The Paris Declaration on Aid Effectiveness calls upon donor and partner countries to enhance the effectiveness and efficiency of country systems in a way that guarantees ownership and sustainable results. Within this context, the current paper provides a synthesis of major elements and approaches of institutional assessment that may be applied to environmental management. It suggests that while a large number of diagnostic tools are in use, their level of elaboration is not sufficient for systemic sector-specific capacity assessments that would match partners’ and donors’ needs. In order to facilitate the improvement of these tools, the paper provides an inventory of core functions for environmental management. This inventory may be used by those involved in capacity assessments to consider more amply specifics of the environmental sector. Each function will need to be associated with benchmarks reflecting the multifaceted nature of institutional capacity. The evolving approaches to environmental management, as well as changes in the international and country context, impose the need to regularly update both the list of functions and complementary benchmarks.