Operationalising the Loss and Damage Fund

The 27th UN Climate Conference (COP27) concluded with the groundbreaking agreement to establish a new loss and damage (L&D) fund. This significant development aims to enable vulnerable countries to respond to and recover from climate impacts.

In setting up the new L&D fund, a transitional committee (TC) was tasked with providing recommendations on its institutional arrangements, elements of the funding arrangements, sources of finance, and ensuring coordination and complementarity with existing arrangements for L&D. Within this process, two pivotal questions arise: (i) how can the fund learn from existing funds and enable comprehensive responses to L&D? (ii) how can the fund best serve the needs and priorities of vulnerable and marginalised communities facing losses and damages?

Anchored within the principles of climate justice, this report aims to shed light on these questions by offering insightful recommendations to the process on how to best operationalise the fund to achieve its intended goals. It draws learnings and best practices from existing funding institutions, and builds on the experiences, insights, and recommendations from  practitioners in the field, aiming to consolidate ideas that have proven effective in the past. These encompass diverse areas such as governance forms, access requirements, instruments, and channels, which can potentially be adopted for the new L&D fund.

5 cross-cutting recommendations emerge from our research:

1. Adopt alternative eligibility requirements
2. Adopt approaches that have proved to work for philanthropic and humanitarian support to reach the local level
3. Adopt participatory and representative decision-making approaches
4. Adopt a flexible, grants-based approach
5. Adopt comprehensive, full-spectrum approaches to L&D finance

The report emphasises that the design and operation of the L&D fund will be significantly influenced by its intended scope. With diverse opinions among stakeholders on the fund's optimal design, the selection process for these recommendations is of paramount importance. Consequently, the TC must ensure procedures are inclusive and equitable, fostering an environment that encourages learning from a myriad of perspectives, especially from the most vulnerable.