Vulnerable countries and communities already face losses and damages as a result of climate change, and they urgently need financial support to enable recovery from trauma and lost homes, lives and livelihoods. At the 26th UN Climate Change Conference of Parties in Glasgow (COP26), Scotland made history as the first Global North country to pledge bilateral finance specifically for addressing climate-related loss and damage (L&D).

This report gathers 16 lessons under six overarching themes, from the dissemination of L&D funding through the Climate Justice Resilience Fund (CJRF). Included are recommendations for L&D finance, as well as for climate negotiators who will discuss how the new L&D Fund will be operationalized at COP28, beginning at the end of November in Dubai.

These findings shed light on the benefits and limitations of small grants for locally led action, what trade-offs might manifest when implementing locally led approaches, and how L&D finance can be used in a manner that can reach and serve vulnerable and affected groups.

The authors make the following calls to action:

• Funders addressing L&D should give small and locally led grants a central role in their portfolio as a mechanism for assessing local needs, enabling rapid action, piloting new approaches, and building the capacity and agency of vulnerable groups. Such grants should also embed flexible provisions for non-economic L&D and psychological support.
• Public finance institutions should complement small grants with larger-scale, flexible and programmatic finance instruments. Small grants could fund activities that map L&D action needs and feed into larger-scale programs and national strategies for addressing L&D.
• Recipient countries of L&D finance should disseminate a share to the local level as part of national recovery plans, and the future UNFCCC L&D fund should enable small grants, for instance in the form of enhanced direct access finance.
• Future L&D finance should follow the Scottish government’s example of requiring small grant partners to have community-driven approaches and to embark a climate justice and human rights framework to their work.
• Parties to the UNFCCC should prioritize pragmatism and the interest of affected people above political differences in designing the L&D fund. The Parties should ensure that adaptation and L&D response can be funded jointly without creating burdens to the recipient countries and organizations.