New Loss and Damage Fund Must Deliver Climate Justice


As the Transitional Committee wrestles with the new fund's scope, scale, and modalities, the focus must remain on affected communities and people

protest sign that says "climate justice now"

Catastrophic climate impacts are hitting all over the world with a vengeance, but the poorest and most marginalized are the worst impacted. Countries and communities, disproportionately those in the developing world, are being ravaged by cyclones, floods, and droughts, and suffering the consequences of a steady sea-level rise. They are paying the price of the rich historical emitters who continue to expand fossil fuels, further exacerbating the crisis.

The writing is on the wall — countries have gone past the point where adaptation alone can arrest the climate impacts. Losses and damages are happening with ever growing economic and non-economic costs. The unfortunate reality is all of this is expected to worsen because collective efforts to limit global warming fall short as rich countries in particular fail to live up to their responsibility and historic climate debt. This means that any development gains in the global South will be further eroded, and its people, who are not responsible for the crisis, will bear the brunt of it — through displacement, loss of infrastructure, lives, and livelihoods.

Countries and communities incurring significant costs associated with climate change-induced loss and damage need and deserve as a matter of justice urgent financial support. However, this has been a sore issue for developed countries in negotiations under the UN Framework Convention on Climate Change. Following nearly 30 years of advocating for funding for loss and damage, at last year’s global climate summit in Sharm el-Sheikh in Egypt (COP27), delegates achieved a breakthrough — COP27 took a decision to establish a fund for addressing loss and damage. This historic decision needs to be promptly and meaningfully implemented. The decision is historic because so far, such a targeted funding mechanism under the UNFCCC to address loss and damage has been missing.

Since late March this year a Transitional Committee on loss and damage has been working to come up with a set of recommendations for the next climate summit, COP28 in Dubai, including on how the new Fund should operate. But several challenges remain, which are more political than technical, and thus can be overcome with the necessary political will.

Discussions around what role the new Fund will play in a mosaic of existing climate, development, and humanitarian institutions; how the Fund will be resourced; who is eligible to receive funding and how easily it can be accessed; what will be funded; what will be the sources and instruments of funding; whether the Fund will be a standalone institution or housed in an existing institution — these are continued points of disagreement and contention between developed and developing country representatives. They are expected to dominate the deliberations at the third meeting of the Transitional Committee in Santo Domingo in the Dominican Republic from August 29 to September 1. More than half-way through the process, the meeting in Santo Domingo is critical in articulating a first draft of the recommendations, with a last meeting of the committee in October that should approve by consensus the final set of recommendations for COP28. This must include a draft charter or governing instrument for the new Fund detailing its core modalities and functions.

A set of civil society organizations representing the constituencies of environmental NGOs (Climate Action Network, Global Campaign to Demand Climate Justice) and of women and gender groups of the UNFCCC have come together to present our vision for the way the new Loss and Damage Fund should be governed and operate to support affected countries and communities with their needs and priorities in addressing loss and damage, as detailed in our proposed Governing Instrument .

An Independent Fund

We expect for the Loss and Damage Fund to be the anchor fund in the loss and damage finance landscape, and believe its purpose is to make a significant and ambitious contribution to provide new, additional, predictable, and adequate financial support to assist developing countries and communities that are particularly vulnerable to the adverse effects of climate change in comprehensively addressing and providing remedy for economic and non-economic loss and damage. It is critical for the Fund to address the shortcomings of the past around lack of access and bureaucratic processes. The Fund must center communities’ needs and ensure communities have easy access to the resources.

Like in the Green Climate Fund, we expect for the Loss and Damage Fund to be a stand-alone fund with an independent Secretariat and a Board overseeing its operations. The voices of those affected need to be equitably represented in such a Board though, meaning a majority for recipients, not ‘shareholders’ as in multilateral development banks. We are also calling for this Fund to be an operating entity of the Financial Mechanism of the Convention and the Paris Agreement and guided by their principles and provisions.

Our proposed Governing Instrument details the objectives and guiding principles of the Loss and Damage Fund; Governance and Institutional Arrangements; Rules of Procedure and Role and Functions of an independent Board; and other operational modalities. 

Who Gets the Money and from Where?

We expect that the Fund will receive its main financial inputs from developed country Parties to the Convention and the Paris Agreement. Financial inputs by developed countries must be exclusively in the form of grants and non-debt creating financial instruments. This is an issue of justice as much as acknowledging that developing countries need fiscal space to deal with losses and damages short- and long-term. The Fund should also be capable of receiving and administering financial inputs on an ongoing basis from a variety of other public as well as private, philanthropic, and innovative/alternative sources.

