Results-Based Financing and Its Potential Role in Advancing the Nexus Approach - Governing the Nexus: Water, Soil and Waste Resources Considering Global Change - page 88

3.3.3 Capacity and Competencies

The principal should be in a position to administer the scheme and collaborate with
the agent in resolving implementation issues. This requires understanding of the
principles behind the RBF approach and how they come into play to design the
speci c project or programme.

Much like RBF, interventions are tailored to each situation based on these
principles, available funding and institutional options. The nexus approach requires
solutions to be crafted at the appropriate scale combining strategies like IWRM,
decentralization and participation with the appropriate tools depending on speci

c
sociopolitical and environmental contexts to tackle the complex socioecological
challenges at hand.
From the RBF perspective, the principal should also be able to provide assurance
that it has the capacity to oversee project implementation and follow up on the
independent veri cations

and capacity to deliver the results, as in input-based projects, but should also have
the

cation process. The agent should have the technical quali

financial capacity to absorb the additional risk and to obtain the funding
required to deliver the expected results before being paid. Bene

ciaries should be
ready to play their role, paying for their part of the deal, adopting new practices,
habits or technologies so the project can progress smoothly.
Depending on the previous experience of each stakeholder and the kind of
intervention planned, substantial awareness and capacity building may be required
for successful implementation of an RBF intervention. Given the complexity of
elements that will need to be handled by the stakeholders and the interactions
between them, the same is valid for the nexus approach.
One noticeable point of contact between the nexus approach and RBF is the RBF
mechanism known as PES. This mechanism requires a broad understanding of the
value of the environmental services involved, which is not always obvious to some of
the stakeholders. Developing this capacity to understand not only the value of the
services, but the mechanisms to determine that value and the process to recognize and
pay for them provides an opportunity to advance both the nexus and RBF approaches.

3.4 RBF Attractiveness

Even if the preconditions are satis ed, RBF also requires more up-front preparation

than traditional development projects do. Transaction costs of developing and
independent veri cation of results can be higher than in a conventional scheme.

However, there is a trade-off between preparation and supervision costs, as
supervision tends to be lighter in RBF projects due to the focus on results and,
precisely, the inclusion of the independent veri

cation agent (IVA).
In addition, transferring additional risks to the agent will lead to higher pricing.
Therefore, assessing the RBF attractiveness requires a cost bene

t analysis com-
paring an RBF approach to a conventional approach, addressing additional costs