Why financing resilience must also mean financing the institutions that deliver it
Somalia faces two challenges with respect to climate change. First, it must attempt to save lives and to protect livelihoods in the face of recurrent droughts and floods. However, it also needs to develop new institutions to manage and secure climate financing. However, access to these finances is often dependent upon the ability of countries to demonstrate capabilities that investment is intended to build. Robust financial management, project-ready investment propositions and robust monitoring and evaluation systems are all needed. However, countries with the greatest need also face the greatest barrier to accessing financing because of a lack of the resources required to meet financing requirements. Consequences of this ‘capacity paradox’ will be felt across the economy—household assets, agricultural production, businesses and public finances. A financing approach that integrates institutional development with climate investment is required to build capacity while delivering resilience.
A financial problem, not only an environmental one
A climate shock affects the economy in a number of ways. A pastoralist loses livestock or productive assets, a farmer loses a harvest and related income to purchase inputs for the next planting season, and a trader loses income because of reduced sales or disrupted transportation. Families spend on food, water, etc., to ensure survival as opposed to education and enterprise activities. Furthermore, economic shocks affect the government. Its normal revenue will decline when the government’s spending requirements increase to address a crisis affecting infrastructure as well as displaced persons requiring services. With limited resources that will have to be stretched even further to cope with a crisis affecting the country, the institutions that are expected to develop strategies to prepare the country for future crises are themselves weakened. The World Bank’s 2026 Somalia Country Climate and Development Report states that climate change has the potential to reduce GDP adversely. This makes climate change and related adaptation important for economic planning, investment and fiscal management, with potential impacts over several decades.
The cost of qualifying
Addressing a problem is not the same as coming up with a financially viable solution to it. Presenting a flood-management proposal requires more than just showing around some damaged houses. In addition to providing credible and up-to-date climate information, a flood management proposal also needs an engineering assessment, cost calculations, consultative processes, procurement strategies, environmental and social protection measures and a maintenance strategy. Each of these issues needs to be addressed in turn, and when all have been addressed, a major investment can be sought. The costs of this preparatory work can be substantial before any principal investment is available. An institution with experienced staff and a solid track record of implementation and with dependable and functioning operational structures can absorb these costs. However, a capacity-constrained administration will struggle to keep a team of specialists to commission studies to answer technical queries repeatedly. The UNDP notes how conflict can lead to a country losing climate data capacity and the corresponding technical services needed for climate action planning and implementation. For Somalia, this means the possibility of a cycle of weak capacity for climate-related action limiting funding opportunities, but funding constraints further limit the development of the necessary capacity to address increased climate-related vulnerability. Vulnerability to climate change therefore creates a need for action, but the administrative readiness to spend capital on the necessary investment is a critical constraint. Access to funding for climate change is a problem of a complex interplay between the recipient’s capacity and the funding institution’s processes and procedures. Improving one aspect while ignoring the other leads to more incomplete reforms.
Somalia does not start from zero
Somalia does have access to substantial amounts of climate funding, and work is already under way to address climate change issues through national ownership and international partnerships. Ugbaad (the climate resilient agriculture project in Somalia), is a program being for strengthening rural communities’ resilience through programs of land restoration, improved access to water and agricultural practices and value-chain development. The Federal Government of Somalia recently launched a multi-million urban-resilience project for 17 cities in the country. The project is a combination of efforts to strengthen the capacity of institutions and build resilience through grants for resilience investments. While these partnerships could immediately address some of Somalia’s capability gaps, the strategic question is what is left behind to better prepare, manage and monitor subsequent funding. Will Somali institutions be any better off after the project?
