“The loss and damage finance pledges made so far are important steps in the right direction,” said Inès Bakhtaoui, co-lead author of the report and a research associate at SEI Oxford. “We hope even more emerge at Sharm El-Sheikh. At the same time, our analysis shows there are significant gaps in existing climate finance mechanisms that make it important to create a dedicated L&D mechanism that can better deliver funds to meet the needs of victims of climate change.”

Drawing on observations from the first session of the Glasgow Dialogue, as well as the author team’s own analysis of existing climate, development and humanitarian finance mechanisms, the report identifies several gaps that make it difficult to meet loss and damage finance needs without a new mechanism.

“Climate, development and humanitarian finance provided today are inadequate to address loss and damage and provided in a form that often fall short of core principles of equity and climate justice today,” said Liane Schalatek, a contributing author and associate director of the Heinrich-Böll-Stiftung in Washington, DC. “Humanitarian assistance is usually short-lived and not sustained, and does not deal with slow onset changes; and development finance often prioritizes donor preferences. Financing to address loss and damage is not aid and needs to be treated as obligation of developed countries.”

The report then identifies key principles for delivering loss and damage finance in a manner consistent with climate justice: historical responsibility and the polluter pays principle; equitable and targeted support (including ensuring gender equality and protecting human rights); grant-based and programmatic finance; accessibility; recipient ownership; and transparency and accountability.

Building on those principles, the authors explore what a potential global loss and damage finance facility might look like, including what structures and modalities need to be put in place at the global, national and sub-national level. The analysis is based on interviews with 18 stakeholders, including negotiators, philanthropic funders, civil society, humanitarian organizations and researchers. The result is a series of practical recommendations relevant both to a future dedicated mechanism, and to existing institutions:

• Prioritize simplified and enhanced direct access procedures that deliver funding directly to communities and marginalized groups.
• Prioritize small grants and unconditional cash transfers, which are likelier to reach disempowered and marginalized groups quickly, and avoid loans, which increase debt burdens.
• Ensure that recipients – particularly representatives of the most vulnerable and discriminated communities – are involved at all stages of decision-making.
• Embed independent and participatory approaches to monitoring and evaluation and create accountability mechanisms that empower recipient communities.
• At COP27, agree on a phased approach of establishing a dedicated loss and damage facility in the medium term and mobilizing finance through existing mechanisms in the near term.

“Any decision on loss and damage finance at COP27 must centre the needs and priorities of vulnerable communities most affected by loss and damage,” said Zoha Shawoo, co-lead author of the report and an associate scientist at SEI US. “This involves giving them sufficient decision-making power over how finance is used, such as by sitting on the board of a loss and damage finance facility or devolving the management of finance to the lowest level. In the near term, a small grants pilot programme under an existing finance mechanism could urgently disseminate finance to those who need it, be directly accessible and give autonomy to affected communities to utilize it in accordance with their needs.”

Background

As the Sharm El-Sheikh Climate Change Conference (COP27) gets underway, one of the top priorities for negotiators from the Global South, including highly vulnerable island states and disaster-stricken African nations, is to secure commitments for finance to address loss and damage.

Loss and damage – the toll of climate change impacts, from cyclones, to droughts, to gradual desertification, that for various reasons, cannot be avoided – is imposing large and growing burdens on vulnerable countries. By 2050, a recent UN report found, losses linked to climate hazards in Africa alone could reach US$50 billion per year.

Yet in Glasgow last year, the Parties rejected a proposal to create a dedicated loss and damage mechanism, instead establishing a three-year “Glasgow Dialogue” to explore ways forward. In the meantime, Denmark, Scotland, and a few others have pledged some dedicated finance, but as of September 2022, it totaled just $16 million in public funds, plus $3 million from private sources.

Read the report in its entirety here.