Africa Region for is a Senior Industry Specialist in IFC Advisory the World Bank, based on Tanzania. Services in Public-Private Partnerships. 4 | WORLD BANK GROUP John Kjorstad INTERVIEWEES leads infrastructure research and business support Marcus V. Alves for KPMG Global Services on behalf of partners is Managing Director of the Brazilian Forest and member firms around the world. Service (Serviço Florestal Brasileiro). Stephen Ling John Briscoe is an Environment and Natural Resources Manage- is Gordon McKay Professor of the Practice of ment Specialist at the World Bank, and a trained Environmental Engineering and Environmental ecologist and conservation scientist. Health at Harvard University, where he directs Bernardete Neves the Harvard Water Security Initiative. He was is Natural Resources Officer, Incentives for named the 2014 Stockholm Water Prize Laure- Ecosystem Services in Agriculture, for the Land ate for his contributions to global and local water and Water Division of the Food and Agriculture management. Organization of the United Nations (FAO). Jean-Michel Cousteau Cristina Rumbaitis del Rio is founder of the Ocean Futures Society, a is a Senior Associate Director at The Rockefeller non-profit marine conservation and education Foundation, where she leads exploratory work on organization. oceans and fisheries conservation. Luis Alfonso Pinzón Corcho Steven Schauer is Manager for Projects and Civil Works at Aguas is Manager of External Communications for the de Cartagena, S.A. E.S.P. (ACUACAR), a public- San Antonio (Texas) River Authority. private agency that has operated as the water public Lampros Stougianis services provider for Cartagena since 1995. is an Associate at Dentons Canada LLP and a M. Sanjayan member of its Infrastructure and Public-Private is Executive Vice President of Conservation Partnerships practice group. International. He is also the science correspondent Robbert van Eerd for the Showtime climate change documentary is an Infrastructure Finance Consultant in the series “Years of Living Dangerously,” and World Bank’s Public-Private Partnerships Group. contributes science and environment reporting to a number of international media outlets. Andrew Venter is CEO of Wildlands Conservation Trust, a leading non-profit organization in South Africa. PUBLIC-PRIVATE PARTNERSHIPS | 5 Illustration © bo68/istock By Jeff Delmon, World Bank TRADE- OFFS NATURAL RESOURCES PPPs’ PROMISE TO FUTURE GENERATIONS Public-private partnerships (PPPs) in sustainable ing where in the world one can make enough natural resources—such as watersheds, oceans, profit from sustainable natural resources to merit forests, and other natural treasures—need sup- working through the regulatory and political port, management, maintenance, and protection complexities of such a sensitive sector. to benefit future generations. Typically, though, So the terms of the discussion should be set from talk of PPPs sparks shudders among those who the start: natural resource PPPs are a trade-off. picture greedy corporate robots pillaging the The private sector needs access to these sustain- planet’s greatest treasures in search of filthy able natural resources to make money, create lucre—alongside the private investors wonder- jobs, and pay taxes, while the public sector 6 | WORLD BANK GROUP PERSPECTIVE needs to manage those resources with limited resources (reducing poaching, managing access, budget and expertise. As compellingly argued by and ensuring sustainability). It also underscores the experts writing in this issue of Handshake, the importance of the confluence of interests sustainability of trees, seas, and everything in with the private sector (neighboring commercial between requires recognition that this is an ideal activities, property development, and resource space to leverage the best of public and private. access—especially to water). OF FOXES AND FARMERS First, let’s address the cynics. One might say that One might say that creating PPPs creating PPPs in sustainable natural resources is in sustainable natural resources like putting the fox in charge of the hen house. is like putting the fox in charge But if done well, this sort of PPP should be like turning the fox into a tenant farmer responsible of the hen house. But if done for managing the hen house sustainably. If he well, this sort of PPP is like manages it well, he gets his share of eggs and turning the fox into a tenant chickens. If he does not, he gets kicked out, farmer responsible for managing loses his investment, and some other fox takes his place. Equally, the government turns from the hen house sustainably. an angry, gun-wielding farmer to a landlord interested in the success of the fox/tenant farmer: in other words, a partner. The head of Brazil’s Forest Service makes the case eloquently in these LIVING DANGEROUSLY? pages, explaining the role of government reforms in laying the foundation for the PPPs that have Although PPPs in natural resources are working, revitalized that country’s forests while continuing whether or not they’re working fast enough, or at to provide livelihoods for its people. a large enough scale, is another question alto- gether. M. Sanjayan, Executive Vice President at The first step in a PPP for sustainable natural Conservation International and correspondent resources requires the government to implement for Showtime’s documentary series on climate a process for valuing precious resources, putting change, “The Years of Living Dangerously,” a monetary and notional value against these believes that the world needs to do better. In a resources that are often ignored or taken for wide-ranging interview, he shares his perspec- granted. This assures government officials appre- tive on how the smallest hiccup in the natural ciate the value for money available from more process can have negative health ramifications efficient management and maintenance of the for humans. PUBLIC-PRIVATE PARTNERSHIPS | 7 Benefits to government are also important in private investor receives a clear, detailed, and the natural resource PPP trade-off. By entering contractual (hence easier to enforce) legal right into master developer concessions, the govern- to exploit the resource, through a socially and ment takes on a privately oriented partner that politically legitimate process and mechanism. is bound to sustainable management of the It’s a hedge against expropriation, illegal exploi- natural resources through responsible develop- tation, land invasion, and local community ment plans. In other cases, the sustainable resistance. Equally as important, establishing the natural resources will be linked to commercial relationship by contract can also reduce the risk opportunities, as when the private sector exploits of regulatory creep by forcing the government a sustainable natural resource for profit but to consider in advance the detailed performance is required (and motivated) to manage that mechanism, and provide a clear mechanism for resource sustainably. In agriculture or forestry the parties to work together. investments, for example, while they involve Even where the natural resource itself is not eas- exploitation of a sustainable natural resource, ily translated to a revenue stream, there may be the investor must also be careful to manage that linked activities that create commercial oppor- resource well to avoid loss of value over time. tunities. Multi-use dams are a good example; in These are also projects that might normally be addition to flood mitigation and water resource managed through leases or licenses with little management, they can provide water for electric- detail related to investor obligations, but which ity generation and irrigation. Where properly might be better managed through PPPs set- valued, these activities can provide the right mix ting out exactly what is expected of each of the of incentives for the private investor to manage parties. the sustainable natural resource more effectively than could the public sector. Payments for Ecosystem Services (PES) is a The challenge may be bigger, and creative and practical approach. This issue of the structuring more complex, but Handshake contributes several important and original threads to the discussion, sharing ideas benefits from a PPP in sustainable and showcasing models from the FAO, the natural resource management are Rockefeller Foundation, and the World Bank to significant. demonstrate the variety of ways this works across sectors and around the globe. We also issue a call to action. Although there are now hundreds of PES programs at a variety of scales, an accurate The government therefore gets a clear and global overview of the total area covered by PES detailed partnership with the private investor to contracts does not exist. Establishing a reliable deliver the sustainable natural resource manage- and up-to-date global database for PES contracts ment services desired. At the same time, the with consistent definitions would be highly 8 | WORLD BANK GROUP valuable for international policymakers, allow- ing them to determine the areas with the biggest RELATED READING opportunities for PES projects and to better For certain PPPs, sustainable natural focus their efforts in stimulating PES contracts. resources will be part of a larger value proposition where the value identified GETTING PAST PERFECTION for the public is often easily translated These projects, which determine access to our into value for the private sector. The shared patrimony as world citizens, are not most obvious example is the desire to without controversy. John Briscoe, the 2014 leverage the few opportunities to benefit Stockholm Water Prize Laureate and director of from sustainable natural resource loca- the Harvard Water Security Initiative, is familiar tions, such as tourism bordering ecologi- with the debate over balancing water resources cal areas and other exclusive positions and development agendas. “Development that the private sector will profit from happens in stages,” he tells Handshake readers, (though not directly) and will therefore urging government officials, NGOs, and experts be motivated to protect. Examples of who work in the natural resources sector to sustainable natural resources as a value calibrate their expectations. “A vision of perfec- proposition include tourism development tion,” he says, “means that you can’t do anything and national park management, which right.” have been covered in these articles in past issues of Handshake: “The Economics of Uniqueness” “Whole Park PPPs” Men have forgotten this truth,” said the fox, “But you must not “The Geopolitics of Food Scarcity: An Interview with Earth Institute’s forget it. You become responsible Lester Brown” forever for what you have tamed. “Heritage’s Helper: An Interview with —The Little Prince, UNESCO’s Francesco Bandarin” by Antoine de Saint-Exupéry “Fighting Poverty with Passports” Illustration © Antoine de Saint-Exupéry PUBLIC-PRIVATE PARTNERSHIPS | 9 By Robbert van Eerd, World Bank Public-Private Partnerships & Ruben Brekelmans, PPIAF THE COST OF CONSERVATION Trends in Payments for Ecosystem Services Illustration © plrphoto/istock, Amazon River, Brazil 10 | WORLD BANK GROUP COMPASS Payments for Ecosystem Services, or PES, is Establishing a reliable and up-to-date global an innovative approach to public-private part- database for PES contracts with consistent nerships (PPPs) in natural resources whereby definitions would be highly valuable for inter- managers of natural resources are paid for envi- national policymakers. It would enable them to ronmental services. PES has been defined several determine the areas with the biggest opportuni- different ways, but it’s known most widely as ties for PES and to better focus their efforts in “a voluntary transaction where a well-defined cultivating PES contracts. environmental service (or a land-use likely to Despite the lack of aggregated data, there is secure that service) is being ‘bought’ by a service ample qualitative documentation on PES. Three buyer from a service provider if and only if the prominent trends emerge from a review of this service provider secures service provision (con- documentation. ditionality).” (Wunder, 2005 and Pagiola and Platais, 2007) PES schemes are predominantly used in Latin The services financed by PES programs have America, but are spreading to the rest of the positive externalities, benefiting people other world. than the direct users, managers, or owners of In 1997 Costa Rica was the first country to set natural resources. Paying for these externalities up an institutionalized PES program. Costa through PES schemes can help to strengthen Rica’s forests were a major source of income for environmental, physical, human, and financial the tourist industry, which urged the govern- capital. ment to pay landholders for preserving forest on their land. In other words, economic and envi- TRACKING TRANSACTIONS ronmental incentives were strongly aligned. The apparent success of Costa Rica’s PES program The use of PES has been growing rapidly since prompted many other Latin American countries Costa Rica launched the first explicit PES to follow its example. In the late 2000s, over program in 1997. There are now hundreds of 80 PES programs were active in 18 countries in PES programs at a variety of scales, ranging from Latin America and the Caribbean. small local to large national programs. However, an accurate global overview of the total area Today, Latin America is still the center of gravity covered by PES contracts does not exist. This for PES, but governments elsewhere have started is partly due to the lack of a comprehensive to use PES contracts as well. High opportunity listing of PES contracts at the national level, and costs remain a major obstacle for PES in Asia, partly due to differences in reporting standards but countries like Vietnam, Indonesia, and that impair the reliability of most aggregated China are now using PES contracts on a signifi- numbers. cant scale for forestry and watershed services. PUBLIC-PRIVATE PARTNERSHIPS | 11 In many forest areas in Africa, further progress PES is expanding beyond traditional boundar- is needed to define land rights and strengthen ies into natural resource PPPs that include institutional and government capacity. Neverthe- oceans and coastal areas. less, some African countries (such as Kenya) have Building on the experience with PES schemes started to initiate PES contracts, and more are elsewhere, the scope of the concept is being considering ways to do the same. expanded into new areas. Most prominent are PES initiatives are increasingly user-financed, new PPP initiatives around ocean conservation. shifting course from large government financed The seafood industry, for example, has teamed programs. up with the World Bank/GEF and Food and Agriculture Organization of the United Nations In the beginning of PES, government-financed in the ALLFISH PPP for sustainable fisheries. schemes dominated the conversation. For The recent Global Ocean Action Summit, hosted example, Costa Rica’s PES program was made by the Government of the Netherlands, and the possible by a fuel tax. Large scale PES schemes “Our Ocean” conference, hosted by the U.S. saw multilateral institutions such as the United Department of State, have stimulated these new Nations Development Programme/Global types of PPPs, with alliances announced at each. Environment Facility (GEF) or Global Carbon Fund as buyers. The GEF, for example, has been The idea of “blue carbon” is another a recent involved in 42 projects since 1991, investing development. Blue carbon refers to the process more than $222 million. of reducing atmospheric CO2 and mitigating global climate change by conserving mangroves, In recent years, user-financed PES projects have sea grasses, and coastal vegetation. Marine grown relatively faster than government-financed Ecosystem Services (MARES) programs aim to schemes. User-financed PES doesn’t impose a expand PES to coastal and marine ecosystems. burden on government budgets and better allows Projects such as the Abu Dhabi Blue Carbon for small PES projects in places with weak insti- Demonstration project rode this wave ahead of tutional capacity to monitor services. Hybrid most others. “Blue Bonds,” which are analogous approaches, partly funded by the government to the existing “Green Bonds” market, may prove and partly by users, also exist. critical to this effort. Multinational corporations are increasingly funding PES projects, albeit often on a more A CLOSER LOOK local scale. Examples include Coca-Cola’s proj- ects in the Mekong Delta, Vietnam, and United The expansion and proliferation of these trends Breweries in Lake Victoria, Uganda. Likewise, does not mean that PES is always the best instru- smaller companies and individual citizens are ment. In some cases, PES has failed to achieve also paying for environmental services. Local the intended outcomes. In areas where institu- PES schemes for watershed services in Brazil are tional arrangements are weak, the implementa- a good example. tion of PES is especially likely to be ineffective. 