We are also calling for all developing countries to be eligible to receive financial support from the Fund to address economic and non-economic loss and damage. Income classifications used outside of the UNFCCC system must not determine nor differentiate eligibility.

No Relabeling, Only New and Additional Finance

Finance provided under the Fund must be new and additional, going beyond Official Development Assistance (ODA), humanitarian assistance, and to other types of climate finance, such as mitigation and adaptation funding. There must be no relabeling of resources. It is time loss and damage funding got due priority because of the impacts communities are facing.

Developing countries have heavy, unsustainable debt burdens and loans will only exacerbate their inability to respond adequately to repeated and compounding climate shocks. The Fund must therefore provide funding exclusively in the form of grants and non-debt creating financial instruments.

Funding Channels

In addition to providing support for rapid-onset events in the aftermath of climate disasters, finance should also be available for continued recovery, rehabilitation, reconstruction, other forms of remedy, and alternative livelihoods for communities facing slow-onset events and cover both economic and non-economic losses and damages.

We are calling for the following four windows of funding to be initially established under the Loss and Damage Fund:

  1. A rapid-onset window to provide quick release funding in the aftermath of climate disasters;
  2. A window focused in the medium-term on rebuilding lives, livelihoods, wellbeing, and infrastructure through rehabilitation and reconstruction measures;
  3. A slow-onset window to provide funding for longer-term loss and damage, including support for planning and policy frameworks and transformative programming such as permanent relocation or a just transition to alternative livelihoods; and
  4. A community direct access window for sub-national and local actors, in particular affected communities, women, youth, Indigenous Peoples, people living with disability, and civil society organizations working directly with them for both rapid response and addressing slow-onset impacts.

The Fund must also provide resources for readiness and preparatory activities and technical assistance to developing countries, such as the preparation of comprehensive, inclusive, and participatory loss and damage needs assessments, and for in-country institutional strengthening, including the strengthening of capacities for country coordination and to meet fiduciary principles and standards and environmental and social safeguards, in order to enable countries to directly access the Fund.

Accessing resources to tackle the climate crisis has traditionally been very difficult for developing countries, and almost impossible for affected communities. It is our clear ask that the Fund must encourage and prioritize direct access through competent sub-national, national, and regional entities designated by recipient countries for all its funded activities. It would also be key for the Fund to offer enhanced direct access modalities that devolve individual financing decisions for specific activities to the sub-national and local levels, aided by national-level coordinating entities or distribution mechanisms (for example utilizing existing structures and national-level programs or funding mechanism).

Inclusive, Transparent Fund

It is also an imperative that actions supported by the Fund must respect, promote, and consider human rights; the right to health; the right to a clean, healthy, and sustainable environment; the right to development; the rights of Indigenous Peoples, local communities, migrants, women and girls, children, youth, persons with disabilities, LGBTQIA+ communities, and people in vulnerable situations as well as gender equality and intergenerational equity.

We demand the meaningful and effective public participation of affected communities, including women, youth, and Indigenous Peoples, as well as civil society organizations, in the design, implementation, monitoring, and evaluation of the Fund’s policies and activities.

No More Delay

The world can no longer afford to delay in assisting developing countries and communities already experiencing catastrophic losses and damages from climate events. Nor can we allow the newly-established Loss and Damage Fund to remain an empty vessel. For true collective climate action to take root, developed nations must take immediate, meaningful steps. We envisage the Loss and Damage Fund becoming the authoritative body for financing initiatives that address loss and damage. It should provide leadership and direction among the existing landscape of funding arrangements and institutions.

Developed countries have a moral and ethical obligation to resource this Fund promptly and adequately. This is crucial for meeting the urgent and growing needs of people in developing countries, protecting their rights and livelihoods, and delivering climate justice, both in letter and in spirit.

With the 3rd meeting of the Transitional Committee scheduled to convene extensively in closed session, and with continued limits to effective civil society and community participation in its ongoing proceedings, civil society groups from several observer constituencies in the UN Framework Convention on Climate Change (UNFCCC) are calling for the utmost transparency and increased stakeholder engagement. Please read this letter from the Climate Action Network, Demand Climate Justice, the Women and Gender Constituency, and YOUNGO.