How G7 nations can address loss and damage finance with the urgency it requires

Devastating and unprecedent floods in Bangladesh and Northern India left millions homeless and at least 116 dead last week: a clear sign that the harsh and deadly impacts of climate change that scientists have warned us about for decades are already a lived reality for the poorest and most vulnerable. The science is clear that this is only the beginning of what is to come if we do not act now.

Ironically, these events take place just after the Bonn Climate Change Conference wrapped up this month, where discussions on delivering financial support to victims of loss and damage delivered no outcome. But when millions are left stranded, that shows clearly that loss and damage goes far beyond debates in a negotiating room: It is a matter of extreme urgency, in which people’s lives are at stake and which the existing systems aren’t equipped to handle.

Existing structures and organizations won’t solve the problem

Rich countries argued at the Bonn conference that in light of the urgency, we should turn to the existing finance architecture like the Green Climate Fund to pay for loss and damage, rather than establishing something new.

But research has already shown that existing climate finance mechanisms do not address the majority of loss and damage finance needs. Limited capacity makes it extremely difficult for poorer countries to meet the stringent requirements of the Green Climate Fund and access funding. It can also take years for the money to arrive on the ground – too long for the most vulnerable communities to rebuild homes and roads and livelihoods after an extreme weather event has struck.

Rich countries also pointed to the humanitarian aid sector to fill the gap. But humanitarian aid is already overstretched. A recent report by Oxfam revealed that appeals linked to extreme weather events are now eight times higher than they were 20 years ago. Nearly half of the appeals over the past five years have not been met.

Humanitarian aid is also not well equipped to deal with losses from slow onset events. They are simply not set up to help local fishing communities, for example, who are forced to abandon their homes and culture when rising sea levels deprive them of their livelihoods.

Taking loss and damage finance forward after Bonn

When the conference in Bonn closed, it did not result in loss and damage finance firmly and formally on COP27’s agenda. Consultations about this will have to be picked up again in Sharm el-Sheikh. When even such procedural questions drag on over months, there is a clear risk that a new facility – a mechanism to deliver finance to communities facing losses and damages – would not materialise for several years. And even if the political will was there to establish a new facility, it would likely be left grossly underfunded.

Vulnerable communities cannot afford to wait for the cumbersome negotiations process to deliver an outcome. But there are ways to make urgent progress without reverting to the failing existing finance architecture.

Rich countries can follow Scotland’s example and bilaterally deliver public finance to affected countries now. Such finance should come in the form of grants rather than loans, as loans only add to poor countries’ existing debt burdens.

Vulnerable countries are also already piloting a loss and damage finance facility, and are seeking additional funding. Rich countries could channel additional finance for loss and damage through this facility, which would also give greater ownership to vulnerable countries over how the money is utilised. They could also directly fund poor countries’ national disaster funds, which already exist in countries such as Mexico. This would make it easier for local communities to access the funds without long delays.

From the G7 and Petersberg, onwards and upwards

G7 nations like Canada and Germany say they’re aware of the need to advance the issue of loss and damage finance, and open to exploring options. Germany in particular, currently presiding over the G7, can use the leaders’ summit taking place in Bavaria until 28 June, as well as the Petersberg Climate Dialogue in July, to coordinate among wealthy nations, and establish a positive dynamic towards COP27.

The G7 interest in creating a ‘global shield’ for the most vulnerable shows they are aware that those who have done the least to cause the climate crisis are already being hit the hardest now. But they also need to recognize that an insurance mechanism alone won’t deliver much-needed support.

We still need the new loss and damage finance facility that developing countries have called for, and wealthy nations in the G7 and individually should show their support for it – including by making it an agenda item at COP27.