12 | WORLD BANK GROUP In addition, inefficiency arises if PES agree- CAN’T SEE THE FOREST FOR THE ments compensate individuals who would TREES? FAO WANTS YOU TO START have delivered the services otherwise. LOOKING FOR THE PEOPLE INSTEAD. However, examination of the trends shows that these examples are exceptions. With As countries strive to achieve sustainable for- a proper enabling environment for PES, est management, it is important to measure it is usually possible to design efficient progress in all of the different dimensions of transactions. Its recent record promises sustainability. Information is routinely collected that PES is expected to spread across the about environmental and economic aspects of world, become increasingly user-financed, forest management, but measuring the social and expand to new areas like oceans and or socioeconomic benefits from forests is much coasts. more challenging, due to a scarcity of data and lack of a clear definition of what exactly should be measured. To measure the socioeconomic benefits from forests, data collection must focus on FOR FURTHER people, not only trees. READING Global Environment Facility (2010). Payments for Ecosystem Services. With the exception of formal employment fig- ures, forestry administrations have little informa- Pagiola, S., and G. Platais. (2007). tion on how many people benefit from forests. Payments for Environmental Services: From Theory to Practice. Washington: Current data collection, which focuses on forests World Bank. and trees, needs to be complemented by data collection on the benefits that people receive. Wunder, S. (2005). “Payments for This is best done by collaborating with public environmental services: Some nuts organizations undertaking such surveys. and bolts.” CIFOR. Occasional Paper No.42. Bogor: CIFOR. From “State of the World’s Forests: Enhancing the socioeco- nomic benefits from forests,” Food and Agriculture Organi- See also the PES learning paper series zation of the United Nations. Rome, 2014. of the World Bank Group. PUBLIC-PRIVATE PARTNERSHIPS | 13 n o t how to spend it By John Kjorstad, KPMG The Financial Times newspaper in London has a resource revenues in a sovereign wealth fund that regular glossy magazine supplement advising its largely invests outside of Norway. It’s said that a wealthier readers “How To Spend It” (presum- billion dollars per week passes through the fund’s ably after they’ve earned it). office in Oslo, and it will be worth $1 trillion Luxury is a personal choice. I wouldn’t criticize by 2020, according to a BBC report published a private consumer with means for being drawn in 2013. into the lifestyle, but when it comes to public This strategy helps the Norwegians achieve two wealth, the rules are different. I reflect on how things: keep inflation in check by diversifying Muammar Gaddafi nationalized Libya’s oil sector investment beyond their borders, and preserve after taking power in 1969 and proceeded to live wealth for future generations. a life of luxury fueled by natural resource wealth until his downfall and death in 2011. Gaddafi’s DON’T SUBSIDIZE IT vanity is the cover story in this parody; for states lucky enough to be blessed with publicly-owned Taking another page out of the Scandinavian natural resources, here are a few simple rules for playbook, Norway has the most expensive petrol avoiding the curse it can bring. prices in the world despite being Europe’s largest oil producer. Instead of subsidizing petrol to make it cheaper for consumers, they tax it to DON’T SPEND IT ON YOURSELF support expensive maintenance of the country’s This goes beyond dictators with a penchant for transportation network. palaces. Norway is the bellwether for all other oil By comparison, Nigeria is Africa’s largest oil or resource rich nations to follow. The Norwe- producer. Its government reluctantly subsidizes gians are famously thrifty about how they spend petrol because much of the population depends lucrative oil profits. They choose not to increase on it (with some even powering homes with public spending or subsidize public services personal generators that compensate for frequent (with a few exceptions like social healthcare). blackouts). The removal of subsidies would free The Norwegians opt instead to place state up billions of dollars to boost Nigeria’s economy 14 | WORLD BANK GROUP INSIDE INFRASTRUCTURE and improve the country’s decaying infrastruc- plan to deliver economic balance and diversity is ture. However, once you’ve started down that as important as new roads and railway lines. slippery slope, it’s hard to come back up. DON’T GO IT ALONE DON’T SPEND IT ON UN- Partnership has many advantages. International AFFORDABLE INFRASTRUCTURE expertise is often needed to effectively develop a Using natural resource wealth to fund major natural resource. Partnerships can attract foreign infrastructure projects is a great idea in principle, investment and allow some of that expertise to but the underlying business case for build- transfer into local firms. When ExxonMobil led ing infrastructure needs to stand on its own an unprecedented multi-billion dollar invest- economic support beams. Infrastructure is an ment into a liquefied natural gas facility in Papua enabler, not a panacea. New Guinea in 2010, for example, it knew the The temptation with natural resource wealth is socio-economic considerations would be huge to put the proverbial infrastructure cart before as the capital costs of developing the project the skills horse and build an Aerotropolis or were greater than the country’s gross domestic entire “technology” city with the misplaced hope product. of attracting global businesses. Abu Dhabi’s Following this logic, the company consciously sovereign wealth fund managers wisely chose planned around cultural sites and set an agenda a different strategy. Mubadala Healthcare first to ensure that stakeholders were consulted and partnered with the Cleveland Clinic in the compensated in an open and transparent process. United States to bring healthcare expertise to the The company provided employment, training, United Arab Emirates; then they built a clinic and local business development. It also con- together which will open in 2015. Smart. tributed to health, education, and agricultural initiatives. These are essential hallmarks of a DON’T FORGET THE LOCALS competitive, open, and transparent marketplace. There is a wider economy to natural resource Natural resource opportunities are a stepping wealth, and the local community should benefit stone for further private investment into other as much as possible. China’s resource-for-infra- infrastructure sectors helping nations tackle structure deals in Africa ten years ago were great the broader transportation, energy, and water for development (in principle), but left some challenges they may face. Get them right, and feeling the model was not sustainable long-term governments won’t have to worry about how for local populations. Resources are finite— they spend their wealth. They can invest con- which is what makes them valuable—and sooner fidently, knowing that future generations will or later the local economy will have to thrive benefit from their foresight. without them. Investing in skills and a long-term Now that’s luxury. PUBLIC-PRIVATE PARTNERSHIPS | 15 WATER WHEEL OF F RTUNE John Briscoe’s argument for an incremental, not integrated, development agenda Interview by Jane Jamieson, IFC 16 | WORLD Photo BANK © Alexa Briscoe GROUP INTERVIEW John Briscoe’s entire career has been Early in your career as an devoted to water: how to get it, how engineer in the government to distribute it fairly, how to keep it water agencies of South Africa clean, and how to ensure access for and Mozambique, you saw the future generations. He was most recently impact of water scarcity from the inside. How did that perspective recognized with the 2014 Stockholm eventually translate into your Water Prize, known informally as policy work and inform the the “Nobel Prize of Water,” in honor positions you’ve taken in of his “unparalleled contributions global organizations? to global and local management of water—contributions covering vast Both of those early jobs in government thematic, geographic, and institutional impacted me more profoundly than environments—that have improved anything I could have learned in a the lives and livelihoods of millions of classroom. In South Africa in the early 1970s, amid the social inequality, as a people worldwide.” He is currently government worker you felt you were Director of Harvard University’s Water helping develop your country—and in Security Initiative, and a professor our case, we were in the era of building of environmental engineering and the water platform for growth. It was environmental health at Harvard, where obvious that this had to be done, and I he teaches students about water- was privileged to see what a well-func- management issues in international tioning bureaucracy can accomplish. In development. Before that, he was senior Mozambique, it was the opposite expe- advisor to the World Bank’s $50 billion rience as we worked in a low-capacity water program and the World Bank’s government. You have to be incredibly country director for Brazil. Here, he talks disciplined, set goals, and be clear about to Handshake about ways his even earlier what the priorities are. You have to jobs in government were more valuable learn to deal with what political leaders perceive as problems, rather than what than what he learned in the classroom, you think the problems are. Eventually, how having a historical perspective on you establish credibility by solving the water development can help shape perceived problems, and you can then expectations, and why balancing water deal with the more complicated prob- resources and development agendas isn’t lems. This is a fundamental lesson really as tricky as it seems. I carry with me. PUBLIC-PRIVATE PARTNERSHIPS | 17 How is it possible to responsibly The government is not just another stake- develop water resources and balance holder—it is the responsible party, accountable concerns with a country’s development to all of the people. Governments have a legiti- agenda? macy that’s unique. Today, participation of the self-appointed, single-issue NGO is out of kilter. It’s a tricky question because we make it tricky. Should you listen to the NGOs? Yes, but you Every country in the world has dealt with devel- don’t necessarily have to accept their views. For opment in some sort of sequence. No developed me, this is a very important issue. country has followed an integrated plan to do it all at once. In every country, there’s a need for people to get their water needs met. So water Do governments see water PPPs as a comes first, then that brings sanitation problems, risk that’s different from partnerships then countries address questions of how to deal in other sectors? with wastewater. So that’s handled next. The idea Private investments in water are high-risk, low- that all of this is done at once is impractical. return investments in most developing countries. But there’s no sense of the history—how access Even in rich countries, PPPs in water are very to water actually unfolded. For example, look at sensitive. In the Thatcher era in the U.K., water Great Britain in 1857. The Parliament building was the government’s 17th privatization—close in London had to be hung with lime-soaked to the last one. That’s because it’s a highly sheets because of the stink of the Thames. complex, emotional, and visceral issue, unlike London then had to deal with sewage disposal. the privatization of telecoms or other sectors. No Everything happens in stages. But a vision of matter what country you’re talking about, Bolivia perfection means that you can’t do anything or Brazil or Argentina, the conditions are quite right. demanding, and there are no shortcuts. All solu- tions must be tailored to the country’s broader view of how an economy should be organized. A vision of perfection means that you can’t What country is taking an innovative do anything right. approach to PPPs in water these days? There has never been a social consensus on PPPs in water in Brazil. But over time a hybrid model What’s the balance between the role developed. For example, in São Paulo, the utility of governments in bringing access to is 51 percent owned by the State, and 49 percent water to citizens and the perspective by both local and foreign investors. This has of NGOs? worked very well, with dramatic improvements 18 | WORLD BANK GROUP in productivity but also with social control. The big-bang approach, as done in Argentina, is often not the right way to go. The government is not just another stakeholder— Your multiple roles at Harvard highlight it is the responsible party. the necessity of a multidisciplinary approach to water management. In Governments have a contrast, many governments take a legitimacy that’s unique. more fragmented approach, where responsibility lies with just one minis- try. What would you say to encourage institutions to involve a broader group zational change—creation of a water ministry, in water management? for example—is a fallacy. Instead of looking at the organization, you should look at the instru- Water is connected to everything else, just like ments, like pricing and regulation. That should transport, energy, and other sectors. Thinking be the focus. Who that’s administered by is that coordination can be solved by an organi- unimportant. FROM “THE GREAT STINK” TO GREAT SEWERS In 1858, Sir Joseph Bazalgette was commissioned to design and build a system of sewers which would remove the sewage from the Thames. PUBLIC-PRIVATE PARTNERSHIPS | 19 nature’s PRICE TAG TYPES OF ECOSYSTEM PAYMENTS FOR INTEGRATED WATER RESOURCES MANAGEMENT PUBLIC SCHEMES PRIVATE SCHEMES A public entity acts as the primary buyer of Both buyers and sellers are private entities an ecosystem service, as well as administering (companies, non-governmental organizations, and executing the scheme. Typically, public farmers’ associations or cooperatives, private schemes target water-related services to secure individuals). Private (self-organized) schemes water supply (water-quality and water-quan- are typically local schemes where the buy- tity services), flood protection, and erosion ers and sellers have been able to identify an control through the provision of financial agreed ecosystem service and negotiate and compensation or incentives to induce land settle upon an agreed price. The buyers make users to refrain from changing practices or to payments on a voluntary basis to the stipula- change to specific practices. tions of the agreed contract. Public schemes may operate at the local or The distinguishing feature of private schemes national level. Local public schemes are PES is the manner in which the PES contract and schemes in which municipalities or local funds are administered and disbursed. In governments fund, administer, and pay private schemes, this is typically taken care for ecosystem services in a specified “local” of by a PES administration (or management) part of a basin that will yield specific water- entity (either registered as an NGO or trust related benefits. National public schemes are fund) that has been established specifically equivalent to subsidy mechanisms of national to manage the PES. These PES management governments, under which the financial units administer the PES contracts with buy- incentives for the ecosystem service is not tied ers and sellers, collect the funds from buyers, to a specific locality. As such, national public disburse the funds to sellers, and hold them schemes tend to be river-basin independent. accountable for their service provision. 