Sri Lanka's Central and Upper Watershed Area (CUWA) is one of the country's most important natural assets, supplying water to 23 major river basins and supporting water security, food production, hydropower generation, biodiversity conservation, tourism, and climate resilience. Often referred to as the country's "water tower," these watersheds provide critical ecosystem services that underpin Sri Lanka's economic development and the wellbeing of millions of people.

However, decades of deforestation, unsustainable land use practices, soil erosion, encroachment, and increasing climate-related pressures have significantly degraded watershed functions. The resulting impacts include the loss of ecosystem services, reduced water-regulation capacity, increased risks of flooding and landslides, sedimentation of reservoirs, declining agricultural productivity, and threats to downstream infrastructure investments.

Recognizing the strategic importance of upper watersheds as natural capital, ADB is supporting the development of the Sri Lanka Upper Watershed Ecological Restoration Program (SUWERP). The program aims to strengthen institutions, mobilize sustainable financing, and support large-scale ecological restoration and sustainable land management interventions across priority upper watershed landscapes.

To inform the design of SUWERP, ADB commissioned two complementary studies. The International Water Management Institute (IWMI) undertook a hydrological assessment to understand better the role of upper watersheds in water security, climate resilience, and ecosystem functioning. In parallel, Dr.Alex Money conducted a valuation of water and ecosystem services to quantify the economic contribution of upper watersheds and explore how natural capital values can inform investment and financing decisions.

The proposed SKOP event will present the findings of these studies and facilitate a policy dialogue on the importance of investing in natural capital. The event will also draw on international experience in establishing blended finance vehicles and innovative financing mechanisms for landscape restoration, to identify practical pathways for scaling investments in upper watershed restoration in Sri Lanka.

ADB conducted a knowledge event under its Serendipity Knowledge Program (SKOP) for Sri Lanka on 13 August 2026 as part of its support for advancing investments in upper watershed restoration and natural capital. The event brought together government agencies, development partners, international experts, academia, the private sector, and civil society to discuss new evidence on the hydrological and economic value of Sri Lanka’s upper watersheds and explore innovative financing solutions for ecological restoration. It provided a platform for knowledge exchange, partnership building, and policy dialogue to identify practical pathways for scaling investments in watershed restoration and strengthening climate resilience, water security, and sustainable development.

The proposed SKOP event presented the findings of these studies and facilitated a policy dialogue on the importance of investing in natural capital. It also drew on international experience in establishing blended finance vehicles and innovative financing mechanisms for landscape restoration to identify practical pathways for scaling investments in upper watershed restoration in Sri Lanka.

The knowledge event was jointly supported through Technical Assistance SRI: Knowledge and Innovation for Transformative Economic Solutions and the regional Technical Assistance on Scaling Natural Capital Investment in Asia and the Pacific.

Objectives

The objectives of the knowledge event were two-fold:

1. Presented the hydrological and economic case for investing in Sri Lanka’s upper watersheds, highlighting their contribution to water security, climate resilience, and sustainable development.
2. Explored financing solutions and built partnerships to scale upper watershed restoration through innovative natural capital investment approaches and the proposed Sri Lanka Upper Watershed Ecological Restoration Program (SUWERP).