Financial Mechanism by GOLD STANDARD

A Presentation By: Harish SharmaEnvironmentFirst Energy Services (P) Ltd.

Water Benefit Certificates(AN OPPORTUNITY FOR INDUSTRIAL, RESIDENTIAL, AGRICULTURE, HORTICULTURE, INSTITUTIONAL WATER

EFFICIENT AND WASTE WATER TREATMENT PROJECTS)

Water Benefit Certificates (WBC)

Harish SharmaEnvironmentFirst Energy Services (P) Ltd.

The Water Benefit Standard is a results-based finance mechanism to drive funding for water supply, purification and conservation projects. These projects help maintain the water balance within a watershed, encourage local stakeholder engagement and consultation, promote sustainable development, ensure environmental integrity and prepare water users to contend with a world of increasing water scarcity.

Water Benefit

Standard

Water Benefit Certificate (WBC): A unit of water outcome (or benefit) representing that a certain volume of water has been sustainably supplied, purified and/or conserved by a given project during a specific period of time. Projects are issued Water Benefit Certificates (WBCs) according to the volume of water benefits they generate per year.

Project Must Address

Water balance Water scarcity Water sensitivity

Environmental integrity

sustainable development

Eligibility Requirements

Water supply Water purification Water conservation

Two types of certification are possible under the WBS

1. Regular project certification

2. Retroactive project certification

Project Selection

A WBC is a volumetric unit of account. The basic unit that holds across all projects is set as 1 WBC = 1 cubic meter of water supplied, purified or conserved. However, due to the wide spread of volumes between very small and very large projects, the Water Benefit Standard applies discount factors to project volumes that exceed certain thresholds in order to encourage economies of scale.

Calculating WBCs

As a project grows, the amount of water needed to generate one WBC increases

For volumes up to 40.000 m3 p.a., 1 m3 is worth 1 WBC

For additional volumes greater than 40.000 m3 but less than 1.300.000 m3 p.a., 10 m3 are worth 1 WBC

For additional volumes greater than 1.300.000 m3 p.a., 100 m3 are worth 1 WBC

Categorization

Eligible Project Must Insure

Sustainability• Sustainability ensures that projects are

designed and implemented in a sustainable and participatory way. to assess the risk the projects may pose to the project's area of influence and to ensure the projects meet the sustainable development requirements of the Gold Standard. Projects shall provide clear evidence that there are no negative impacts in set socio-economic and environmental criteria. 1

Watershed Risk Assessment• The Watershed Risk Assessment assesses the risks that

may be faced in implementing projects within a specific watershed or basin and determines whether additional monitoring may be required based on water scarcity, vulnerability, or areas and species of high environmental value. Each criteria is addressed with a 'yes' or 'no' response with justification provided as to why the response has been entered.

Sustainability Assessment• to assess the risk the projects may pose to the project's

area of influence and to ensure the projects meet the sustainable development requirements of the Gold Standard. Projects shall provide clear evidence that there are no negative impacts in set socio-economic and environmental criteria. 2

• Each requirement is assessed according to the following criteria.

• Negative (-): There is a risk that the project will negatively impact the requirement. Mitigation is required and will be monitored for the duration of the project.

• Neutral (0): The project will not have any impact on the requirement. Mitigation is not required.

• Positive (+): The project will positively impact the requirement and will be monitored for the duration of the project.

• Enhance (E): The indicator is neutral, but can be improved over the lifetime of the project and become positive. Requires monitoring for the duration of the project.

• Not Relevant (NR): The requirement is not relevant to the project methodology and/or design. Mitigation is not required.

Sustainability Assessment 3

Human rights and socio-economic situation

The project respects internationally proclaimed human rights including

Universal access to water, and dignity.

Cultural property and uniqueness of indigenous people.

Legal rights, customary rights, special cultural

ecological, economic, religious or spiritual significance

4

The project don’t have any negative Impact on

Good Working condition

Food Security

Water Quality

Pollution Level

Ecology 5

Demonstration of Financial

Additionality

•Projects that issue Water Benefit Certificates via the Water Benefit Standard must demonstrate that they are beyond business as usual, meaning that they would not have been implemented without the Water Benefit Standard. The project developer proves this by conducting a Financial Needs Assessment (FNA) as part of the initial certification. The FNA can be completed in one of two ways:

•Compliance with a positive list of preferred technologies, methods or geographical regions that permits the project to per se pass the FNA. Such projects must still disclose a financial forecast over the project period.