20 | WORLD BANK GROUP WATER Payments for Ecosystem Services (PES) are cash transfers to providers of environ- mental services conditional on continued provisions. PES programs target a variety of ecosystem services, including carbon sequestration, watershed protection, landscape beauty, and protection of biodiversity habitat. They have the potential to be an environmentally effective, economically efficient, and socially equitable tool for implementing integrated water resources management. This article is adapted from Recommendations on Payments for Ecosystem Services in Integrated Water Resources Management, adopted by the Parties to the United Nations Economic Commission for Europe (UNECE) Convention on the Protection and Use of Transboundary Watercourses and International Lakes. PUBLIC-PRIVATE SCHEMES TRADING SCHEMES Public-private schemes, a specific subset of Trading schemes refer to the establishment private schemes, in principle have the same of markets on which established rights (or features as a private scheme, except that the permits) and/or quotas can be exchanged, buyer (or one of the principal buyers) is a sold, or leased. For example, environmental public utility (such as a municipal water- pollution quotas for nitrate, phosphorus, and/ supply company or a public power utility). or salt discharges may be sold or traded by The feature which distinguishes public-private low-polluters to high-polluters. Also within schemes from local public schemes is the role the realm of water management, trading of the participating public utilities in public- schemes can be very promising mechanisms private schemes. This role is limited to that for effectively trading, banking, or leasing of providing funds to the PES schemes in water quantities among urban/industrial, the role of a service buyer, just as any other agriculture, and ecosystem users/uses. A private buyer would do. This means that the prerequisite for trading schemes is a strong, utility is not involved in the administration well-defined and working legal and regulatory and management of the PES contract, as in framework that (a) clearly defines the pollu- local public schemes, but participates as a tion quotas or water rights/permits; and (b) contracting party of service buyers. In public- allows and enables the (economic) transfer, private schemes, the PES contract is thus whether temporarily or permanently, of these administered by a third-party PES manage- among different users and uses, including ment entity in the same manner as in private nature or ecosystems. schemes. PUBLIC-PRIVATE PARTNERSHIPS | 21 Photo © AJtimes3 SAN ANTONIO RIVER WALK BLAZES A TRAIL IN URBAN ECOSYSTEM RESTORATION the peoples’ WATERWAY By Steven Schauer, San Antonio River Authority 22 | WORLD BANK GROUP WATER Texas’ San Antonio River Walk is a nationally recognized tourist attraction and one of the U.S.’s most unique urban linear parks. Work began on the River Walk project in 1939, and improvements—the result of a series of successful public-private partnerships (PPPs) and local residents’ consistent involvement—continue today. Archaeological excavations show that the first The San Antonio River Foundation has raised humans lived along Texas’ San Antonio River money from the private sector to bring artistic, as long as 10,000 years ago. Today’s hunters recreational, environmental, and educational and gatherers—shoppers and foodies—are enhancements to the San Antonio River. also attracted to the waterway. From early in • Bexar County will contribute approximately the morning until late at night, residents and $229.4 million from the county’s flood tax visitors stroll along the River Walk, a series of specifically for flood control and ecosystem pedestrian-friendly routes made possible by a restoration elements of the project. successful PPP that many other communities around the world are trying to replicate. • The City of San Antonio contribution is anticipated to be approximately $76.7 mil- lion over the life of the project, from the city’s SHARED RESPONSIBILITIES capital improvements fund for amenities and Today, the San Antonio River Improvements recreation elements. Project (SARIP), which includes local residents, • USACE will contribute approximately $57.9 is expanding the River Walk—restoring the local million to support the ecosystem restoration ecosystem as it engineers new solutions to the and recreation elements in Mission Reach age-old problem of flooding. and $2.6 million toward construction in the SARIP is a $384.1 million ongoing investment Eagleland segment on the southern edge of in flood control, amenities, ecosystem restora- downtown San Antonio. tion, and recreational improvements along 13 miles of the river. The City of San Antonio, THE NEWEST MISSION Bexar County, the San Antonio River Author- Mission Reach, the section of the San Anto- ity (SARA), the U.S. Army Corps of Engineers nio River Walk targeted for restoration, is of (USACE), and the San Antonio River Foun- particular historical significance as it links four dation have partnered to deliver the project. 18th century missions—the largest collection of SARA provides project coordination among the Spanish colonial architecture in North America partners and will conduct ongoing operation currently under consideration to become a and maintenance when the project is completed. World Heritage site. But in the years since the PUBLIC-PRIVATE PARTNERSHIPS | 23 establishment of these missions almost 300 years South Korea, Israel, Malaysia, Germany, Canada, ago, this stretch of the river’s original route, Mexico, and Taiwan have visited Mission Reach beauty, and life had been lost. In the 1950s, for inspiration, looking for ways to bring these after years of devastating floods, Mission Reach results to their own communities. was engineered into a trapezoidal storm water channel by the U.S. Army Corps of Engineers. Though it worked well for flood control, the CITIZEN CONSENSUS change left this area devoid of native plant life From the earliest days of the River Walk to its and with a diminished aquatic habitat. most recent expansion, citizen involvement has been critical to achieving these sought-after results. In 1998, Bexar County, the City of San Antonio, and SARA officially formed the San San Antonio is becoming Antonio River Oversight Committee (SAROC) by enlisting the support of the same citizens a world leader in urban who had been vocally promoting the River Walk ecosystem restoration. expansion. SAROC was created as a 22-member stakeholder committee. The most important lesson learned from the project relates to the formation of SAROC. Rather than selecting specific individuals to sit After improvements are made, Mission Reach as representatives on the SAROC, stakeholder will once again house the river’s natural environ- organizations were chosen, and each of the 20 ments and aquatic habitat. Over 23,000 new stakeholder entities were responsible for choos- trees (over 40 native species) will be added, along ing their own representative. By selecting orga- with hundreds of acres of native grasses and nizations to be members of SAROC rather than wildflowers (over 60 species). Features will also individuals, SAROC was created to last for the include hiking, biking, and paddling opportuni- duration of the project—from early conceptual ties to reconnect people with the river. work to completion of construction. Individual By cultivating this drainage channel back into a turnover on the committee has occurred, but the functioning part of the San Antonio River, San institutional project knowledge and interest held Antonio is becoming a world leader in urban by each stakeholder organization was kept intact. ecosystem restoration. Representatives of cities The organizations selected represent a diverse from countries such as China, India, Japan, group of stakeholders including neighborhood 24 | WORLD BANK GROUP associations, chambers of com- merce, business interests, non- SAN ANTONIO RIVER PROJECT profit organizations, and other The project is comprised of four distinctive reaches: community associations. Even The Museum Reach, a four-mile segment of the river; the Archdiocese of San Antonio the Downtown Reach, a segment of the original River was chosen as a stakeholder, Walk; the Eagleland Project, a one-mile segment; and because the 1700s-era missions the Mission Reach, an eight-mile section of the river. along the river are still active parishes. Getting a diverse group of stakeholders along with representatives from multiple branches of government to agree on project concepts and final designs was at times a monumental task. Consensus building was of paramount importance; the unity of voice among the committee members helped to provide clear direc- tion for funding, building, and maintaining the project. This open communication and the vitality of the community— both of which contribute to a sustainable ecosystem that will benefit residents and visitors for many years to come—was critical to the success of the project. PUBLIC-PRIVATE PARTNERSHIPS | 25 WATER By Nagaraja Rao Harshadeep The private sector plays a & Stephen Ling, World Bank major role in fueling development around the world, creating millions of jobs, allowing countries to meet basic necessities, and boosting exports. However, private investment is not without its costs— resource use and pollution are high among them. As concern grows, so do innovative approaches to reduce the pollution and resource footprint of industrial activities. The Lake Victoria Environmental Management Program (LVEMP) is an especially promising initiative with potential for replicability. GETTING TO THE SOURCE Cleaner production in the Lake Victoria Basin Lake Victoria has a mythic past. Long known as Its shores are speckled with cities and towns, the source of the Nile River, its waters sustained and home to factories that discharge their waste some of recorded history’s earliest communi- directly into the lake and its rivers. ties. In the middle ages, traders explored the rich, fertile area in search of gold, ivory, and But an innovative partnership may help turn other precious commodities. Today, though, the the tide, restoring to Lake Victoria some of its Lake Victoria basin—one of the most densely former glory. Through LVEMP, the governments populated rural areas in the world—is known of Kenya, Tanzania, Uganda, and the newer East for its pollution and natural resource challenges. African Community members of Burundi and 26 | IFC.ORG/HANDSHAKE WORLD BANK GROUP Photos © Ugurhan Betin/istock Rwanda are cooperating to undertake cleaner COMMON INTERVENTIONS production activities that will help industries improve the efficient use of resources (such as Energy: Simple activities, such as placing trans- water, electricity, and raw materials), and reduce lucent roofing tiles in factories that let in natural pollution throughout the production cycle. light, have saved hundreds of thousands of dol- lars annually in electricity bills for large factories. Other investments have included metering, COORDINATING CLEANER improved electrical control systems and variable PRODUCTION speed drives, higher efficiency bulb replacement, wind-driven cyclones, lights on timers, power The Kenya Cleaner Production Center serves co-generation, and improved insulation. as a regional coordinator, working with similar centers in Tanzania and Uganda (and helping Water: Activities include rainwater harvesting, start such centers in Rwanda and Burundi). “dry” cleaning or use of pressurized hoses, meter- ing, fixing leaks, condensate recovery, and water Activities include: recycling. • A survey of industries by key polluting Wastewater: Activities include improved meter- sectors (such as large breweries, sugar, food ing, wastewater treatment, and recycling. Some processing, leather, etc.); of these, like chrome recovery, have very short • Awareness workshops and follow-up training; payback periods and significant environmental • Plant-level resource efficiency and cleaner and public health benefits. production assessments; Process Improvements: Other activities include • Identification of measures to improve the overall modernization of the production resource efficiency and reduce pollution; and process, resulting in savings of water, wastewater, and energy, and a reduction in materials wastage. • Recognition of good performers though national and regional awards. Over time, these activities have demonstrated that the best way to get local, regional, and LVEMP’s work has leveraged significant invest- global environmental benefits from industries ments. About $3 million of technical assistance is to incentivize and emphasize the financial has gone to targeted training and assessments for benefits of such activities. 186 industries in Kenya, Tanzania, and Uganda. Of these, 88 adopted cleaner production tech- In the arena of cleaner production, small techni- niques. In just 30 of these industries, this has cal assistance inputs can leverage significant leveraged about $82 million in investments and private sector investments. Work like this can be cost savings of $14.5 million annually. Results scaled up in the region, but also be replicated far reward participants with very short pay-back beyond Lake Victoria—which has the potential periods, generally ranging from a few months to once again be recognized as the source of to a couple of years. great natural wealth. IFC | 27 PUBLIC-PRIVATE PARTNERSHIPS Photo © piccaya/istock, Cartagena restoring CARTAGENA’s COAST A mixed-capital model for water and sanitation in Cartagena—one By Elvira Broeks, World Bank of the first instances of private sector participation in Latin America— raised public health standards and restored the coast, revitalizing this historic city. Cartagena, Colombia has a population of around urban development, and poor wastewater one million, and it has experienced rapid growth management had severely deteriorated Carta- as the population doubled over the last two gena’s rich coastal resources, generating a public decades. Because of its history and spectacular health and environmental crisis. At this time, natural attractions, Cartagena is also Colombia’s less than half of the households had connections largest tourist area, welcoming around one to a wastewater disposal system and none of the million visitors annually. But just a few decades wastewater was treated. ago, Cartagena faced an uncertain future. By the Desperately in need of solutions to save the city, mid-1990s, rapid population growth, unplanned the District of Cartagena became one of the 28 | WORLD BANK GROUP WATER first municipalities in Colombia to introduce incremental approach. ACUACAR and the private sector participation in the water sector. Cartagena Regional Environmental Authority This followed the 1994 Public Services Law that (CARDIQUE) both played an important role. expanded the role of private operators and cre- Strategic priorities over the last two decades ated a national tariff regulator alongside a service included: quality regulator. After many years of chronic • Improving water supply service in order to inefficiencies in the provision of water sup- enhance ACUACAR’s financial stability and ply and sanitation services (WSS), the District cost recovery; decided to liquidate the municipal utility and create a new public-private mixed capital enter- • Improving drainage in high-value economic prise with the World Bank’s support. In Decem- areas that were subject to frequent