Legal and Institutional Analysis

​Legal and institutional analyses are undertaken to determine the feasibility of developing a Water Fund given local, regional, or federal legal requirements and institutional structures.

Most important topics for a Legal and Institutional Analysis


    The water fund should contribute and complement existing plans, programs, and projects that different levels of government have established in their environmental policies. There should be consideration of key legal aspects such as national environmental policies, legislation for financing environmental services, the capacity or obligation of public agencies to finance watershed management, existing legislation to establish water service rates, and other existing mechanisms for funding.


    There should be a careful exploration of existing management plans in the project area to determine how the Water Fund could partially or fully contribute to financing them (e.g. existing plans that are underfunded). These management plans may be broad in scope, in line with the priority focus areas of the water fund, which may include protected areas, territorial zoning, irrigation districts, and so on.


    Given that each country has different regulations for the administration of public resources, there should be consideration if any of the potential funders will be subject to a permanent oversight by state audit agencies and therefore limited or requiring additional steps for their involvement.


    The water fund’s success will largely depend on the adequate management of resources, legal, and financial guarantees, as these can often be limited. As such, the selection of ‘the best option’ for administering those resources is critical. The legal and institutional analysis should explore these options, which may include consideration of the following: Trust Fund, existing national environmental fund, creating a new organization, and operating within an existing organization.


  • What are the challenges and opportunities for developing a Water Fund in terms of the legal and governance context?
  • What laws/institutional considerations should be taken in the design of the water fund?
  • What type of entity needs to be created in order to have a water fund adequate for the site and how the money will be managed? (e.g. fiduciary trust, environmental fund, NGO, etc.)?
  • How will decisions be made in the Water Fund (governance)?

The general process for conducting a legal and institutional analysis will vary depending on the local context.

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