Payments for Ecosystem Services: Funding the Impact of Restoration
The climate crisis is in full swing, and already heavily impacting life in the Andes. Water is becoming less reliable, and forests are under intense pressure as a result. As glaciers continue to melt rapidly, water security diminishes – threatening livelihoods, urban and rural communities, industries, and biodiversity. At Global Forest Generation, our work to restore and conserve high-Andean ecosystems is grounded in both science and community leadership, exemplifying our commitment to continued learning and accountability. GFG’s flagship initiative, Acción Andina, goes beyond reforestation. It’s about restoring ecosystems that protect water. Future-forward ecosystem restoration requires a commitment to long-term, locally rooted support. As we look ahead, we must answer the question: if nature benefits everyone, how do we support the people who protect it? One financial mechanism that Acción Andina is considering as part of its long-term vision, Payments for Ecosystem Services (PES), can help address this in countries where it is legally regulated and permitted.
PES provides a way for people and institutions to recognize and financially value healthy ecosystems, helping channel resources toward the people and communities who look after the land and its many benefits. PES doesn’t replace philanthropy, but rather complements it by diversifying funding while strengthening community leadership and regional ownership. It’s also not a one-size-fits-all market solution, but a locally adapted agreement rooted in trust, governance, and shared outcomes. It affirms that local and Indigenous communities are doing essential work and deserve long-term support to continue it.
As we expand from reforestation and conservation to integrated landscape management, unlocking finance mechanisms from within the region through governance and partnerships is key. Phase 2 of Acción Andina’s 2025-2030 vision, The Path of Water (or Yaku Ñan in Quechua), focuses on creating long-term systems that safeguard water, including the design of an Andean Finance Facility, where Payments for Ecosystem Services is a potential financial mechanism. With growing regional interest in paying for measurable water outcomes, connecting Andean communities that benefit from water with those who protect its source presents an invaluable opportunity.
Many of the funding mechanisms Acción Andina is looking into are linked to real outcomes on the ground. That’s why connecting any potential PES with robust Measurement, Reporting, and Verification (MRV) systems is so important, because it demonstrates tangible outcomes, and how those outcomes can be supported and valued over time. Pairing PES with MRV also makes it easier for partners and stakeholders to support communities over the long term because the impact can be clearly shown. So how does PES work and how may it help finance our work in the Andes? One way PES can function is by collecting small contributions from water users by the cities (e.g., water utility bill), and directly rechanneling them to support forest protection upstream. But it doesn’t work the same in every region. Because PES involves financial transfers tied to land and water use, it must operate within national legal frameworks. So, even though implementation through public utilities or local governments may work in some countries, limited regulation in others makes it more challenging.
Across the Andes, there are examples of water-focused financing models already in place. In Cuenca, Ecuador, the public utility ETAPA allocates a small portion of municipal water tariffs to conserve the upstream forests and páramos (highlands) that protect the city’s water supply. This model shows how cities can reinvest in the ecosystems that sustain them, and can help inform how Acción Andina is thinking about long-term water finance.
Given that PES mechanisms are established through government regulation, Acción Andina may explore alignment with existing legal frameworks as part of a broader, longer-term financial strategy under the Andean Finance Facility. We’re currently strengthening our understanding of how forests influence water systems and collaborating with partners to track and measure results. Acción Andina’s MRV framework is focused now on establishing baselines and methodologies, while preparing to implement water monitoring in selected pilot projects. We already have a Water Impact Monitoring Framework (WIMF) in place, which we plan to implement in the near future. Since capacity building, collaboration, and learning are core to how we would approach PES as a future mechanism under the Andean Finance Facility and Yaku Ñan, this phase is about communities, partners, and local organizations listening, testing, adapting, and shaping these ideas together for the future. True success comes when these mechanisms are co-designed with local partners and adapted to local realities.
“Protecting water in the Andes means valuing the ecosystems and communities that sustain it,” says Stephanie Arellano, GFG Conservation Program Officer. “At Acción Andina, we are building the evidence and thoughtfully exploring financial mechanisms, such as PES, as part of the potential Andean Finance Facility, to better understand how these approaches could contribute to the long-term conservation and restoration of these landscapes.”
Water connects us all, and protecting it is a shared responsibility. Payments for Ecosystem Services is one financial mechanism among many that will help care for Andean ecosystems over time. Acción Andina is building solutions step by step, and partners, donors, and communities alike all have a role to play in protecting water for the future. Together, through long-term, locally grounded finance, we can restore forests, strengthen communities, and secure water for generations to come.