flooding ber 1994, Aguas de Barcelona (AGBAR, the and sewer overflows into the streets and sur- privately owned Water Company of Barcelona), rounding beaches; was selected as the partner of the municipality, • Improving water circulation in the Ciénaga and the mixed enterprise Aguas de Cartagena de la Virgen (an estuary that at the time (ACUACAR) was created. received 60 percent of Cartagena’s untreated ACUACAR took over responsibility for the wastewater) with the construction of self- provision of WSS services in June 1995. The actuating tidal gates to increase flow into the District was responsible for capital investments Lagoon, and a long seawall within the estuary to expand the existing WSS system, while to route the tidal flows through the Lagoon ACUACAR was responsible for capital expendi- and flush out the pollution; and tures to improve the existing system. Although • Collecting, treating, and disposing of Carta- this model is commonly used in Spain, this was gena’s wastewater through the construction of the first time such an arrangement had been a submarine outfall coupled with a prelimi- tried in Latin America. nary wastewater treatment plant. DUAL PRIORITIES RESULTS Tackling Cartagena’s public health risks Improvements have been dramatic. Coastal and severe coastal environmental degrada- beaches are virtually pollution-free, and there tion in the mid-1990s required a long-term have been significant improvements in the PUBLIC-PRIVATE PARTNERSHIPS | 29 Photo © piccaya/istock, Cartagena Cartagena Bay water quality and the eco- KEY LESSONS logical restoration of the Ciénaga de la Virgen. Moreover, through improvements in utility As with every significant public-private partner- management, moderate increases in tariffs, and ship, the officials behind the project faced many infrastructure investments, ACUACAR has been challenges along the way. Some of the lessons able to significantly improve the quality and learned from Cartagena’s rich experience include: efficiency of water and sanitation services and An efficient and sustainable water utility achieve sustainability. Potable water, which meets is crucial for effective wastewater manage- the national quality standards, is provided on a ment—which is fundamental for coastal cities. continuous basis to all households—even to the The creation of ACUACAR in 1995 was a key poorest neighborhoods. component of Cartagena’s success. Based on its tariff revenues, ACUACAR is able Partnerships at the local, national, and to cover all operating and maintenance costs, international levels can facilitate and expedite and help contribute to infrastructure invest- environmental improvements. The Colom- ments. ACUACAR’s mixed capital model has bian national government formulated the become institutionalized in Cartagena, and the policy framework for private participation in combination of local political control of the the water sector and enhanced environmental company combined with professional private management, as well as providing significant sector management has performed remarkably financial support for Cartagena’s infrastructure. well. Strong partnerships at the local level between CARDIQUE, the District of Cartagena, and ACUACAR were indispensable to program con- CARTAGENA WATER 1995 73% 1995 2013 14 HOURS 24 HOURS 2013 99.9% SERVICE CONTINUITY WATER SUPPLY COVERAGE 30 | WORLD BANK GROUP tinuity and coherence. International institutions, Long-term, incrementally phased, and pri- such as the World Bank, provided financial oritized programs are necessary for water support and technical assistance. pollution control and environmental restora- Public relations, community outreach, and tion. With the commissioning of the wastewater building consensus among local stakehold- management system, Cartagena has completed ers is critical to planning and implementing the first phase of its long-term program to wastewater programs. There is usually no obvi- restore the coastal environment. ous “best technical solution,” but in consultation Submarine outfalls, combined with pre- with all stakeholders, a “preferred alternative” liminary treatment, can be an appropriate often emerges. The challenge is then to imple- solution for protecting coastal areas such as ment this approach in an expeditious manner to beaches, bays, and estuaries, while providing avoid further environmental degradation. flexibility for future upgrades as necessary and Comprehensive wastewater management is a when affordable. The feasibility of an outfall long-term process and can take a decade or approach depends, of course, on the capacity of longer. In Cartagena, it took around five years the receiving water body to assimilate the dis- (1995-2000) to ensure the proper policy, insti- charges and must be accompanied by extensive tutional planning, and financial arrangements environmental, engineering, and social studies. were in place before the construction could commence, and then over ten years (2000-2013) This article is adapted from and updates “Restoring before the wastewater treatment system could be the Coastal Environment in Cartagena, Colombia,” fully constructed and commissioned. published in the World Bank’s Environment & Water Resources Occasional Papers. Source: Aguas de Cartagena 1995 62% 1995 2013 90.3% 0% >90% 2013 SEWAGE SYSTEM COVERAGE WASTEWATER TREATED PUBLIC-PRIVATE PARTNERSHIPS | 31 Photo © piccaya/istock, Cartagena BEHINDthe SCENES Luis Alfonso Pinzón Corcho is Manager for Projects and Civil Works at Aguas de Cartagena, S.A. E.S.P. (ACUACAR), a public-private agency that has operated as the water services provider for the city of Cartagena since 1995. With financing support from the World Bank and the Inter-American Development Bank that required the backing of the Colombian government, ACUACAR and the City of Cartagena have jointly invested more than $300 million in the design and implementation of the Master Plan for Water and Sewerage for Cartagena. In this interview, Pinzón outlines what reforms were necessary to create this unique hybrid agency, how dependable water and sanitation services have helped stabilize the country, and what’s next for ACUACAR. Interview by Alison Buckholtz WHAT ARE THE MOST SIGNIFICANT WHAT SORT OF ROLE HAS IMPROVED REFORMS THAT WERE REQUIRED WATER SERVICES AND WATER QUAL- BEFORE ACUACAR WAS EVEN ITY—A RESULT OF THIS PARTNERSHIP— CREATED? PLAYED IN STABILIZING COLOMBIA? Decentralization was a major force in shaping The lack of adequate water and sanitation the structure of the water and sanitation sec- services strengthened the circle of unhealthy tor, since through the Decentralization Law conditions, poverty, and lack of opportunity. it transferred the responsibility for operating With improved water and sanitation services, and managing the systems to the local level. and better water quality, there is a good chance Secondly, with Law 142, enacted in 1994, more that the circle can be broken. These are key aggressive reforms were introduced that allowed factors for putting urban and rural development private sector participation (PSP) in the infra- back on a feasible and sustainable growth path structure sector. This clearly separated service that can improve the economy and the quality of provision and policymaking, and created the life for millions of Colombians. With this kind Water Regulatory Commission alongside the of partnership and planned investments, a rapid Superintendency of Public Services, which is improvement of water services is possible. This is responsible for monitoring and supervising the the basis for a sustainable growth plateau and a adequacy and efficiency of operating companies. path to a more sustainable country. 32 | WORLD BANK GROUP INTERVIEW LEAKAGES, AND IMPROVE COLLEC- TIONS. WHAT OTHER TARGETS OR MILESTONES HAVE BEEN SIGNIFICANT? The level of customer satisfaction is a key factor in making water and sanitation services sustain- able, so providing excellent water quality is very important, as well as responding quickly to customer needs and requests. It’s equally important to develop, provide, and maintain an CARTAGENA’S EXPERIENCE CAN SERVE efficient and economical system of water supply AS AN INSPIRATION TO THE WIDER and sewerage. Assuring service reliability and CARIBBEAN REGION AND PROVIDE availability requires a complete risk analysis and A MODEL FOR OTHER DEVELOPING contingency plan, enabling a quick response to COASTAL CITIES. HOW WOULD YOU an unexpected event. ADVISE GOVERNMENT OFFICIALS WHO ARE INTERESTED IN CREATING AN IN ADDITION TO IMPROVED WATER AGENCY SIMILAR TO ACUACAR? SERVICES, THE COMPLETION OF THE It is important to support water sector reforms WASTEWATER SYSTEM HAS GENER- for large- and medium-sized cities by facilitat- ATED SPECTACULAR ENVIRONMENTAL ing the incorporation of the private sector in IMPROVEMENTS, LIKE POLLUTION-FREE the management and operation of water and COASTAL BEACHES WHERE IT IS NOW sanitation services in the utilities, and by provid- SAFE FOR PEOPLE TO SWIM. WHAT ing financial support of these utilities to ensure IMPROVEMENTS TO THE ENVIRONMENT services to the poor. Once the private sector gets WOULD ACUACAR LIKE TO SEE? involved in the management of utilities, the water and sanitation service quality will improve, Cartagena has a rich endowment of natural become more efficient and reliable, and cover resources that need to be restored and main- access to poor consumers. There are different tained to guarantee the conservation of these mechanisms to facilitate the incorporation of water bodies. With the support of CARDIQUE, PSP, and a mechanism should be tailored to the City of Cartagena and the Ministry of Envi- respond to the needs of each municipality. ronment, the improvement and conservation of the Ciénaga de la Virgen is a key issue to con- THE ACUACAR CONTRACT INCLUDED tinue to address. This requires the formulation VARIOUS PERFORMANCE TARGETS TO and implementation of a strategy and action IMPROVE SERVICE QUALITY, REDUCE plan to accelerate the lagoon’s recovery. PUBLIC-PRIVATE PARTNERSHIPS | 33 Illustration © simon2579/istock TAKING THE BAIT ON IMPACT INVESTING New models to finance sustainable fisheries New forms of investments are emerging, including public-private partnerships, that will unlock opportunities for better fisheries management and shared value creation. By Cristina Rumbaitis del Rio, The Rockefeller Foundation 34 | WORLD BANK GROUP OCEANS In early 2014, The Rockefeller Foundation fishing practices and management, we could President Judith Rodin and my former colleague provide immense opportunities for returns on Margot Brandenburg released a new book on investment while improving the livelihoods of the power of impact investing. Impact invest- small-scale fishers and delivering a more reliable ing—investment dollars designed to deliver both product for consumers. financial and social or environmental returns— provides investors with a compass for shared prosperity. It shows the power of double bottom MANAGING FISHERIES BETTER line investments, where a social gain is delivered The core idea here is simple—better managed and the investor earns a worthwhile return. fisheries are more profitable than poorly man- aged ones—and so there is potential to make A similar approach to investing can be applied money by putting in place the management with potentially transformative results to measures that allow fish stocks to rebound. To oceans and fisheries management. With better unlock this potential, we need to learn from investment strategies and simple changes in what has been done in other sectors, innovate SWIMMING AGAINST THE CURRENT Source: FAO (2012). The State of World Fisheries and Aquaculture, 2012. FAO, Rome. PUBLIC-PRIVATE PARTNERSHIPS | 35 and test ideas with some risk capital, and mobi- NON-TRADITIONAL ALLIANCES lize a good dose of a global ambition. Saving our oceans has gone from being mostly a With good reason, there is a tendency to be pes- public policy-focused endeavor to a collaboration simistic about the challenges and opportunities between private and public actors who derive ahead for the fisheries sector. Too many people shared value from improved fisheries manage- are chasing too few fish, and globally more than ment. Indeed, this new wave of interest and non- 80 percent of fisheries are over-fished or on the traditional alliances is part of what has piqued verge of collapse. The pressure on wild fish stocks The Rockefeller Foundation’s interest in this area, is mounting as demand for fish continues to rise. leading to an exploration of new approaches to Climate change adds a layer of uncertainty to the unite the actors who will benefit from improved future of our oceans and their related resources. fisheries—impact investors, seafood retailers, seafood processors, government regulators, and fishers—to make the urgent changes needed to Saving our oceans has gone revitalize small scale fisheries. from being mostly a public Already, new forms of investments are emerging policy-focused endeavor to a that will help unlock opportunities for better fisheries management and shared value creation. collaboration between private EKO Asset Management Partners, with support and public actors who derive from The Rockefeller Foundation, Bloomberg shared value from improved Philanthropies, and in cooperation with Oceana and Rare, has proposed three mechanisms that fisheries management. could help change the future of fisheries. These include: 1 Despite these daunting challenges, we are already A microfinance/small and medium- seeing positive changes, including the increasing enterprise route-to-market vehicle, which involvement of the private sector in advanc- targets improved processing and distribu- ing models for sustainable seafood production. tion logistics to increase the sourcing We’re seeing seafood buyers and retailers get of sustainable seafood in developing involved with fisher groups to make sure that countries. This mechanism gives local the fisheries where they source their product are fishers the opportunity to benefit from the well managed. We’re seeing them invest time success of this model. and resources in improving conditions in poorly managed fisheries through Fishery Improvement Partnerships, which are growing in number and 2 A public-private partnership vehicle whereby investors fund private partners to deliver a number of data, enforcement, coverage across the globe. management, and assessment services that 36 | WORLD BANK GROUP support sustainable fishing practices and investors, and consumers. All will benefit from increased employment in the fisheries the improvements made to fisheries, and the sector. subsequent increased fishing efficiency and resil- 3 A pay-for-performance impact vehicle. ience of the resource. These mechanisms will be This would fund interventions targeted further developed in the Philippines, Chile, and at specific seafood production systems, Brazil, and, if promising, will be tested further providing long-term supply contracts that by market actors. alleviate the burden of risk borne by fish- The growth of the impact investing field has ers in exchange for measures that improve proven that there is an appetite among inves- the management of the fishery. tors for these kinds of social and environmental The unique added value of these strategies is that investments. These financing tools might everyone involved in the partnership is a winner: satiate this hunger while propelling fisheries the marine ecosystems, fisheries communities, toward a sustainable future. THE CHANGING CULTURE OF FISHERIES IN CHILE A personal reflection on the hake fishery in Chile, the changes and challenges, and why sustainable fish- eries are important. PUBLIC-PRIVATE PARTNERSHIPS | 37 AMBASSADOR of the SEA Jean-Michel Cousteau’s case for sustainable fisheries Since first being “thrown overboard” by his father at the age of seven with newly invented SCUBA gear on his back, Jean-Michel Cousteau has been exploring the ocean. The son of ocean explorer Jacques Cousteau, Jean-Michel has investigated the world’s oceans aboard Calypso and Alcyone for much of his life. Jean-Michel