Financing Loss and Damage at Scale: Toward a Mosaic Approach

Hurricane Tomas floods the streets of Gonaives, Haiti, November 6, 2010. (UN Photo/ UNICEF/Marco Dormino)

The historic decision on loss and damage (L&D) at the 2022 UN Climate Change Conference (COP27) calls for a new fund and funding arrangements focused on addressing L&D. It also tasks a Transitional Committee to prepare recommendations on the new fund and funding arrangements for adoption at the 2023 UN Climate Change Conference (COP28) in Dubai. This decision reflects a recognition that existing funding arrangements are grossly inadequate to address the escalating scale of L&D. Addressing L&D will require both enhancing these existing arrangements and creating a new fund and funding arrangements, forming a mosaic of solutions across countries, institutions, and markets.

This paper aims to aid the Transitional Committee and other stakeholders by providing an initial sketch of that mosaic. First, it examines existing arrangements, modalities, and sources of funding for addressing L&D from UN humanitarian agencies, multilateral development banks and international financial institutions, and insurance and bond markets. Second, it proposes reforms to existing arrangements that would address key finance gaps and bottlenecks. Third, it identifies elements of a new L&D fund that would complement existing arrangements and make use of innovative finance (including levies and bond issuances) to operate at scale.

With roughly six months left until COP28, the Transitional Committee will need to work efficiently to achieve its mandate, which includes determining the fund’s institutional arrangements, modalities, structure, governance, sources of funding, and coordination and complementarity with existing funding arrangements. To this end, the paper recommends that it should:

  • Begin securing financing before COP28, particularly innovative financing, which takes longer to secure than traditional donor contributions;
  • Consult with the private sector to determine its role, including in the use of insurance mechanisms and risk pools, frontloading, and connections between L&D and jobs;
  • Determine the form and role of triggers, including for slow-onset events;
  • Consider how to address noneconomic losses, including displacement and forced migration; and
  • Identify the actions, mechanisms, and institutions required to operationalize the fund, including an internal or external coordination mechanism.