Meanwhile, national water codes enumerate the physical forms through which we attempt to manage it: dams, dikes, embankments, canals, channels, wells, pipelines, pumping plants, purification plants, water outlets, spillways, aqueducts, and reservoirs. Our cultural, relational, and political meditations on water are as endless as our infrastructure. How we then choose to manage the stock and flow of freshwater is and remains a primary human concern.

To pay attention to the problem of water is to begin to situate oneself squarely within these intertwined histories: engineering, governance, ecology, and culture. It is also about understanding how decisions shape not only the physical flow of rivers but the emotional currents that define who we are and how we belong to a place. The 2025 World Water Development Report underscores the urgency of this connection, one that is increasingly threatened by climate change and growing demands on water resources. The report says that globally, investment and infrastructure for water and sanitation will need to accelerate dramatically, by as much as tenfold, highlighting the need for more focused technical and policy responses to improve how water is managed.1

Currently, many water management plans focus primarily on identifying the challenges of maintaining a clean and reliable supply, balancing the often competing interests and needs of farmers, fisheries, hydropower, and growing cities. Yet these strategies frequently overlook the essential role that intact upstream ecosystems—forests, high-mountain landscapes, and protected areas—play in sustaining that supply in the first place. The 2025 report suggests that one place to begin is in high-altitude landscapes, the world’s “water towers” that provide essential freshwater services to downstream communities.

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It is no wonder, then, that one compelling example of this approach can be found in Armenia, one of the world’s most ancient civilizations, and a country where water is both material and mythic. A place where scattered across green steppe grasses stand Dragon Stones, otherwise known as Vishaps (վիշապ), named after the serpentine beings of Armenian folklore who are said to patrol high-altitude lakes, rivers, and mountain springs.

Sometime toward the end of the fifth millennium BC, these stones (quarried, sculpted, and polished from single pieces of basalt, and weighing up to seven tons) were hauled up steep mountain slopes by the pre-Urartian communities living below.2 Their strategic placement near springs, streams, and seasonal snowmelt was to honor and safeguard the sources of clean water flowing downstream—water that sustained irrigation-fed agriculture. However, until recently, maintaining this ancient ethos has proved a challenge in modern water management.

The challenge, in part, is that while Armenia’s economy may have diversified, it remains heavily reliant on water-related sectors including tourism, horticulture, agriculture, aquaculture, and hydropower generation, which together contribute more than 25 percent of the country’s economy. In the Ararat Basin alone, water supports roughly $270 million in annual economic activity, largely through irrigated agriculture, fish farms, and hydroelectric power. Climate change threatens this delicate balance, with some headwaters (where rivers originate) projected to lose up to 18 percent of their flow by the end of the century. Rising temperatures, increasingly inconsistent rainfall, and aging Soviet-era infrastructure only compound the challenge.

However, a new analysis is helping to update river basin management plans, and in doing so re-incorporating the role of the forests and high-altitude protected areas where the Vishaps still stand. Though perhaps not as immediately evocative as “dragon stones,” a team of scientists and economists used a natural capital assessment to demonstrate this relationship. Quantifying the connection in both biophysical and monetary terms, the researchers examined exactly how much downstream sectors rely on the maintenance of a key ecosystem service provided by these upstream ecosystems: maintaining baseflow, the steady underground water that sustains rivers during dry months.

Through a combination of hydrologic mapping and economic analysis, the team created what they termed a “Water Value Index” (WVI), a new tool to identify not only where baseflow originates, but also how different land uses or potential climate and management scenarios could enhance or threaten these flows. In the Ararat Basin, their findings showed that upstream forests and protected areas generate more than 200 million cubic meters of water per year, enough to fill roughly 80,000 Olympic-size swimming pools. Using the InVEST Seasonal Water Yield (SWY) model, the team pinpointed that most of this baseflow was originating from a specific mountainous region in the northeastern part of the basin. It is this water that flows downstream, feeding those numerous sectors that rely on (and derive substantial economic value from) the consistent availability of water.

