A climate loss and damage fund that works

For more than 30 years, the United Nations has grappled with the best way to address the disproportionately high levels of loss and damage suffered by developing countries due to climate change.

While substantial progress has been made to establish a Fund for responding to Loss and Damage (FRLD), questions remain, including how recipients should be assessed and how funds should be distributed.

In a new Lowy Institute Policy Brief, entitled A climate loss and damage fund that works, Lowy Institute researchers Dr Melanie Pill and Georgia Hammersley argue that the newly instated FRLD Board must avoid making the mistakes of other multilateral climate funds.

They write that “the Fund needs to allocate financing based on recipients’ climate vulnerability, greenhouse gas emissions, GDP, and policy actions” to ensure that financing reaches the countries and communities in most need. Recipients should receive financial support directly through national systems rather than through intermediary organisations.

The authors explore innovative approaches for fund mobilisation and suggest that the Board should engage philanthropies to seek contributions, and encourage countries — developed and developing — to adopt voluntary market mechanisms such as levies to raise additional funds.

Lowy Institute Research Director Hervé Lemahieu said: “there is a lot at stake in the global Loss and Damage debate, and a yawning gap between reality and expectations. My colleagues have approached this policy challenge constructively with a set of recommendations that, if implemented, would significantly bolster the chances of the Fund’s success in responding to Loss and Damage from climate change.

KEY FINDINGS

• The new Fund for responding to Loss and Damage should adopt a clear allocation mechanism based on recipient countries’ vulnerability, emission contributions, and climate change policies.
• Loss and Damage solutions are unlikely to result in clear financial returns, and the Fund should therefore focus on providing fast and efficient grant-based finance to the most vulnerable countries. Simplified procedures for countries and organisations to access financing and a flexible suite of implementation approaches are key.
• To raise more financial support, the Fund should explore the potential for engagement with philanthropies and encourage donor countries to adopt voluntary market mechanisms such as levies to raise additional funds

The Policy Brief, A climate loss and damage fund that works, is available to read and download now.

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