Accountability must include waiting costs
Easier access to funding should not be conflated with less accountability. Somalia needs transparent procurement processes, proper audits, community engagement and meaningful ways for citizens to report any problems with funds. All public funds lost to poor management of development funds are forms of the communities’ resources that were never delivered. However, recognizing the cost of delays in making investments is crucial. Postponing investments while administrative issues are cleared can be costly for people and assets that could have been productive in the meantime. It is equally important to recognize the two risks that funding health must aim to mitigate: the risk of implementation failure and the risk of delay leading to avoidable harm. Proportionate controls for proportionate risks: A small community water intervention should not be subject to the same set of requirements as a large infrastructure intervention. Supervision should be proportional to the financial, environmental and social risk of the intervention. Deliver projects responsibly—implement them well and do not let minute details of the process stop useful development.
Building a Somali route from proposals to results
A strong project preparation function within existing national structures should be Somalia’s first priority. This does not necessarily have to be another institution but rather finance, environment, planning and sector-specific expertise organized around a small number of ‘ investable’ projects. Local knowledge is needed for planning at the federal member state and district levels. The participation of these entities in the national coordination of local knowledge should not be limited to information sharing but should be organized within national coordination. Second, to finance capacity, training must lead to the creation of working institutions. Workshops on their own are not enough to establish procurement, accounting, and climate information systems. In addition to trainers, staff with skilled employees, supplied with necessary hardware and software, financed with operating budgets, mentored, and given the opportunity to apply their newly acquired skills are needed.
International partners can ensure that knowledge transfer, including the joint preparation of projects, shared management responsibilities, and increasing national ownership, helps to transform single projects into a pool of knowledge for the institution as a whole. Budgets for investments should outline the ownership structure, define the operating responsibilities, outline the necessary recurrent expenditures and ensure affordable access to the services for poor and vulnerable groups, including IDPs. There is a need for Somalia to distinguish between projects that can attract commercial finance and those that require a public or concessional finance channel. Revenue-generating utilities such as telecommunications can attract private participation to deliver services to generate returns. Essential protection for the poor and vulnerable should not depend on them generating returns for investors. Finally, announced commitments, approved projects, disbursed funds, expended funds and operationalized services all represent different aspects of a financing journey that should be monitored by the government and its partners. They need to be separately reported to highlight any bottlenecks and ensure greater transparency and public awareness.
Capacity should be an outcome of finance
The new institutional setup will not solve the global financing shortage for climate-related projects. Nor should capacity constraints in Somalia be used by financing partners as an excuse to do less and make access even more difficult. Somalia must develop capacity while financing partners make access easier. Capacity can be considered both a prerequisite and an outcome of climate investment, and countries develop their institutions as they implement and learn from well-supported projects and retain expertise. For Somalia, the most valuable climate investment will be that which has two lasting legacies: improved protection of communities from shocks and improved ability of institutions to manage subsequent challenges. The so-called “capacity paradox” cannot be solved by lowering the standards for climate financing or by demanding that countries such as Somalia first become strong enough to develop their own institutions. What is needed is accountable financing that helps build the necessary capacity.
Conclusion
To address the capacity paradox that Somalia is facing, climate finance must strengthen institutions while at the same time creating tangible protection for vulnerable populations. The Somali authorities need to strengthen the following areas: coordination, project preparation, financial management, and the participation of local stakeholders. The international community must provide financing with a predictable volume and with proportionate access requirements. In addition, financing must be channeled toward sustainable investments in the systems required for implementation to achieve results. Accountability for financed activities goes beyond tracking expenditure and needs to establish whether sufficient functional services have been created and if the economic vulnerability of communities has been reduced. In addition, the capacities of national and local institutions need to be strengthened to manage financing for development in the long term. Funding for expertise, running costs and maintenance of climate-resilience projects needs to be allocated in addition to financing the actual infrastructure. The success of financing for climate-resilience can be measured by the amount of losses of livelihoods that are avoided and by the capacities that Somali institutions develop to deal with long-term natural disaster shocks. Therefore, institutional recovery and climate resilience need to go hand-in-hand, and financing should build the required capacity for responsible implementation to enable each investment to protect livelihoods in the short term while strengthening the country’s ability to deal with long-term shocks.
By Dr. Mohamed Ibrahim Nor