founded Ocean Futures Society in 1999 to carry on this pioneering work. Here, he speaks to Handshake about how a life on the sea convinced him of the urgent need for more sustainable fisheries. Photo © Carrie Vonderhaar/Ocean Futures Society 38 | WORLD BANK GROUP INTERVIEW Your family has played a legendary role educating people about nature, transforming familiar surroundings into something magical, and encouraging responsibility toward the Earth. What are the best ways to transmit deep respect for the environment—and environmen- tal stewardship—from generation to generation? Children around the world have a hard time listen- ing to their parents. But if you make them part of the adventure, if you take them into nature, to the ocean, to the mountains, together, as a team—then, kids absorb everything. Kids have to feel, touch, smell—that’s the best investment you can make as a parent. I know that from raising my own children—my son started buddy breathing in a swimming pool on his fourth birthday, and my daughter was taken SCUBA diving with my father in the Mediterranean when she was nine years old. As adults, my children are now dedicating themselves to better understanding how we depend on nature for the quality of our lives. In the last several years you have become a vocal proponent of sustain- able fish farming. How did your ideas on this evolve? I grew up in the South of France with my friends, the fishers. The fishers make a living by catching and selling Interview by Alison Buckholtz fish. That’s how they pay for their boat, feed their family, PUBLIC-PRIVATE PARTNERSHIPS | 39 and survive. Well, it’s no fault of theirs but we’re I have had some of the fish from the lab of Dr. taking more from the ocean than the ocean can Yonathan Zohar at the University of Maryland produce. Every year we are adding another 100 Biotechnology Institute’s Center for Marine million people to the planet. We’re starting to eat Biotechnology, who supplies them to local up our own natural capital. That’s why we need restaurants. It tastes exactly like fish just caught to do exactly what we did when the early hunters in the Mediterranean. I would never have known and gatherers on the planet ran out of things the difference. to catch and gather on land. We need to farm. There are many different species of freshwater What impact can these sustain- and ocean species we can farm in a sustainable able fisheries make on the way—by putting it where the demand is. environment? Let’s not forget that when you buy a fish from “ the ocean, you’re not just buying the fish. You’re Let’s not forget that when you buying the service to catch, transport, and freeze buy a fish from the ocean, it. With the ability to put a fish farm wherever the demand is, completely self-contained, those you’re not just buying the fish. fish will cost much less. And because it’s self-con- ” You’re buying the service to tained, it means their waste becomes resources catch, transport, and freeze it. that will help plants grow—and the plants that are growing will feed these fish. It is a completely closed system. Putting the fish farm at or near the source of the demand will drastically reduce transportation, in turn reducing CO2 emissions. Do farmed fish taste different? There’s even a sustainable energy solution here. Because these fish farms will be completely self- The energy that you need is generated by the contained, it ultimately improves the quality of fish, which produce methane. This methane can our food. This is because we now use the ocean be converted to energy to drive the pumps that as a garbage can and a universal sewer where circulate the water. thousands of chemicals wash down the land and end up in the ocean. Many species of heavy How would you advise citizens metals have been washed into the ocean. All of that accumulates in the food chain, including who want to work with govern- the creatures we catch and put on our plates. The ment officials to create policies for fish from fish farms will not have this problem. sustainable fisheries? 40 | WORLD BANK GROUP People in government are there for a very short period of time. Their obses- sion is to do something while they are SYLVIA EARLE: MY WISH— in power. Our job, looking at the long PROTECT OUR OCEANS term, is to sit down with them, never point a finger, and reach their heart. Legendary ocean researcher Sylvia Earle Those people have families, they have shares astonishing images of the ocean— children, they want to make a differ- and shocking statistics about its rapid ence. We can help them use their expe- decline—as she makes her TED Prize wish: rience in government to continue doing that we will join her in protecting the vital what they should be doing, much better blue heart of the planet. than they have, and make sure the next generation will benefit from that. You have to reach their heart. You are very optimistic about the future of sustain- able fisheries. What would you tell a young person who chooses to fish for a living? I tell young people, if you want to stay in the business of fish, become fish farmers and you’ll have a wonderful life. As people, we have options. We can disappear like another species, or because we have the privilege of these In 50 years we’ve... immense and incredible tools—our eaten over 90% of big fish in the sea. hands and our brain—we can be the one species that will not disappear. We seen nearly half of the coral reefs disappear. can adapt. We can look at our children and grandchildren and tell them they protected less than 1% of the world’s oceans. will have the same advantages we had. I am a firm believer that this is what we are heading toward. PUBLIC-PRIVATE PARTNERSHIPS | 41 OUR LIVING RESOURCE 85 nations + $102 billion 5x more per year are involved carbon is stored by in international trade in coastal habitats than fish and fish products. by tropical forests. 350 million 5x more estimated jobs are linked nitrogen fertilizer application— to the oceans globally. a huge source of ocean pollu- tion—exists than in 1960. 1 billion people in developing countries depend on 405 dead zones where most marine life fish for their primary cannot survive, spot our source of protein. oceans. Source: “Oceans: Our Living Resource,” Global Partnerships for Oceans Photo © Jim Maragos/USFWS 42 | WORLD BANK GROUP OCEANS Oceans cover 71 percent of the planet. Our oceans feed us, provide a source of livelihood and economic stability, regulate our climate, and so much more. But the shared resource of the world’s oceans is under stress and it’s time to work together to restore the health and productivity of oceans. THE GLOBAL PARTNERSHIP FOR OCEANS AND PPPs: WHAT’S NEXT? The Global Partnership for Oceans (GPO) is a growing alliance of over 140 governments, interna- tional organizations, civil society groups, and private sector interests committed to addressing the threats to the health, productivity, and resilience of the ocean. It aims to tackle widely documented problems of overfishing, pollution, and habitat loss. The GPO’s Blue Ribbon Panel—convened by the World Bank to advise the GPO—comprises leaders from 16 countries, representing government, the private sector, civil society organizations, academia, and multi‐lateral institutions. The Panel was tasked with providing recommendations to the GPO on the principles and practices for prioritizing and implementing sustainable ocean investment. Nelson Del Rio, in his role as a member of the World Bank GPO Blue Ribbon Panel, is focused on the development of goal-based PPPs and related financing as tools to generate socio-ecological sustainability of the oceans and related communities. These PPP-specific efforts will be highlighted in a future issue of Handshake following the launch of his new effort, Prosperity of the Commons International, with co-founders Robin Davies and Jack Sterne. TWO MINUTES ON OCEANS: BLUE CARBON A two-minute look at the importance of marine coastal habitats in mitigating climate change, ocean acidification, and other issues related to the increase in atmospheric CO2. PUBLIC-PRIVATE PARTNERSHIPS | 43 M. Sanjayan, Executive Vice President of Conservation International, is also the sci- ence correspondent for the Showtime cli- mate change documentary series “Years of Living Dangerously,” and contributes science and environment reporting to a number of international media outlets. In his role at Conservation International, he focuses on how conservation can improve human well- being, wildlife, and the environment. Here, he shares with Handshake his ideas for sus- tainable conservation after the donor dollars stop coming, how government officials can create public-private partnerships (PPPs) for protected areas without ceding control, and the “aha” moment in the forest of Sierra Leone that powers his efforts to save the world. BEYOND THE “JUST SO” STORY Quantifying the benefits of conservation Interview by Alison Buckholtz 44 | WORLD BANK GROUP Photo © Ami Vitale INTERVIEW How have PPPs changed ideas Once you understand their challenges, start- ing to talk about solutions will eventually lead about conservation? you to talking about how to diversify sources of It’s almost impossible to do conservation the funding, how to increase technical capacity, or old way, like what Roosevelt pulled off, which is materials, or resources. essentially declaring a place off limits. You just can’t do that anymore. Virtually everything I’ve What makes protected areas work ever been able to do in the field of conservation over time, withstanding chang- over the last decade has had a very big element of public-private partnerships, and all the big ing governments and fluctuating nonprofits understand this right now. I worked economies? on one of these partnerships several years ago If you want sustainable conservation—that is, to protect a very large area, 21 million acres conservation that lasts beyond the donor dol- of temperate rainforest. It happened by bring- lar—it has to be inclusive. It has to self-generate ing together 30 First Nation communities, the need and value, locally. As long as conservation timber industry, and the government. The basis relies exclusively on U.S. and European philan- of the partnership was all of us recognizing a thropy and World Bank and NGO funding, common future where First Nation communi- that’s easy. Everything will be safe. But the ties transition into a more green, sustainable minute that tap turns off, the whole thing will economy. fall apart, unless you create that self-generating value. It doesn’t have to be equal or complete, Do governments still need to be but it has to be there. That’s why when you look at these parks in protected areas that have man- convinced that these partnerships aged to hang on, even in very difficult places, it’s will benefit them? often because they have that local constituency that understands the value that nature or the Here’s the thing with governments: many park provides. officials recognize the incredible power of these partnerships to bring untapped sources of Protected areas work when you have local voices revenue, often going directly to the people of the raised to protect that place. When there is a local area. But it’s always the lack of control that gov- constituency built in, there’s a chance that pro- ernment officials worry about. It’s not that they tected areas will weather the storms of change, don’t get it—they do—they just don’t want to whether government change or policy change. In lose their jobs. So when talking to government order to get that local participation, you have to officials, we start with what their challenges are. be able to demonstrate your value to the people. PUBLIC-PRIVATE PARTNERSHIPS | 45 Where have you seen local voices mals migrate, or where birds nest. This work is about the human condition, and by listening— make a big difference in a conser- empathetically listening—you feel what people vation project? are dealing with, and their pain. If you go with your assumptions, you can be totally wrong. You At Conservation International we’ve worked have to back your way into a solution. closely with President Tong of the Republic of Kiribati to help create the Phoenix Island Protected Area. The Republic of Kiribati is 2,000 How has the idea of “natural capi- miles from end to end, a gigantic seascape, and tal” changed conservation PPPs? its waters are home to enormous schools of migratory tuna. If you want to protect tuna at One of the most important things you need for scale, you have to identify the places that are a PPP to work is a true accounting of natural important to them, and Phoenix Islands are capital. This has started, and the Gabarone Dec- incredibly important to them because that’s laration is a good example. Ten African heads of where they spawn and aggregate. President Tong state agreed to account for their natural capital has completely closed it to commercial fisheries in their planning. You need that as a first step— starting at the end of 2014. Of course, in the but it has to go beyond the simple, obvious stuff Republic of Kiribati, people make their income and delve into the interdependencies between from fisheries, so it’s a big deal for them to people and nature. Right now, I can only tell sacrifice short term gains from commercial fleets you a “just so” story or an anecdote about what a from the U.S. and Asia. But they’re doing it, and forest is worth or what will happen if a breeding during the transition we’re helping government ground for fish is restored. I can’t quantify what enforce the closure, and helping local people the beneficial effects on people will be if we fix gain some benefits until stocks recover. the fisheries in Lake Malawi, for example, but I can tell you that if we save the lake, we save What’s the role of communication in developing the support of local constituencies? How you communicate is key. People need If you want sustainable conserva- nature. If you start from that premise, then how tion—that is, conservation that we communicate and empathize with people on issues related to conservation becomes an incred- lasts beyond the donor dollar—it ibly useful tool and a skill—maybe even more has to be inclusive. It has to self- important than how we understand when ani- generate need, locally. 