•If a project does not comply with the positive list, a formal financial analysis must be conducted to demonstrate that the revenue from WBCs is required to make the project financially feasible.

6

Real, Measurable and Verifiable

•First, a baseline methodology estimates the state of water use in the absence of the project. Then a monitoring methodology calculates the actual water benefits directly resulting from the project, taking into account any water benefits from sources within the project boundary. By determining both the baseline and project scenario, water benefits are objectively verified in a transparent way. Due to the variety and complexity of project types and location, there is likely to be additional criteria that are not specified in the universal Water Benefit Standard.

7

How is this different from other initiatives?• The primary difference is the Water Benefit Standard’s focus on

catalysing finance for water projects and making the most of these funds. While the other initiatives provide methods for measuring a water footprint or define specific water stewardship actions, the Water Benefit Standard is designed to make funding flow to critical water projects and to ensure that every dollar makes the greatest impact.

What type of projects are eligible?• The Water Benefit Standard is open to any technologies and measures

that address locally defined water issues and create verifiable benefits to natural and human environments according to an approved methodology.

Who Audits the Outcome?• Pre-Feasibility Assessment (Gold Standard Foundation) After completing the project

documentation, The Gold Standard conducts a desk review assesses whether the project is likely to comply with its requirements.

• Initial Certification (Independent Auditor) An independent auditor determines whether the project adheres to the rules of the Standard and is thus eligible to be registered as a Gold Standard project.

• Performance Certification (Independent Auditor) After each year of monitoring the registered project, the independent auditor verifies the outcomes. This reviews the water benefits that occurred over the previous year, and determine the number of WBCs to be issued.

How Long is project cycle? • A regular project term is either 10 years or 3x7 years using a flexible baseline approach after

each 7 year period. For projects that are part of a programme of activities (PoA), the project term is up to 28 years. All outcomes, including sustainable development metrics, are audited and reported in a transparent public registry each year.

Who is going to buy Water Benefit Certificates?• Corporates, governments and public institutions, NGOs and concerned

citizens that want to make the greatest impact with every dollar they invest in water initiatives. Several corporate buyers have already committed to purchasing Water Benefit Certificates. Like these companies, corporate buyers will have an interest in good water stewardship as part of their corporate social responsibility programmes and/or to preserve the basins that support their supply chains.

How are Water Benefit Certificates priced?• By 2016, an anticipated 10-15 projects will have Water Benefit Certificates

available for sale covering WASH, water-efficient agriculture, household and industrial wastewater treatment, irrigation techniques and more. Currently WBCs have traded in the range of 7-10 US$ per Certificate.

How do Water Benefit Certificates fit into Organization's CSR strategy?• Corporates are encouraged to responsibly manage and reduce their own water footprint wherever

possible. But recognizing that most organizations cannot reduce to zero, Water Benefit Certificates are a way to invest in water security. It is important to consider that water is inherently a local resource, such that a cubic metre of water from a project in Canada is qualitatively vastly different from a cubic metre of water from a project in the Sahel. Further, water has value on multiple levels, ranging from economic to social to cultural. Therefore, in order to make purchases of WBCs credible, it is important that they be used as one component of a larger, comprehensive water stewardship strategy, and that the desired outcomes from purchasing WBCs are communicated appropriately and effectively.

How are sustainable development principles measured and managed?• Unlike many donor/ public funded efforts where sustainable development outcomes are often

unclear or anecdotal, all projects under the Water Benefit Standard must first be evaluated for sustainable development outcomes and these must then be tracked and measured on an annual basis. Any negative impacts must be mitigated whilst all neutral and positive impacts are monitored for project duration. This process involves local stakeholder consultation and is reviewed externally, and all reports are transparent and publicly available online.

Registered Office: Abhishek Kumar Mazumdar

405 A, Prakrati Corporate, Y N Road, Indore (INDIA) 452001 • +91-731-6007860

Chandigarh Office: Harish Sharma

SCO 48, 2nd Floor, Opposite P.O., Sector-8, Panchkula (INDIA) 134109 • +91-7696644244

Mumbai Office: Anand Pandey

A1-1603, Runwal Garden City, Balkum, Thane (W), Mumbai (INDIA) – 400607 •+91-9699559222

Other Representative Locations

Delhi, Chennai, Ahmadabad and Jaipur

Email ID: info@environmentfirst.in