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Rationale

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Clean and regular water supplies are among the most basic human needs, as well as being core to most industries and to food and energy security. Each year, hundreds of billions of dollars are invested in the equipment and facilities that are required to abstract, store, treat and distribute water. Such investments, however, have paid scant attention to some of the most important, and productive, components of water infrastructure: these are the ecosystems – wetlands, forests, grasslands and other natural habitats – that provide a wide array of services to maintain water supplies, uphold water quality and guard against water-related hazards such as pollution, storms, floods and droughts.

Just like built infrastructure, natural infrastructure provided by ecosystems in healthy watersheds is a valuable part of the stock of facilities, services and equipment needed to ensure water security for poverty reduction and economic growth. The key to investing in ecosystem services as natural water infrastructure is understanding their value. Economic valuations of ecosystems are being made increasingly using tried and tested tools for analysis. With ecosystem values in hand, decision makers can then weigh up the costs and benefits of alternate choices for water infrastructure development and operation, with a more complete picture of the likely impacts on sustainable development.

Performing ecosystem valuations, especially in ways that encourage whole communities to participate, empowers all stakeholders. Better informed decisions can be made and consensus improved for initiatives that sustain both the environment and livelihoods. With knowledge gained from ecosystem valuations, priority can be given to projects that combine investment in natural and built infrastructure. Development outcomes will be more sustainable and climate resilient as a result. Incorporating investment in ecosystems into water infrastructure development will be a fundamental building block of the future green economy.

Strategic Action Programmes (SAP) have been developed that not only form the basis for the GEF approval of IW projects but also include a cost benefit analysis of the benefits of action compared with non-action. The challenge facing most projects is that the only "ecosystem values" readily available are based on global data and have subsequently been challenged on both economic and scientific grounds. Thus, revisions of Transboundary Diagnostic Analyses (TDA) increasingly include the determination of regionally applicable economic values for environmental goods and services.

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