46 | WORLD BANK GROUP Your family wanted you to the people. But we can’t get funding with just the story. We need to go a step beyond that and become a medical doctor and you make sure our work is data driven. studied genetics in grad school. Why did you decide conservation What’s happening in Lake Malawi? was your calling? Fisheries along the shoreline have collapsed in many Rift Valley lakes, and this has led to an I trained myself to save the world. My “aha” increase in the snail population. Snails bring moment came on a rainy day in the forest of bilharzia, a little fluke that swims into your legs, Sierra Leone, a few years after the civil war works its way to the veins between your liver there ended. I came into a tiny little village to and small intestines, produces millions of eggs, take shelter from the rain, and I saw a group of and clogs your veins. Now, in some villages children huddled around a little smoky fire. I around Lake Malawi, 85 percent or more people went up to them and looked over their shoulder have bilharzia. Among all the other problems, and saw they were burning the fur off a dead an infected person urinates blood. Then we see monkey. They were going to cook and eat the HIV infection rates skyrocket. So here you have monkey. As I watched the scene, slightly fasci- the collapse of the fisheries, and it results in the nated and slightly grossed out, I saw they had increase in bilharzia and HIV. We put the pieces this little piece of tin, about as big as a card, that together in order to see the big picture. Every- they were using to fan the flames of the fire. I where, we find very surprising links to nature looked at this little piece of metal once they set it that we ignore at our peril. We evolved alongside down, and it said World Food Program (WFP), nature, so it makes sense. But these deeper con- alongside the WFP logo—it had been cut from a nections are underappreciated and difficult to metal sign. I thought, “The irony!” They’re using monetize. a sign from the WFP to fan the flames of the fire to cook the monkey they got out of the forest when they had nothing else to eat. So at the end of the day, when the government abandons the people, when institutions crumble, when people just don’t have any other means, guess what? Nature still provides the ultimate safety net. Everywhere, we find very surprising links to nature Here’s what I realized coming out of that jungle: that the poor can be the greatest allies we have in that we ignore at our peril. the fight to save nature. They are our best allies because they need their natural resources far more than we do. PUBLIC-PRIVATE PARTNERSHIPS | 47 Photo © andreusk/istock SEEDS to TREES By Tuukka Castrén, World Bank Encouraging more balanced private investment in forests Sustainable forest management needs between lion in 2011 (excluding “Reducing Emissions $70 billion and $160 billion each year to be from Deforestation and Forest Degradation,” implemented properly, but official development or REDD). Latin America accounts for a vast assistance to forestry only covers about 1 percent majority of annual investments, with $1.5 of the estimated total financing need. Those billion (83 percent) of the global total amount. numbers don’t bode well for the future of forests. Investments in Asia and Oceania are estimated at $279 million (16 percent of the global total), The private sector has a role to play in filling the while private investments in plantation forests financing gap. And it is stepping in to fill that in Africa are estimated at $20 million (just 1 need—especially in countries where there is con- percent of total value). Although Latin America siderable private forest investment. But available draws the most private forest investment, it is data points to an uneven distribution of private unevenly allocated: Brazil accounts for more forest investment across regions and countries. than 80 percent of the regional total. There is a similar trend of regional imbalance in A CLEAR IMBALANCE the estimated 66 million hectares of commer- Total private sector plantation investments in cial, production-oriented forest plantations in developing countries are estimated at $1.8 bil- developing countries, about one-third of which 48 | WORLD BANK GROUP FORESTRY are privately owned. Privately owned planta- ment projects in the forestry sector also discour- tions are spread over 18.7 million hectares in age private forest investors. Latin America and comprise 78 percent of total commercial-production plantations. In contrast, PLANTING PRIVATE FOREST there are only 5.1 million hectares of commercial INVESTMENT plantations in Asia and Oceania and 0.3 million hectares in Africa. To attract more forest investment, the govern- ment needs to take steps to make the business RISKS AND RETURNS environment better—by improving policy and legislation, governance, transparency, and infra- It is clear that while some countries are strug- structure. The public sector can also strengthen gling to gain access to private forest financing, land tenure systems, reduce investment risks others are drawing the lion’s share. Correcting through guarantees and public-private partner- this imbalance requires that we understand its ships, and improve access to finance. Access to root cause. So in a study recently published by information—especially around the availability the World Bank’s Program on Forests, we begin of suitable land for investments—is also impor- with the following question: What factors cause tant for potential investors. private forest investment to flow to certain countries, and not others? We found that, when assessing potential invest- To attract more forest investment, the ments, forest investors acted like any other government needs to take steps to make investor and compared expected returns and the business environment better. risks. Tree-growing conditions, access to markets, growth potential, physical and institutional There are many ways for the public sector to infrastructure, and the business environment— facilitate long-term investments in sustainable including political and economic stability and wood production. These include strengthening security of land tenure—are some of the major the information base on forest resources and determinants of investment flows. finance and recording and publishing informa- We also discovered that the main barriers to tion on domestic investments. financing private investments in Sustainable For- Private forest investment may be unbalanced, est Management (SFM) in developing countries but this trend shouldn’t be accepted as irrevers- include high real and perceived risks, such as ible—especially considering the urgent need for those related to land tenure; the weak availability SFM. The private sector has a role to play in of both domestic and foreign equity and loan SFM and, by taking action, the public sector can financing; and unfavorable terms for financing. make it easier for private forest investment to Finally, high upfront costs of preparing invest- grow where it’s needed most. PUBLIC-PRIVATE PARTNERSHIPS | 49 By Steve Gretzinger, World Bank orest airy tales that timberland investments can be a surpris- You might have heard ingly good and even conservative investment investing in timberlands is risky. with decent returns. In other words, trees always grow despite market fluctuations, and multiple But did you know: Investment in products equal multiple revenue streams. This premise is a surprise to many government private timberland in the U.S. and Europe has officials in tropical countries faced with defor- been quite profitable over the last 20 years. estation, who are grappling with approaches to There’s been a very good, inflation-adjusted stopping illegal logging. return, relatively low risk, and little correlation with other financial sectors. As part of this trend, pension funds have put substantial funds into You might have heard Pro- Timber Investment Management Organizations tecting the rainforest requires a (TIMOs). For example, Harvard University’s pension fund was a pioneer in timberland invest- “hands-off” approach based on ment, alongside others such as Hancock and protected areas. TIAA-CREF. At one point, Harvard was one of the largest non- industrial private timberland owners in the U.S. But did you know: There is very little economic incentive for landowners to sustain- Although these results from the north aren’t ably manage forests since it is cheaper, easier, immediately and easily transferable to the and quicker to cut trees, and convert forests to Amazon, the Congo, or Indonesia, it does show agriculture. Likewise, simply classifying an area 50 | WORLD BANK GROUP FORESTRY Debunking the 4 biggest myths as a national park—where no resource use is est areas. It is difficult to put a value on natural allowed—often does not work well, since hungry capital in a way that will translate into peoples’ people are seldom kept out by under-funded everyday lives. Policies that promote this concept governmental agencies. still have little relevance with most actors in a A more pragmatic and functionally successful practical sense, because economic concerns are approach is to place forests under management so pressing. If a farmer can’t feed his kids and where landowners obtain tangible benefits from can’t get a loan, he has to cut down trees and following government rules. Here’s one example: plant yucca regardless of natural capital account- in the Peruvian Amazon, recent studies showed ing, Kyoto protocols, or the academic value of that some of the lowest deforestation rates occur all components of the native plants found in a in forest concessions where you have active road- forest. building, tree-cutting, and transportation. Under such models, forest is not converted to agricul- You might have heard ture but remains as managed forest under regula- tion. People are making money, and following More stringent government procedures. If companies stick to the law, they regulations lead to better forest can manage a concession for 40 years, investing in infrastructure, deriving incomes, and having management. a steady supply of raw materials. The opposite approach—declaring an area off-limits—invites But did you know: For government officials it’s natural to think that more rules illegal activity, since it is often not protected provide a framework for control, but what hap- effectively. pens is that the “good guys,” who follow these You might have heard Car- rules to the letter, are penalized. Although these regulations are well intentioned, they often put a bon credits, natural capital, and burden on people who ultimately do what they non-timber forest products will have to do and apologize afterwards. Often, the most practical business plan—if you are earning save the rainforest. money to feed your family—is to not abide by the rules. Following stringent rules results in But did you know: Natural capital additional costs that illegal or informal operators accounting makes sense intellectually, but the evade, thus making the products made by the market seldom recognizes it at present, and it is “good guys” more expensive and less attractive not a reality for most owners or managers of for- to buyers. Letter illustration © Mary Ann Shmweli/istock Border illustration © Dzhamiliya Ermakova/istock PUBLIC-PRIVATE PARTNERSHIPS | 51 A TURNING POINT Brazil’s Public Forest Management Law ushers in a new era of PPPs Interview by Mahomed Bashir, IFC Photo © Serviço Florestal Brasileiro 52 | WORLD BANK GROUP INTERVIEW The Brazilian Amazon forest is the Why was it necessary for the Bra- largest tropical forest area in the world, and the country is both the zilian government to implement largest consumer and producer of reforms to curb the rate of defores- tropical timber. But forest conversion tation in the Amazon region? How to agriculture—driven primarily by the demand for land for livestock and agri- have these reforms affected defor- cultural production—is damaging and estation rates? inefficient. First, there is no investment in new technologies to explore the Expansion of the agricultural frontier is the full economic potential of a species- major driver of deforestation in the Amazon diverse forest. Further, there is no way region, along with land grab attempts. In the to sustainably explore the forest to early 1990s, timber production in Brazilian guarantee a continual flow of wood Amazonia reached more than 50 million cubic products—which assures a robust local meters of logs. Since then, it has been falling economy alongside the forest’s public until reaching its lowest level ever recorded in benefits. As a result, the economic history, around 12 million cubic meters per year. activities undertaken in the Amazon forest represent only four percent of Overall, it is clear that there is a close rela- the region’s GDP, and deforestation tionship between the deforestation rate and has increased exponentially to make consumption of Amazon roundwood. Even room for cattle raising and soybean considering the significant reduction in the con- fields. sumption of tropical Amazon logs, the supply of Marcus V. Alves, Managing Director wood from sustainable sources is still incompat- of the Brazilian Forest Service (Serviço ible with domestic demand. And this is due to Florestal Brasileiro, or SFB), is charged the lack of forest tenure rights by most of the with implementing decade-old govern- companies that operate in the Amazon, which ment legislation and reforms to curb cannot secure long-term stable and sustainable these trends. Here, he talks to Hand- forestry-related activities by private companies. shake about the turnaround in forest management since the new law, the But there has been great progress during the last growing role of public-private partner- decade, with government dedicating significant ships (PPPs), and what he’s learned efforts to better manage the Brazilian forests. As about including the private sector in a result, from 2004 to 2013, the deforestation these efforts. rate dropped more than 80 percent. PUBLIC-PRIVATE PARTNERSHIPS | 53 The Public Forest Management Law government that really expects to reduce defores- of 2006 was a turning point in tation and forest degradation. management of the forest sector. In the last few years, the Brazilian What parts of this law could be Forest Service has been trying to adapted by other governments involve the private sector in sustain- facing similar threats due to able forest management. What are deforestation? some of the lessons Brazil’s forestry In 2006, the Brazilian Congress passed a law sector has learned about including addressing forest tenure and management. the private sector in plans to stabi- The Public Forest Management Law of 2006 lize forests? decentralized the regulatory role for sustain- able forest management in private lands, giving There is no doubt that the development of the state governments a stronger role. The law also Amazon region requires the establishment of created the conditions for adding value to forests a new forest-based economy—the opposite of through sustainable forest management, and what has been in place for the last decades. The established a legal framework to implement federal government employs a model that focuses sustainable public forest management through on forest management for multiple uses, where concessions. actors act in synergy to ensure the maintenance of the forest as a permanent economic and envi- ronmental asset, able to generate employment “ and income for the people who live in and near The development of the the forests. Amazon region requires Since more than 55 percent of Brazilian territory the establishment of a is covered with forests—and of those, more than ” new forest-based economy. 60 percent are public and administered by the governments at federal, state, and municipal lev- els—federal and state governments have a huge responsibility in managing these lands. That However, the main achievement of that law is responsibility must be shared with the private related to the establishment of solid mechanisms sector. Our experience with the private sector has of transparency and social control, which makes demonstrated the importance of working with it possible to create a sound environment for companies that have not only extensive experi- strong forest governance. This aspect of the ence in forest management, but more impor- law should be considered for adoption by any tantly, solid business management capacities. 