The analysis showed that the greatest value of these flows was for irrigation, generating approximately 92.6 billion AMD per year (about $241 million USD), followed by fish farming (6.8 billion AMD, or approximately $18 million USD) and hydropower generation (5.5 billion AMD, approximately $14 million USD). Building out scenarios, the team was able to pinpoint how, for example, the Vedi River not only holds the highest water value among the basin’s rivers, but that maintaining its reliable baseflow will be a critical management consideration in order to continue supporting the highly productive agricultural sector.

So how exactly does this information serve water management in Armenia? In this case, it has provided evidence for decision-makers to anticipate changes in water flows due to climate change. It helps pinpoint where land and resource management interventions could be most effective. And, because the water-related value of many protected and forested areas will decline under business-as-usual resource management, the study highlights how and where improving local watershed conditions by reducing soil erosion or restoring natural ecosystems could help mitigate these projected losses.

To date, this information has already been integrated as a supplement to the Ararat River Basin Management Plan, with the long-term vision of incorporating a chapter on natural capital approaches into future water basin management plans, including the Sevan and Hrazdan Basins. These plans are due for revision in 2028—offering further opportunity to refine, expand, and institutionalize the approaches piloted in the Ararat Basin across the country.

Natural capital approaches underway in Armenia highlight the enduring connections between land and water, myth and measurement, and the shared language of science, economics, and policy.And the Vishaps, having watched snowmelt nourish early farmers and witnessed Roman cisterns and aqueducts fill, will, in the decades ahead, witness restoration efforts, reforestation, and the careful stewardship of these high-altitude water towers.

To think of water is to engage in a practice that extends beyond our own lifetimes, reaching back through millennia of ice melting, seas rising and receding, and the shifting flows that have shaped landscapes and human societies alike. It is to understand oneself as connected not only to the people and communities downstream, but to the land, the mountains, and the ecosystems through which water flows.

Further Reading & Resources

• Final Report: 3Ps Armenia Final Project Report

• Policy Brief: 3Ps Armenia Case Study

This initiative began under the global People, Planet, Prosperity (3Ps) project as a partnership between the Natural Capital Alliance at Stanford University (NatCap) - formerly the Natural Capital Project; Armenia’s Institute of Botany (part of the National Academy of Sciences of the Republic of Armenia); and the Asian Development Bank (ADB)—including the Principal Natural Resources and Agriculture Specialist and the Senior Climate Change Officer at ADB’s Armenia Resident Mission—in coordination with the Hydrometeorology and Monitoring Center of the Armenia Ministry of Environment (ArmHydromet).

In the Los Ríos region, every tributary carries not just ecological complexity but also an industrial and cultural imprint, from the Indigenous Mapuche-Huilliches people to the lasting influence of German settlers. Here, a fisherman catches trout, a farmer irrigates land upstream, the Lican Hydroelectric Plant’s turbines spin, and a tour boat guides visitors in search of black-necked swans in the wetlands. These communities and industries depend on the health of the river systems, and the connections between them are subtle but important indicators of the livelihoods that surround it.

These details are also part of a complex web of information being gathered to inform Chile’s Natural Capital Committee, established in 2023 by President Gabriel Boric to “institutionalize ways to measure, value, protect, restore, and improve” Chile’s natural capital. Natural capital is defined as Earth’s natural assets, including its lands, waters, and biodiversity—and, as the name suggests, it seeks to estimate the value of these assets. These values can be quantified by their biophysical contributions as well as in economic metrics, not only for tradable resources like fish, but also for the less obvious ecosystem services such as a landscape’s role in nutrient retention, flood prevention, and water purification.

For example, Valdivia’s wetlands naturally filter pollutants like fertilizers from upstream agriculture. When using natural capital approaches, scientists use modeling and mapping software tools to identify how much of this benefit it is providing to nearby populations. Economists then translate this data into monetary terms using valuation methods like replacement cost—what it would cost to replicate the forest and wetland filtration service artificially if they were lost. In other words, if the natural landscape was polluted or developed, the city would have to build and then maintain a water treatment plant to perform the same function.

Historically, humanity has reacted in crisis mode. Many ecosystem services remain invisible until they fail from degradation or overuse. Natural capital assessments illuminate their benefits to people in advance, offering a replicable and transformative way to recognize our dependence on nature before further damage occurs. The challenge often lies in demonstrating to decision-makers that it is in their best interests to work together. This isn’t free, but it almost always costs less than waiting until those services are gone.

