The impacts of climate change are escalating rapidly, with the most vulnerable communities around the world already losing their homes and livelihoods to floods, hurricanes and sea-level rise. These communities urgently require financial support to enable their recovery, which could range from USD 290 billion to 580 billion per year by 2030 for developing countries.

Within the UN system, however, developed countries have for the past 30 years blocked progress on providing finance to help compensate these losses and damages. This stalemate ended at COP27 in November 2022, with the historic decision to create a fund to provide finance for loss and damage – a decision that UN Secretary-General António Guterres hailed as “an important step towards justice”.

Research, engagement, and opportunity

SEI research and outreach played a critical role in the process. A new SEI report published ahead of COP27 assessed how loss and damage finance could be operationalized. Led by SEI and seven partners in both the Global North and South, the research drew on interviews with key stakeholders and a literature review to identify the principles that should guide the creation of a loss and damage fund, as well as how to design it so that these principles can be applied effectively. Extensive outreach to partners and engagement with policymakers, negotiators, civil society, media and national governments all helped break the historical deadlock on the issue and provide critical insights on how a loss and damage fund can be fair, feasible and effective.

Various factors converged to catalyse change. Pressure from civil society had been growing, examples
of the misery inflicted by climate change, including floods in Pakistan and droughts in East Africa, were
fresh in people’s minds, and countries from the Global South had formed a tight coalition. And Scotland’s
leadership at COP26 in Glasgow played a part where, as host, it took the important step of backing
a new financing philosophy.

Laying groundwork for success

SEI took advantage of this support. The research was partly funded by the Scottish Government, which
offered a platform for SEI to present its results at key political events in the run-up to COP27, in Edinburgh and Brussels. The Scottish Government endorsed the principles and arrangements advanced in our research in its report on its first loss and damage grant, intended to serve as a blueprint for action on loss and damage.

Scotland’s efforts at COP27 were also vital, including bilateral meetings with countries crucial to a decision on loss and damage that in the past had been hard to reach.

In the run-up to COP27 the research team worked with the Alliance of Small Island States (AOSIS) and the Climate Vulnerable Forum, and because the engagement of developed-country actors was critical to success, the team held a bilateral meeting with the office of of US Congresswoman Diana DeGette and a workshop with the EU loss and damage negotiator.

Influence in official negotiations and on public debate

COP27 negotiations demonstrated that the loss and damage issue and our approach had gained traction. The G77+China – the largest developing country negotiating group – called for a loss and damage fund that was aligned with SEI’s recommendations. For example, the group emphasized the need for the fund to be accessible, non-project-based and grantbased – all principles identified in the report. Moreover, developed countries finally shifted their position and agreed to a loss and damage fund, which we believe was in part due to our assessment of finance gaps and pathways forward.

SEI’s research also built momentum on loss and damage finance in the public discourse. The report was cited by global outlets such as Reuters and national outlets in India, Bangladesh, Germany, France and Egypt. Leading climate activist Vanessa Nakate quoted and backed the report’s approach in an opinion piece in The Guardian that issued a clear plea: “Start getting funds to those who need them most.” On Twitter, the report was promoted in a video by UN Climate Summit News, an influential news aggregator for UN climate summits. At COP27, the report’s findings were presented at two official side events and an event hosted by the Scottish Government.

What’s next? Supporting the design of the loss and damage fund

In 2023, as negotiators seek agreement on the details of the new fund, our work on principles and modalities for a loss and damage fund will only become more relevant. Given the political sensitivity and urgency around the topic, SEI can make an impact by grounding decision-making in evidence and rigorous analysis, and by engaging within UN processes set up to operationalize the fund.

Strategy for action: More effective international cooperation on climate change

By focusing on the need for loss and damage finance rather than focusing on the politics of the issue, the research was able to chart routes forward that represented a compromise for developed and developing countries and contributed to reaching consensus. The research provided a strong evidence base used by civil society and developing-country negotiators in their call for a loss and damage fund.