54 | WORLD BANK GROUP Some investors believe that practices and activities), and the need to establish investing in tropical forest and strengthen local and regional forest-based economies in the Amazon region, PPPs are key concessions may raise reputational elements necessary to the success of this fairly risks. How would you convince an recent forest policy. These PPPs for sustainable international investor to bid for management of Brazilian tropical forests will a tropical forest concession? play an increasingly large role managing Amazon forests. There is still mistrust (based on misunderstand- ing) within a few segments of the Brazilian soci- “ ety and also among a group of potential investors in relation to forest concessions. However, this PPPs for sustainable suspicion has diminished as the model adopted management of Brazilian by the federal government has consolidated its administrative procedures, demonstrated tropical forests will play an increasingly large role in ” technical and economic feasibility, and has been implemented with an awareness of indig- managing Amazon forests. enous rights. Reliable institutional capability for contract monitoring by the federal government and, more There still are some key issues that we need to importantly, legal and land tenure security for face in order to scale up investments in sustain- the entire duration of the contract, should offset able forest management through PPPs. These any reputational risk incorrectly associated with include speeding up land/forest tenure reforms; forest concessions in Brazil. Finally, transparency, enhancing law enforcement; improving logistics social control, and strong governance are our and infrastructure; financing forestry and indus- best sales pitch for Brazilian forest concessions. trial operations; and reducing costs of transac- tions and compliance. Where is the Brazilian forest policy heading? What are the main challenges and trends we Marcus V. Alves, Managing Director should expect in the next five years? of the Brazilian Considering the need for conserving Brazil- Forest Service ian forests, the actual and the future demand (Serviço Florestal for timber products, the need to comply with Brasileiro, or SFB) forestry legislation (reducing illegal forestry PUBLIC-PRIVATE PARTNERSHIPS | 55 FROM IDEA TO INITIATIVE “Trees for Life” takes root in South Africa By Andrew Venter, Wildlands Wildlands Conservation Trust, one of South Africa’s leading environmental organizations, facilitates connections between local communities and their supporting ecosystems. Its "Trees for Life" initiative trains citizens to become "Tree-preneurs" who harness the opportunities to become viable small businesses in their own right. Here, Andrew Venter, CEO of Wildlands, gives Handshake readers a tour of the successful program. The Green-preneur concept was born in the rural village of KwaJobe in northern KwaZulu- Natal, South Africa, in 2004, as our Wildlands Conservation team was running environmen- tal workshops with local schools. The team had gathered around 200 local scholars and was showing them the basics of tree propa- gation, using seeds indigenous to the area. The participants had a thirst for knowledge. A few weeks later, when we returned to the site to see if any of the seeds had grown, we were surprised to see that the majority were flourishing despite any obvious care. That’s when the idea behind our “Trees for Life” program started to take root, and today it’s making it possible for the poor to feed, house, and educate themselves by growing indigenous trees. 56 | IFC.ORG/HANDSHAKE WORLD BANK GROUP FORESTRY In Wildlands’ “Trees for Life” Program, Tree-preneurs grow trees and then barter indigenous trees they plant for food, building material, educational support, water tanks, bicycles, and solar panels. This program has spread to over 100 communities, involved over 8,000 individuals, and enabled the propagation of millions of trees. Based on the success of the “Trees for Life” initiative, our team developed the program “Greening Your Future,” which enables tree planting across 24 community-based ecosys- tem restoration sites. GREENING YOUR FUTURE “Greening your Future” faced the challenge of reintroducing trees into the flood plain used by the commu- nity for farming, while helping the community improve farming activi- ties to make the most of what the local environment offers. Photoa © Wildlands Conservation Trust IFC | 57 PUBLIC-PRIVATE PARTNERSHIPS Photoa © Fotosmurf03/istock NET POSITIVE Biodiversity offsets offer solutions By Valerie Hickey, World Bank Madagascar is recognized as a global biodiversity mining is completed, and working with commu- “hotspot”—rich in plant and animal species not nities on alternative livelihood programs. found anywhere else in the world. In the coun- Another tool has the potential to advance try’s southeastern corner, where the Vohimena conservation goals after all other appropriate Mountains unfold into coastal plains extend- mitigation measures have been considered: ing to the Indian Ocean, remaining pockets biodiversity offsets. This approach to mitiga- of coastal forest provide a home to around 13 tion means the company will protect equivalent percent of Madagascar’s native flora species. coastal forest areas outside its mine sites to help While rich in ecology, this is one of the poorest reduce the overall loss of this type of ecosystem. and most isolated parts of the country: 82 per- It’s expected that these offset sites—which are cent of people here live on less than $1 per day. either fully funded by the company or co-funded In 2004, the mining group Rio Tinto—which with government and conservation organiza- is mining for ilmanite in these coastal plains— tions—will eventually cover some 6,000 hectares committed to a policy of “net positive impact” of Madagascar’s coastal forest. (NPI) on the area’s biodiversity. In other words, BIODIVERSITY IS GOOD the company promised that by 2065, a combi- nation of minimizing damage, rehabilitation, BUSINESS community-based actions, and conservation Rio Tinto is clear that this NPI policy is good elsewhere will result in biodiversity being better for its business. In a 2008 position statement, off in terms of forest coverage and quality than the company declared: “We want to be biodiver- before the mining operation took place. Part sity leaders within the mining industry, for the of these efforts include minimizing impact at competitive advantage and reputational benefit its mine sites, rehabilitating forested areas once this provides. Our performance on biodiversity 58 | WORLD BANK GROUP OFFSETS conservation and management issues will create areas, and sustainable forest management. Biodi- benefits for our business.” versity offsets offer a way to address these distinct All eyes are now on the company as it works objectives in a spatially organized manner. to fulfill its NPI commitment at this and a Early evidence suggests that well-designed number of other pilot sites in Africa and biodiversity offset efforts could ensure that Mongolia. Specialists, including people from large-scale infrastructure, extractive industries, the International Union for the Conservation and commercial agriculture proceed in ways that of Nature, are working with Rio Tinto to over- maintain forests and other natural ecosystems, see progress, strengthen methodologies, and their environmental services, and many rural identify limitations. livelihoods. However, since conservation and Many other companies are realizing the benefits biodiversity protection are not the core business of mitigating their impacts onsite and offsite, of investors, the World Bank Group is engaged including using biodiversity offsets. Two of the in early-stage work with the governments of largest oil, gas, and mining industry associations Liberia and Mozambique to assess the feasibil- (IPIECA and the International Council ity of nationally aggregated biodiversity offset on Mining and Metals) have developed the schemes. These initiatives could establish a state- “Cross-Sector Biodiversity Initiative” in part- endorsed specialized agency (such as a conserva- nership with the Equator Principles Finance tion trust fund) that could deliver conservation Institutions. Their motivation is to find ways outcomes at offset sites where it makes the most to conduct biodiversity management in a more sense to secure ecosystems that are equivalent coordinated manner. or greater than those that are lost. The investor would transfer liability and funding for manag- ing the offset, in the form of an endowment, to COMBINING FORCES the specialized agency. This important work could be a taste of things Aggregated offset schemes could help reduce to come: public-private biodiversity conserva- transaction costs by achieving economies of scale tion deals that benefit countries, companies, and rather than each separate investor shouldering local communities who depend most on natural the burden alone. They could also overcome resources. (By some estimates, ecosystem goods the limitations of individual project offsets by and services account for more than half the coordinating larger, collective offsets that could household income of the poor.) support national conservation priorities. And Offsetting is an approach with real benefits for importantly for governments and companies, developing countries and local communities. aggregated offsets could improve delivery of Many governments are looking to reconcile the conservation impacts and provide for long-term need to expand their extractive industries and sustainability through institutions that maintain commercial agriculture for jobs and food secu- and monitor conservation impacts when the rity, with their desire for well-managed protected investment project closes down. PUBLIC-PRIVATE PARTNERSHIPS | 59 Photo © Center for International Forestry Research leveraging the Structuring natural resource PPPs By Ilan Dunsky & Lampros Stougiannos, Dentons Canada LLP “A nation behaves well if it treats the natural national parks, as well as the Antiquities Act— resources as assets which it must turn over to this is often cited as an example of a forward- the next generation increased, and not impaired, looking leader institutionalizing sustainability in value,” Theodore Roosevelt, America’s 26th and stewardship of the environment. president, remarked in 1910. Coming from Though no one can lay claim to the ideas behind America’s “Conservation President”—who conservation, the impulse to institutionalize it signed legislation establishing the first five U.S. has taken hold in the last century. In the past few 60 | WORLD BANK GROUP LEGALEASE decades, legislation and other legal tools have specific resource in a given area. The developer boosted options for conserving and developing will finance the project and develop, extract, and natural resources, and public-private partner- sell the resource, paying back to the government ships (PPPs) may prove to be a particularly concession fees often based on the amount and/ effective solution. or value of the resources extracted. LEVERAGING THE MODEL CONCESSION VS. PPP Traditionally, the PPP model has been applied But the differences between a natural resource to the delivery of public infrastructure or public concession and a PPP can be significant. First, services—including highways and bridges, hospi- in the case of a natural resource concession, tals, schools, and even correctional facilities—on government typically operates at arm’s length behalf of a public authority. The model has from the concessionaire, as government’s role demonstrated time and again that it is adaptable is typically limited to that of regulator. Second, and sufficiently flexible to accommodate vary- the concessionaire recovers its investment only ing structures, depending on the specifics of any from the sale in its own name of the resource given project. For natural resources, similar mod- extracted, with little or no contribution from els have been successfully applied to the develop- government. In addition, depending on the ment of renewable energy facilities (particularly legislative environment in place, concessions may hydro, solar, or wind energy production). This not offer a sufficient framework within which to works by adapting principles similar to tradi- effectively address broader issues such as sustain- tional PPP projects and combining these with able development and environmental protection. various existing legal and contractual structures Finally, the main public benefit associated with such as concessions, offtake agreements, and concession projects is the royalty fees and taxes development or project agreements. returned to government in exchange for exploit- The issue becomes more complex when con- ing the resource, together with local employment sidering non-renewable natural resources, such opportunities. as minerals and petroleum, which are by their However, it is possible to structure such projects very nature finite. These natural resources have in a manner more similar to a PPP to permit traditionally been exploited as concessions; the government a more active role by imposing government will grant a developer the right additional obligations on the concessionaire. (generally on an exclusive basis) to exploit a Examples include the carrying out of functions PUBLIC-PRIVATE PARTNERSHIPS | 61 on behalf of governmental authorities, includ- structuring a PPP in a developing country which ing responsibility for primary education and combines the granting of long-term cutting healthcare, the supply of clean water, training rights to a private operator with stewardship opportunities for the local population, or the responsibilities, including reforestation but also construction of infrastructure not directly related (why not?) ecotourism and fauna preservation. to the natural resource being exploited, such as In a mining operation, governments could con- schools, hospitals, roads, and electricity distribu- sider increases or decreases in royalties payable to tion networks. These elements would add to it upon the achievement or not of certain prede- the public benefit obtained through the natural termined benchmarks by the operator, similar to resource concession. the deduction regimes contemplated in tradi- tional PPP projects. As always, the structuring of any such mechanisms would likely require great care, given the number of variables involved When combined with a conducive and the need to properly balance any additional payment mechanism and effective obligations imposed on the operator with the need to ensure the project remains commercially monitoring, PPPs can maximize viable and financeable. the sustainable local economic development potential of a project Among PPPs’ key innovations are monitoring and otherwise encourage desired mechanisms developed to ensure that project results in a flexible manner. budgets and timelines are respected and that the operator complies with its obligations pursuant to the applicable contractual framework during the lifetime of the project. Many developing There is nothing in the PPP model to prevent countries lack the capacity or the resources a government from establishing a payment to follow up on the monitoring of a project, structure that would seek to encourage or dis- and this can lead to the government failing to courage certain operator activities or behaviors. recover obligations owed to it or becoming liable For example, where traditional forestry conces- for additional payments. In the context of a sions typically grant forestry companies cutting natural resource project, a PPP-styled monitor- rights over a defined territory, in developed ing mechanism could be incorporated to address countries the concessionaire may be required by these concerns. To address the issue of capacity law to replant harvested areas. One can imagine within government to effectively monitor, the 62 | WORLD BANK GROUP operator could be required to sup- port government in the establishment and operation of monitoring agencies through capacity building. PPP FLEXES ITS MUSCLE One of the key advantages of a PPP is the flexibility provided to government to develop and impose operator obliga- tions applicable to any given project. When combined with a conducive pay- ment mechanism and effective monitor- ing, PPPs can maximize the sustainable local economic development potential of the project and otherwise encourage desired results in a flexible manner. A PPP may also enable governments to achieve social benefits while reducing financial losses (legal or otherwise) asso- ciated with operating a civil service by enabling money generated by a project to be spent directly by the operator on the desired public infrastructure and services, rather than being routed through government ministries. Given the mixed history of the use of natural resource royalties by some coun- tries, PPPs may provide a method for achieving social, economic, and other development aims in a more direct and efficient manner, enabling countries to heed Roosevelt’s call to behave well. Photo © Center for International Forestry Research PUBLIC-PRIVATE PARTNERSHIPS | 63 Photo © Neil Palmer/CIAT, Amazon, Brazil By Valerie Hickey, World Bank CONSERVATION TRUST FUNDS Partnerships that protect The good news is that the area of Earth covered region’s experience with conservation trust funds by protected areas is increasing. Over 14 percent (CTF). of land, and a growing percentage of territorial oceans, are under some