Results-Based Financing and Its Potential Role in Advancing the Nexus Approach - Governing the Nexus: Water, Soil and Waste Resources Considering Global Change - page 89

(transaction costs and risk pricing) and additional bene ts (economic effects of

better results and increased certainty of these results) of the RBF approach. Con-
ducting this analysis underlines the level of control or con

dence that the inter-
vention at hand can generate the desired output/outcomes. In turn, this con dence

level is strictly linked to the possibility to measure and predict such results, so that
the risk compensation for the agent can be properly set.
Integrating RBF tools with the nexus approach could add to the bene ts, as the

information gathered by the IVA can contribute to improve understanding of the
cross effects of the intervention so that they can be taken into account for future
interventions.

3.4.1 Choosing an RBF Mechanism

Depending on the speci c situation and the level at which the intervention is

planned, the spectrum of possible issues to be resolved is enormous, but under-
standing the kind of issue to be resolved could help narrow the selection of RBF
tools that may be most suitable for that level of intervention and situation.
Table 2 summarizes some of the characteristics relevant to this selection process,
although it is important to note that some of the tools could be adapted to other
situations than the ones presented here. The idea is to give a general perspective of
the issue to facilitate the discussion in later sections.
The introduction to RBF presented in Table 2 is not provided as an exhaustive
explanation of all RBF tools and schemes, but rather as guidance for the reader to
navigate through the theoretical discussion in the next section.

4 RBF and the Nexus Approach

It is not the intention of this chapter to present RBF as a magic bullet to advance the
nexus approach. The two scenarios presented below are intended to show the
potential bene ts of using the RBF approach and tools in designing and imple-

menting policies and interventions in the concerned sectors with the nexus approach
in mind.
As the scenarios develop (particularly in the second one), the reader would
notice two levels where RBF can contribute to tackling some of the challenges
mentioned above. At a high level, RBF may contribute to:

(1) Strengthening institutions through results-based programmatic approaches that
scale up pilot projects into national schemes.
(2) Decentralization through the provision of cascading economic incentives that
improves effectiveness and accountability.
(3) Overcoming the natural political focus on the short term (led by election
calendars or financial cycles).