Assessing Governance and Impacts of Water Funds in Colombia: An Institutional Analysis

Sometimes referred to as an influential variant of payment for ecosystem services (PES), Water Funds are among the most promoted schemes in Latin America to foster environmental conservation while securing water provision to some of the region's largest cities. Despite their growing importance, empirical research on the impacts of Water Funds as institutions that reshape watershed governance remains limited. In this study, we analyze five Water Funds in Colombia affiliated with the Latin American Water Funds Partnership through the lens of common-pool resource institutions. Drawing upon Ostrom's Institutional Analysis and Development Framework, we analyze the factors that explain why some Water Funds in Colombia remain active while others dissolve. Specifically, we examine how the rule-making process is influenced by institutional strength, stakeholder trust, and collaboration with environmental authorities, creating outcomes of continuity or dissolution of these governance structures. Our research relies on qualitative methods, including remote interviews with pertinent actors and stakeholders associated with each Water Fund. The findings reveal that although Water Funds can serve as novel governance spaces where diverse public and private stakeholders engage concerning watershed governance, particular challenges persist, putting the continuity of Water Funds at risk. These challenges relate to including a wider array of actors, such as landowners and certain public institutions in the Funds' management bodies, and the need to foster a shared watershed vision between actors to enhance legitimacy and trust among them.