ProjectCycle_Financial_Strategies

WATER FUNDS PROJECT CYCLE Generalization of required financial resources The financial resources required to develop a water fund increase significantly from the initial conception of the idea in the Feasibility Phase through to the implementation of projects on the ground in the Operation Phase. The text below each phase specifies one key factor that will affect the overall associated costs, such as how much information and data are readily available versus how much information would need to be collected and analyzed. The total duration of the phases of the Project Cycle will vary depending on local conditions and context, the availability of resources and data, and several other critical factors. Nonetheless, The Nature Conservancy (TNC) and its partners’ experience indicates that as a global average it takes approximately three years to complete the Feasibility, Design, and Creation Phases and begin operations. From the first day of the Operation Phase, it may take an average of 5-7 years to reach maturity. As noted, some water funds will take much less time; others may take longer. In all cases, new innovative tools and experiences are continuously helping to shorten this duration by gaining efficiencies across the Project Cycle.

FINANCIAL STRATEGIES The financing model of a water fund has similarities with models of start-up finance companies. They are based on \"seed capital\" to create a case that attract large investors. Big investors in this case are public resources. Once a stable source has been secured, it is possible to access sophisticated financial sources (e.g. impact capital / credits). As illustrated in the graphic, funding for the first three phases of the Project Cycle are typically covered through seed capital, while more sophisticated financial instruments are typically required to support the long-term operations of a water fund.