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Typically, economists and ecologists have been seen as having competing interests: economists prioritize growth and production, while ecologists place conservation above all. Economists might see little reason to study nutrient retention or streamflow data, while ecologists fear putting a price on nature would ignore the deeper moral issue of preserving it for its own sake.

One major aim of natural capital approaches is to bring different perspectives and methodologies into the same room, demonstrating how development doesn’t always have to be at odds with the environment, and in fact, relies upon it. Investments that consider the effects of climate change and environmental degradation can yield large financial as well as ecological returns. The work Chile’s Natural Capital Committee undertook in their pilot project in the Río Bueno Basin demonstrates that this is truly feasible.

In collaboration with Stanford University’s Natural Capital Alliance (formerly the Natural Capital Project) and the Inter-American Development Bank, the Chilean Natural Capital Committee collected data on various ecological health markers in the basin. They have used these metrics to develop maps that show, in incredible detail, the current functioning of the river and forests, as well as effects on populations and economic sectors across the region. Then, economists from the University of Valdivia and the Chilean Central Bank used economic valuation methods to translate each of these ecosystem services into monetary estimates.

Their initial results are significant (a final report and case study are coming out soon further showing how this integrates into Chilean biodiversity policy). Rivers and forests prevent sediment and phosphorus from polluting water sources: in the Río Bueno Basin alone, this water purification service is estimated to save $104.7 million annually in treatment and replacement costs. Add up the six other ecosystem services analyzed, including water provision, recreation, water regulation, climate regulation, and habitat preservation, and suddenly, the total value grows to a staggering $475 million per year. For scale, the Río Bueno Basin’s total GDP is $588 million, providing a benchmark to understand the immense contribution from natural capital… a value equivalent to 81% of the region’s total GDP.

Suddenly, the interconnected health of an ecosystem and an economy is no longer a vague abstraction. The health of these Andean forests and wetlands directly supports downstream communities and industries. Taking steps to protect the ecosystems and ensure water availability becomes an obvious priority. After all, preventable floods, clean water, and millions of dollars are on the line. Because many sectors stand to benefit, clear incentives can be identified and leveraged, making this information extremely powerful in driving collaborative efforts.

The Natural Capital Committee is applying this information in interesting ways. First, they identified ‘hotspots’ or priority areas where ecosystem services are making the greatest contributions, narrowing the scope of where restoration efforts, money, and time should be invested, and where development should be avoided. Then, they pinpointed specific laws and policies that could use this information to protect these ecosystem services while simultaneously improving economic output. So far, in the Río Bueno Basin alone, they identified 233 policies across local, regional, and national ministries that could incorporate natural capital data. Its inclusion could shape regional land-use and development plans, placing environmental metrics alongside human and financial capital in driving development and decision-making.

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Reflections at the Río Bueno (the Good River)

In a conference room by the river, the Natural Capital Committee presented these findings to local Valdivian government officials. A passionate debate erupts between a University of Valdivia economist and a Central Bank economist about the economic valuation from the nutrient retention model results. A scientist from the Natural Capital Alliance quietly interjects with clarifying information. In the end, they agree on a plan to refine one specific component of their valuation: a small example of the complexity and challenges that come with merging methodologies, especially those involving the intricacies of ecosystems like those in Valdivia. For months, it has been these lively, passionate discussions that have gradually driven the project forward.

María Paz Gutiérrez Montes, the head of Chile’s Sustainable Finance Office in its Ministry of Finance, described it as “a practice of learning one another’s languages.” This practice is not easy, but with natural capital as the center of gravity, the team continues to engage with one another, and the results prove this kind of collaboration can work. Already, the Chilean government plans to use this project as part of their efforts to scale these approaches nationally. Barbara Saavedra, the director of Chile’s Wildlife Conservation Society, describes exactly why natural capital, of all unifying concepts, has resulted in this powerful momentum. She says,

“The objective of natural capital is to show what has remained invisible…and the opportunity natural capital offers is to convene us.”

It is precisely because this type of assessment requires a vast range of skills, expertise, and diverse value measurements that it can bridge perceived boundaries and sectors.

