Quito Water Protection Fund - FONAG (Fondo para la Protección del Agua)

Water for the Metropolitan District of Quito – home to approximately 2.8M people – originates from high-altitude páramo ecosystems in the mountain ranges surrounding the city. Páramo are high-altitude tropical grasslands that function similarly to wetlands, filtering and releasing water as condensation and rain flow down the mountainside, eventually forming streams and the Guayllabamba River. Almost 15 percent of Ecuador's population lives in Quito, and rapid urbanization, unsustainable water use, and increasing demand and pollution are making the city's water sources increasingly distant. 

Water for Quito and the upper Guayllabamba basin is supplied by surface water, groundwater, and inter-basin transfers. For this reason, it is crucial to prevent the deterioration of páramos and wetlands in the Andean highlands, which are their primary sources of water. 

Concerns regarding the future volatility of this water supply underlay the creation of FONAG, the first water fund supported by The Nature Conservancy (TNC), which was one of several initial key partners. From the outset, the Water Fund was part of a wide multi-sectoral collaborative effort with a clear focus on nature-based solutions.

FONAG was established in 2000 by Quito’s Public Water Utility (EPMAPS) and TNC, as a mercantile trust lasting 80 years. It is legally represented by a private fiduciary company, and under Ecuadorian law, reports to a “Superintendency of Companies”, as do most private companies in Ecuador.

The initial capital endowment consisted of USD 20,000 from EPMAPS and USD 1,000 from TNC. Soon after establishing the Trust, other public and private organizations joined: Quito Electric Company (a public hydropower and electricity distribution company), Cervecería Nacional (a beer brewer), Tesalia Springs Co. (a mineral water and beverages bottler), and Camaren, a national NGO. By 2007, FONAG had six organizations on the Trust’s Board making annual contributions to the endowment. Quito Electric Company committed USD 45,000 annually, while Cervecería Nacional and the Tesalia Springs Co. respectively contributed USD 6,000 and USD 7,000 annually. In 2007, a Municipal Ordinance formalized EPMAPS’ annual commitment to provide one percent of its income from water and sewage fees, and established that FONAG would be responsible for source water protection for the Metropolitan District of Quito. The 2007 Municipal Ordinance also established a gradual increase of the utility’s contribution from one percent of their income to two percent by 2011. It has remained at this level since. Until 2011, all contributions went directly toward capitalizing the endowment, and funding for NbS implementation was limited to interest generated plus any supplementary funding they were able to leverage from corporate replenishment or philanthropic dollars. In 2011, a reform to the Trust’s contract allowed up to 30% of new contributions to be earmarked for NbS implementation, while at least 70% should continue to capitalize the endowment.

In addition, non-financial contributions increased the scope of assets held by the Trust. In 2016, TNC transitioned management of a 900-hectare private reserve to FONAG, and the Quito Electric Company made special contributions totaling almost a million dollars, conditional on the purchase of another 3,000-hectares to protect the catchment of highest strategic importance for the company.

Over the years, FONAG has leveraged additional financial resources from a variety of sources, notably development partners. A multi-year cooperation with USAID funded NbS implementation while local contributions were still exclusively dedicated to the endowment. The French Institute for Overseas Development Research (IRD), GIZ, and the Inter-American Development Bank (IDB) also funded FONAG’s work on the ground. In recent years, FONAG has managed other cooperating entities’ contracts and become an implementing partner of a major REDD+ project managed by the United Nations Development Programme (UNDP) for the Ecuadorian government.

As of December 2025, FONAG has an estate worth USD 38.9 million (cash plus properties); from which the return, plus proceeds from agreements, generates an annual budget greater than USD 4 million. 

FONAG has a three-level governance structure. The Executive level, known as the Trust Board, is composed of the Fund's constituents and adhering members. This body is responsible for issuing directives, approving strategic planning, annual planning and budgets, as well as other responsibilities established in the Trust's founding contract. The Board meets regularly four times a year, is chaired by the largest contributor (EPMAPS), and decisions are made in proportion to the contributions made.

The administrative level, represented by the trustee, acts as legal representative and is responsible for managing the financial resources provided by the founding members, executing investments, and channeling resources for the implementation of actions. 

The executive level is the technical secretariat, which is responsible for executing actions to achieve the Fund's objectives. To this end, it submits to the Board a five-year strategic plan, from which the annual operational plan and corresponding budget are derived. Additionally, it is responsible for issuing semi-annual progress reports on the achievements in relation to the goals established in the planning framework. 

In order to achieve the planning goals, the Technical Secretariat has over 80 people, which includes the work of 23 paramo rangers and technicians in the field. The team is multi-disciplinary, having biologists, sociologists, hydrologists, educators, communicators, and administrative staff.

It is organized into four programs: Sustainable Water Conservation Areas, Vegetation Cover Recovery, Water Management, Environmental Education, and two support areas: Communication and Financial Administration. Each program has a coordinator and its respective technical team. All the team is led by the Technical Secretary.

Fonag has identified approximately 140,000 hectares as areas of water importance. Of these, approximately 70,000 are under a conservation or sustainable use regime, of which more than 47,000 hectares are covered by conservation actions, conservation agreements, and restoration actions by the Fund, and the remaining hectares are within the Nacional Protected Areas System. 

Since 2017, jointly with EPMAPS, FONAG has worked to strengthen and integrate hydro-meteorological monitoring networks, aiming at a single integrated network that guarantees quality, continuity, and shared use of the compiled data. Currently, the Fund has developed 36 meteorological and rainfall stations, 13 monitored hydrological stations, and 4 information systems to store, track, and share this data.

One of the important components is impact monitoring, in which information has been generated for more than ten years to demonstrate the impact of conservation actions in terms of water. The preliminary results are positive, but more time is needed to reach robust conclusions. FONAG has an M&E system with indicators at the macro activity, line of action, and strategy levels linked to its strategic planning. All compliance reports show progress based on this monitoring system. 
The management of high Andean ecosystems has been a learning process, and the new strategic planning considers knowledge management a strategic objective. This will provide impetus for the Fund's lessons learned to be applied to its own decision-making and that of other actors working in high Andean ecosystems.  

A Return-on-Investment (ROI) study conducted in 2017-2019 for the Cinto catchment demonstrated a return of 2.15 for every dollar invested in NbS. Subsequently, a study was conducted for the entire scope of FONAG's activities, showing a positive ROI for EPMAPS, thus demonstrating the role that SbNs play in water supply in the Metropolitan District of Quito.