The first meeting of the Transitional Committee on the operationalization of the new funding arrangements for responding to loss and damage and the associated fund was held from March 27^th to 29^th, 2023, in Luxor, Egypt. The meeting convened the members of the Transitional Committee as well as technical entities and key stakeholders working on climate finance, with a special focus on the finance needs to address climate-induced losses and damages.

The Transitional Committee was set up under the negotiation process of the United Nations Framework Convention on Climate Change (UNFCCC). The 27^th Conference of the Parties to the UNFCCC (COP27) at the end of 2022 saw the establishment of the new funding arrangements and an associated fund to assist developing countries that are vulnerable to the impacts of climate change, as well as to respond to climate-induced losses and damages. The Committee will provide recommendations for consideration during the 28^th Conference of Parties to the UNFCCC (COP28), which will take place in Dubai, UAE, in November/December 2023.

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Addressing loss and damage

The recently published Synthesis Report of the 6^th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR6) states with high confidence that climate change has resulted in substantial damages and irreversible losses. This includes the loss of biodiversity, impacts on local species resulting in their loss due to heat extremes, as well as mass mortality events of different species on land as well as in the ocean.

According to the IPCC Report, climate-induced losses and damages are also having adverse impacts on achieving the Sustainable Development Goals, for example by negatively affecting food and water security, thereby heightening the existing vulnerabilities of communities and ecosystems. In addition to economic losses and damages, climate change also results in non-economic losses, including through impacts on mental health, trauma resulting from extreme events or losses, and loss of culture and ways of life for communities across the world.

The IPCC Report provides with high confidence that there are impacts on individual livelihoods; human health and food security; and economic losses incurred due to destruction of infrastructure. Additionally, it also points to adverse effects which are societal, such as implications on social aspects, including those related to gender and equity.

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Global policy processes

While climate-induced losses and damages have been a focus of discussion since even before the adoption of the UNFCCC, the first concrete step to address the concept of loss and damage under the UN climate process could be considered as the establishment of the Warsaw International Mechanism on Loss and Damage (WIM) in 2013. This was followed by Article 8 of the Paris Agreement in 2015, which provides a legal basis for loss and damage and the work of the WIM.

It could be said that today there is an enhanced understanding of the different forms of climate-induced loss and damage, including both economic and non-economic forms. However, despite this, a lot remains to be done to comprehensively address the various forms of loss and damage. This includes the need for scaling up finance to effectively address losses and damages; building on governance structures and institutional arrangements to better facilitate effective climate action to address the needs of the most vulnerable communities and ecosystems; and creating positive impact through adverting and minimizing climate-induced losses and damages. 

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Funding arrangements and innovative sources of finance

The IPCC Synthesis Report highlights an increase in the magnitude of global climate finance flows and a broadening of financing channels. However, the average growth in climate finance has slowed as of 2018.

The initial UNFCCC synthesis report on the existing funding arrangements and innovative sources relevant to addressing loss and damage associated with the adverse effects of climate change identified different forms of possible funding arrangements, such as grants; taxes; solidarity levies; debt swaps; social marketing; concessional loans; impact bonds; equity investments; and co-investments. An overview of existing funding arrangements could include co-grantee debt swaps such as the Barbados debt-for-nature swap and concessional IMF loans under the Resilience and Sustainability Trust Fund, of which the current availability is marked at US$45 billion.

In addition to these funding sources, there are also concessional loans by the World Bank; grant-based co-funding by different processes such as the Climate Justice Resilience Fund; and donor grants focused on addressing different aspects related to climate-induced loss and damage.

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Key messages

During the first meeting of the Transitional Committee, some members of the Committee and other participants highlighted the need for addressing losses and damages through operationalisation of the new fund, while others pointed to the importance of focusing on a range of funding arrangements. Further, the need for the process to be guided by the principles of equity and common but differentiated responsibilities (CBDR) was also brought up.

The meeting also explored aspects related to the eligibility of countries to receive funding as well as the need for expanding the donor pool for the fund. Additionally, the need for new, additional, predictable, and adequate resources was also highlighted by Committee members.

The Transitional Committee will continue its work to develop recommendations for consideration at COP28 at the end of this year, with a focus on establishing institutional arrangements, modalities, structures, and governance; defining elements of the funding arrangements; identifying and expanding sources of funding; and ensuring the coordination and complementarity of existing funding arrangements.

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Note: This article has been published on The Morning as part of the author’s weekly column.

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