Victor Caro Castro, head of the Division of Environmental Information and Economics at the Ministry of the Environment, described this path as a way

“to progress toward fair policies—ones that not only seek economic growth but also promote social equity and environmental sustainability.”

Natural capital allows us to clearly visualize how the long-term health and well-being of social, economic, and environmental systems are interdependent. It provides a shared vocabulary that links ideas not by commas in wishful statements, but tangible results grounded in science and policymaking – demonstrating how the richness of our ecosystems and natural world can be embedded in the decision-making processes that shape our daily lives.

As we dive deeper into the specific applications and challenges embedded within the world of natural capital approaches — and explore exactly who is driving this work and how — we will look at the challenge from multiple angles, considering the sectors, industries, governments, people, places, and partnerships needed to drive this kind of innovation effectively. Chile makes clear that to achieve fundamental changes in our economic and political systems, we need both scientific understanding of why and how they work (which natural capital assessments can provide) and we need truly collaborative approaches to management and policy.

We will continue to track the Chilean pilot in its next phases of work. Currently, the team is set to expand the integration of natural capital into public planning and decision-making in each of the country’s three macro-zones (north, center, and south). As we move from wetlands into deserts and the subpolar (Patagonia) regions, we will track how gathering information across Chile’s vast ecological and socioeconomic landscape can generate learnings that can then be transferred to national-level commitments. This project is also set to coordinate with the Natural Capital Committee’s Public-Private Natural Capital Roundtable, a group that will bring together companies, trade associations, and civil society organizations. We look forward to keeping you up-to-date on Chile’s progress.

Further Reading & Resources

Policy Brief: Integración del capital natural en políticas públicas: lecciones desde la cuenca del Río Bueno A standalone brief summarizing key insights from the Río Bueno Piloto and its implications for public policy.

Río Bueno Case Study & Final Report: Full technical report from Río Bueno detailing methods, results, and recommendations for integrating ecosystem services into planning.

Final Report Aportes de los enfoques de capital natural a la implementación de políticas públicas en Chile: informe final

Case study Aportes de los enfoques de capital natural a la implementación de políticas públicas en Chile: caso de estudio

Next Stages of Work Promoting Nature-Positive Development Through Integrating Natural Capital — outlining the next stages of work expanding these insights into wider policy, territorial planning, and investment processes.

Chile’s Natural Capital Committee: President Gabriel Boric launches Natural Capital Committee to promote the sustainable development of Chile - Gob.cl

Este reporte sintetiza los aspectos metodológicos, las actividades realizadas y los resultados obtenidos en el Proyecto de Aplicación del Enfoque de Capital Natural en la Cuenca del Río Bueno en Chile, el cual se desarrolló bajo la Cooperación Técnica Regional (CT) “Transformando las políticas y la inversión mediante la integración de enfoques rápidos de Evaluación y Contabilidad del Capital Natural”. Esta CT fue financiada por el Fondo para el Medio Ambiente Mundial (FMAM), implementada por el Banco Interamericano de Desarrollo (BID) y ejecutada por la Universidad de Stanford. Los principales beneficiarios y co-diseñadores de esta CT, en Chile, son el Comité de Capital Natural (CCN) —instancia interministerial integrada por los Ministerios de Hacienda, del Medio Ambiente y de Economía, Fomento y Turismo, con asesoría del Banco Central de Chile y del Consejo Nacional de Ciencia, Tecnología, Conocimiento e Innovación para el Desarrollo.

This report summarizes the methodological aspects, activities undertaken, and results obtained in the Natural Capital Approach Application Project in the Bueno River Basin in Chile. This project was developed under the Regional Technical Cooperation (TC) “Transforming Policies and Investment through the Integration of Rapid Natural Capital Assessment and Accounting Approaches.” This TC was funded by the Global Environment Facility (GEF), implemented by the Inter-American Development Bank (IDB), and executed by Stanford University. The main beneficiaries and co-designers of this TC in Chile are the Natural Capital Committee (NCC)—an inter-ministerial body comprising the Ministries of Finance, Environment, and Economy, Development and Tourism, with advisory support from the Central Bank of Chile and the National Council for Science, Technology, Knowledge, and Innovation for Development.