form of protection. The FINDING FUNDING not-so-good news is that protected areas cost In 2010, parties to the Convention on Biological a lot to maintain and sustain, often suffering Diversity (CBD) committed to conserving 17 from the boom and bust of project financing percent of terrestrial and inland water, and 10 that erodes their natural, financial, human, and percent of coastal and marine areas, by 2020. institutional capital over time. The CBD focused especially on areas of particu- So what do fiscally-stretched governments lar importance for biodiversity and ecosystem wishing to meet their commitments to bio- services. diversity protection and poverty eradication According to the 2014 World Development do? The answer is partnership and financing Indicators, countries have been making good innovation. Such a solution is clear when we progress toward this target for many years, with examine the Latin America and Caribbean low and middle income countries reporting 14.6 64 | IFC.ORG/HANDSHAKE WORLD BANK GROUP OFFSETS percent of their total land under protection—up Brazilian Biodiversity Fund (Funbio) to provide from 8.6 percent in 1990. In the Latin America greater agility, efficiency, and transparency for and Caribbean region, the CBD target has the State’s protected areas. already been exceeded with a massive 21.4 per- In this case, the Fund helps the State capture cent of total land in protected area management. support from different sources, including envi- Key to the region’s progress has been solid ronmental compensation from industry, domes- regulation and institutional frameworks, as well tic and international grants, and carbon credits. as the development of sustainable financing Environmental compensation from investment mechanisms. CTFs—public-private institu- projects, which is mandated by Federal law, is tions entrusted with long-term endowments for by far the greatest contributor to the Fund. The conservation—have played a pivotal role. State is now on track to further strengthen the financial sustainability of its protected area sys- INCUBATORS OF CONSERVATION tem—so much so that financing may no longer be a constraint to meeting ambitious goals of A 2010 study found 22 CTFs functioning doubling the area of Atlantic forest under protec- in 15 countries across Latin America and the tion across five neighboring states. Caribbean, with revenues flowing from them supporting 660 protected areas. These CTFs GLOBAL GOALS are generally set up as private legal entities All over the world, there is a dawning awareness independent from government, often including within the private sector of the need to secure private sector representatives on their governing ecosystem services to ensure sustainable supply boards to help shape investment policies. Many chains and manage risk. Each year, the merit of of these CTFs have grown to become incubators investment in natural infrastructure like forests of conservation that reach beyond the boundar- and reefs becomes more obvious. Protected areas ies of protected areas. The Mexican Fund for can conserve watersheds and regulate water flow, Conservation of Nature, for example, applied 75 prevent soil erosion, influence rainfall regimes percent of the interest obtained from the pro- and local climate, conserve renewable resources, tected areas fund it managed to new staff salaries and protect breeding stocks, natural pollina- for the federal protected area system. tors and seed dispersers. All of these actions Other innovative examples are also boundary- boost industry and agriculture across the entire busters. In Brazil, for example, the World Bank spectrum of the economy. CTFs, which support supported the State of Rio de Janeiro to meet countries trying to meet their protected area 43 percent of its financing needs by setting up commitments, are busting economic as well as the Atlantic Forest Fund. This is a financial geographic boundaries, bringing benefits beyond and operational mechanism developed by the sectors or regions. IFC | 65 PUBLIC-PRIVATE PARTNERSHIPS CULTIVATING CHANNELS for INVESTMENT By Bernardete Neves, FAO Illustration © FAO, 2012 Public-private partnerships invest in ecosystem services in agriculture In densely populated rural areas where family farming is the main livelihood, pressure on soils and water increases every season. Without conservation measures, soil fertility is washed away into rivers, and with it, the family’s food security for the following seasons. But this is a problem not only for the farmer. Land degradation also affects other water users further downstream, increasing water treatment costs and reducing water flow during the dry season. As fields lose productivity, pressure on remaining forests increases and their conversion to new cropland is more tempting, despite forest protection laws. With forest loss, global biodiversity and carbon storage further deteriorates, and we all pay the price. Ultimately, sustained pressure on the natural system may lead to environmental migration and add pressure on teeming urban areas. Thinking globally and acting locally takes on a whole new meaning when we see farmers as managers of our ecosystem services. Voluntary mechanisms offering long-term incen- tives to these men and women who are responsible for our ecosystems are becoming more and more common around the world, and are generally referred to as Payments for Ecosys- tem Services (PES). 66 | WORLD BANK GROUP AGRICULTURE Agriculture provides more than food and fiber. scales worldwide. While their respective goals The farmers, herders, and forest managers who differ, they all aim at partnering with the private manage the world’s land-based ecosystem ser- sector for long enough to allow the ecosystem vices make decisions that reverberate throughout to reveal improvements in its services. In some society at the local, national, and international countries where agriculture is highly produc- level. To adopt more sustainable practices, these tive, national PES programs act as incentives to caretakers of the land need an integrated incen- bring farmers closer to complying with existing tive package that combines capacity building pollution control, biodiversity, and water protec- with access to rural finance and higher value tion laws, eventually expanding beyond that. In markets. They also require a path to participation developing countries, these projects often pilot in the design of these policies and programs. But new legislation, demonstrating the need for financing such an integrated approach is costly locally earmarked water-fee investment in water- and requires investment from a wider range of shed management or tourism benefit-sharing to stakeholders. compensate for the costs of wildlife conservation. AGREEING ON SUSTAINABILITY A PES contract is an agreement between agri- Pooling funds from public culture practitioners (such as farmers, herders, and private sources is key for forest users) and other sectors of society that catchment-wide, long-term have vested interests linked to their activities to assure the continued provision of ecosystem land and water management services. These agreements can be local affairs— strategies. for example, between a water bottling company and the farmers around its spring, agreeing to reduce pollution beyond the levels mandated by A PLACE AT THE TABLE law. Another model includes national programs PES teams’ jobs are hardest at the start, from the where forest owners receive incentives to map moment it’s time to set the negotiating table for and conserve remnant forest patches in their the various actors in the lansdscape. At this stage, farms; in exchange, farmers receive technical getting the ministry of agriculture to understand assistance to improve productivity in their cur- the concerns of the ministry of environment, or rent farmland, to reduce the risk of expansion water supply companies to explain their concerns through deforestation. In these national pro- to the mining industry, is arduous. In develop- grams, hydropower companies or tour operators ing countries, simply bringing these actors contribute funds to invest specifically in their together has been an achievement in itself. Once region of interest. this happens, PES also requires cross-sectoral These and other initiatives are experimenting dialogue. This allows public authorities to work with a variety of governance systems at different more closely with the private sector, exploring PUBLIC-PRIVATE PARTNERSHIPS | 67 legal options to allow for private co-financing retention and productivity increase. Danone of their development programs, and benefiting invests in forest rehabilitation and renewable from their less risk-averse attitude to testing new energy as a contribution to its carbon neutral- approaches and technologies. ity goals. The communities in the Sundarbans that have joined the program benefit from new Within the private sector, Nespresso, Coca Cola, mangrove nursery business and from the restored and Danone are examples of companies that ecosystem function of the mangrove, which is have added PES to their portfolio of socially acting as a nursery and feeding ground for fish. and environmentally responsible investments. Nespresso, together with NGOs and govern- Many of these private initiatives are heavily ment partners, assists the coffee producers taking funded and highly technological—but they part in its AAA Sustainable Quality Program remain extremely local, covering only a few in improving quality and productivity. Farmers dozen households. The challenge lies in upscal- who join the AAA program agree to adopt good ing these solid initiatives to cover larger areas agricultural practices, such as preservation of at lower cost. FAO’s contributions at this stage biodiversity, water management, or prevention include sharing lessons from field experience in of soil erosion, so they can sustain long-term its member countries, facilitating cross-pollina- production in a preserved environment. tion of ideas, and distilling key PES governance models to facilitate wider replication of good practice. National PES programs act as incentives to bring farmers PES AROUND THE WORLD Water trust funds are one of the most successful closer to complying with existing instruments to facilitate public-private invest- pollution control, biodiversity, ments in PES. In Latin America alone, there and water protection laws. are 44 funds at different stages of development, and The Nature Conservancy (TNC) is now expanding its experience with these into Africa Similarly, Coca Cola and its water bottling and Asia. While current funding is still mostly businesses around the world have engaged with public—from legally required contributions conservation NGOs, universities, and national like water fees or compensatory environmental programs to increase water infiltration and offset investments—this type of instrument can also their water footprint. The soy and corn farmers accommodate voluntary investment from the who participate in this initiative benefit from a private sector. Finding a channel to pool public cash incentive to adopt conservation agriculture and private funds is one of the key obstacles in and the consequent improvements in soil water the first phases of most PES agreements, and this 68 | WORLD BANK GROUP is key for catchment-wide, long-term land and the long run. After all, we are all part of the water management strategies. same ecosystem. In Italy, the province of Perugia is partner- The author would like to thank FAO Land and Water ing with Syngenta to ensure that the farmers Division colleagues who contributed to the development of receiving agri-environment payments from the this article, including Mohamed Bazza, Nicoletta Forlano, and Martijn Sonnevelt. European Commission to further protect and enhance the environment on their farmland actually create quality habitats for pollinators. By using the advised seed mix proportion, pur- chased from any seed dealer, and following the management protocol advised by Syngenta, the farmers can actually deliver the environmental service they are receiving subsidies for: pollina- tion, a crucial service of the agriculture ecosys- tem to farm productivity. Subsequent landscape beautification is another valuable asset that agro-ecosystems contribute to regional tourism. But some of the most promising PES stories remain unwritten. For example, in Kenya, even after several years of negotiation, and despite the willingness of Kenya Electricity Generating Company Limited, targeting a share of the water fees being collected in the upper part of the Tana River to reduce sedimentation in the river has not yet been possible. Culprits include overlap- ping and outdated water fee regulations that have discouraged additional investment from the hydropower company. To assure that PES achieves its potential, govern- ments must open channels for the private sector to invest. On the other side, the private sector needs to be willing to partner with institutions whose business practices might be unlike theirs. Cultivating a common strategy will pay off in Photos © Sally Bunning/FAO PUBLIC-PRIVATE PARTNERSHIPS | 69 AGRI-NOMICS FAOLAND&WATER EXPLAINS ECOSYSTEM SERVICES WHAT ARE ECOSYSTEM SERVICES? Ecosystem services in agriculture include the benefits society gets from the environ- ment, thanks to farmers’ interventions. Nutritious food, clean water, healthy soils, pest and disease control, and biodiversity are just a few examples of those benefits. EXAMPLE OF THE ECOSYSTEM SERVICES SCENARIO Sustainable agricultural practices such as conservation tilage, bench protection, or soil organic matter management... induced by training, payment, or impoved access to knowledge, information, and markets... leads to better erosion control, reduced water runoff, and improved soil formation... and finally provides healthy food while ensuring long-term production potential and integrity of the natural resource base. Source: “Incentives for Ecosystem Services in Agriculture (IES),” FAO 70 | WORLD BANK GROUP AGRICULTURE ACTIVITIES THAT PROVIDE ECOSYSTEM SERVICES • Terracing or agroforestry practices • Increase irrigation use efficiency, protection of wetlands, farm-level water harvesting • Establishing contour grass, flower strips, and hedgerows INCENTIVES—SERVICE BUYER • Offsetting to compensate for emissions • Intact natural resource base used for products and services • Fulfillment of sustainability and environmental responsibility commitments INCENTIVES—SERVICE PROVIDER • Training • Improved access to markets and credits • Payments ECOSYSTEM SERVICES • Erosion control and carbon sequestration • Stable water supply for farming activities and business downstream • Biodiversity and pollination BENEFICIARIES—SOCIETY AND PRIVATE BUSINESSES • Water users: clean water, stable supply • Sustainable supply of healthy food • Business interested (agriculture, green economy, eco-tourism, etc.) PUBLIC-PRIVATE PARTNERSHIPS | 71 FROM TREES TO SEAS 2050 Source: NOAA The upper safety limit for CO2 atmospheric CO2 is 350 parts per million (ppm). By experts estimate there will be no fish or coral reefs left due to 401 overfishing and ocean acidification. ppm Source: Science, World Resources as of June 2014 Institute In 60 years 1/4 of land animals will be extinct by 2050 due to global there will be no topsoil left. warming. Source: Time/World Economic Forum Source: Nature /Leeds University 1 3 out of bites of food depend on pollination by insects but over 30% of bee colonies have collapsed. Source: Yale University DO OUR MOST PRECIOUS RESOURCES HAVE A FUTURE? 72 | WORLD BANK GROUP Photo © Victoria Adams-Kotsch, Granite Lakes, Colorado, U.S.A. “ Nature is the ultimate source of all economic value... No commerce or culture is possible without clean air and water, fertile topsoil, a chemically stable atmosphere, and raw materials for food, energy, and medicine. ” —Allen Hershkowitz, Natural Resources Defense Council PUBLIC-PRIVATE PARTNERSHIPS | 3 Subscribe: ifc.org/handshake Connect with us: twitter.com/ifcppp scribd.com/ifcppp ifcppp.tumblr.com handshake@ifc.org July 2014