Introduction

‍COP27 had a focus on Loss and Damage like never before. Given the drumbeat of climate impacts coming into COP - one third of Pakistan flooded, devastating drought and famine in Kenya, heatwaves and drought across Europe and southern China, Hurricanes in Cuba and the US, glaciers disappearing and sea level rise and coastal erosion forcing Pacific Islanders to relocate.

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At what has been billed as an “Implementation COP” in Africa, a continent grappling with loss and damage, went into overtime with so many issues unresolved, UN Secretary General Antonio Guterres pleaded with delegates: 

We need action. No one can deny the scale of loss and damage we see around the globe. The world is burning and drowning before our eyes. I urge all parties to show that they see it – and get it. The world is watching and has a simple message: stand and deliver. Deliver the kind of meaningful climate action that people and the planet so desperately need.

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Developing countries were more aligned than ever before - in pre-meetings and throughout COP all 134 countries in the G77 and China spoke with one voice to demand climate justice. And civil society provided the flank with protests around the world and in the COP venue itself. And, finally, grudgingly, developed countries, with leadership from the European Union, agreed to establish a Loss and Damage fund.

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Whilst this was a massive breakthrough for climate justice, other elements of the Sharm-el-Sheikh outcome were more mixed. Disappointingly there was pushback against a definitive call to phase out all fossil fuels - blocked by Russia,Saudi Arabia and Iran. This issue is still live at time of writing. While countries keep referring to 1.5C, they fail to take the necessary action to stay below this limit to prevent future harms from happening. As long as countries keep fueling the loss and damage crisis by expanding oil, gas and coal, real justice will not prevail.  Importantly, the new Loss and Damage Fund needs to be filled, and the US and other developed countries did not agree to include loss and damage as a target within the new collective quantified goal for climate finance (NCQG), which will need to be corrected at future meetings. 

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Agenda fight 

It is hardly surprising that COP27 went into overtime. Even before the COP had started the initial fight over including Loss and Damage on the agenda took 40 hours and until the early, early hours of the morning. Beginning as they meant to go on, developing countries stood their ground and won the fight to ensure that finance for loss and damage was firmly on the agenda at Sharm-el-Sheikh.

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Loss and Damage Fund (LDF)

Developing countries were strongly aligned and very clear that the establishment of a Loss and Damage Finance facility, or fund, was their number one ask from COP27. The expectation was that the fund or facility would be set up so that it will deliver new and additional finance, not just reallocate money out of other pots that are already too small. And that it be established as part of the Financial Mechanism of the UNFCCC, which also serves the Paris Agreement, to ensure that it operated within the equity principles of the Convention.

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In a truly historic moment, COP27 agreed to new funding arrangements, including a Loss and Damage fund, for assisting developing countries to respond to loss and damage with a focus on addressing loss and damage, which is critically important for developing countries and has been diluted since Paris. This progress was made as a result of the consistency and persistence of developing countries, which did not allow themselves to be divided in the face of several developed countries’ proposals to promise funding for only the most vulnerable countries (seeking to peel off SIDS and LDCs from the developing country block), and also in the face of pushback from developed countries, in particular the US.

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A 24-member Transitional Committee with 14 members from developing and 10 members from developed countries was created to work out the details of the modalities to operationalise the LDF, and identify where funds will come from - they need to be at scale and on a polluter pays basis, so from rich, historically high polluting countries. Developing countries will have the majority of seats (14), with two each for SIDS and LDCs. The decision guides the Committee to look at “potential sources of funding … including innovative sources” - which should include a tax on the fossil fuel industry, a frequent flyer levy or similar. These sources of funding have had great support in the lead up to COP27 - from the head of the UN, Antonio Guterres, through Barbados Prime Minister Mia Mottley, and civil society have been calling for these polluter pays sources for years. That said, there must also be a floor of public finance which links to the discussion on the new collective quantified goal on climate finance (NCQG) described further below. The Transitional Committee will also need to think about how funds will flow for both slow onset climatic processes like sea level rise and extreme weather events like storms and droughts. 

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The Transitional Committee will report to next year’s COP and CMA, and countries would establish the operational modalities for the new Loss and Damage Fund.  The decision also includes two workshops and a synthesis report on existing funding arrangements relevant to addressing loss and damage in 2023 and a call for submissions by 15 February 2023 with views on the second Glasgow Dialogue to take place during the UNFCCC intersessional in Bonn in June 2023. 

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In the decision UN agencies, intergovernmental organisations and financial institutions are invited to provide input on how they might enhance access and/or the speed, scope and scale of availability of finance for addressing loss and damage. The activities and considerations of the decision will be taken into account at the second and third Glasgow Dialogues to take place in June of 2023 and June of 2024. The Chair of the SBI was also requested to provide a summary report of each Glasgow Dialogue within four weeks. This is significant as the decision that established the Glasgow Dialogue did not mandate a report of its discussions and outcome. 

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The decision gives momentum to the Bridgetown Initiative kicked off by Barbados Prime Minister Mottley and her climate finance envoy Avinash Persaud in asking international financial institutions to consider at the 2023 Spring Meetings of the World Bank and IMF the potential for such institutions to contribute to funding arrangements to respond to loss and damage; and inviting the UN Secretary General to convene a meeting of international financial institutions and other relevant entities to identify the most effective ways to provide funding to respond to needs related to addressing loss and damage. Separately Emmanuel Macron had already announced he would convene a finance summit in Paris in June 2023 to follow through on the Bridgetown proposals on how to fund mitigation, adaptation and Loss and Damage. 

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Santiago Network for Loss and Damage 

Applause filled the room as negotiators agreed the mechanisms to operationalise the Santiago Network. The establishment of an Advisory Board to govern the Santiago Network was a key demand of the G77 and China.  Women and Gender, Youth, and Indigenous Peoples constituencies will be represented on the Advisory Board, which will be open to observers. Participation of representatives of groups most affected by loss and damage will increase chances of delivering real and rights-based solutions. However, the omission of Environmental NGOs (ENGOs) is worrying, especially as they would bring additional and important expertise on a wide range of topics ranging from environmental integrity to human rights integration in climate action, contributing to the collective effort to catalyse technical assistance for the poorest and most vulnerable and address the gaps in the existing system. Importantly, the decision states that technical assistance should be in line with human rights, by referring to the relevant preambular paragraph of the Paris Agreement.   

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An additional concern and critical issue is that with little finance committed so far for operation or delivery of technical assistance, the Santiago Network risks being cash strapped and unable to operate effectively unless more contributor countries step up. It is also essential that the Santiago Network is connected to the LDF. Only then will the technical assistance delivered by the network lead to long term and reliable grant based finance flowing to communities to address loss and damage in response to the latest climate disaster.

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Global Stocktake (GST)

The second meeting of the technical dialogue for the Global Stocktake (GST) met in Sharm-el-Sheikh. Loss and Damage was well reflected in interventions from developing countries and civil society, and we expect this will be reflected in the facilitators summary when it is released early in 2023. There was acknowledgement of the urgent need to address loss and damage, including by addressing the gap in existing funding arrangements, as well as a call for new and accessible funding. Additionally, non-economic loss and damage must be addressed, and equity and justice need to lie at the heart of responses. There must be a focus on job losses, just transitions and a need to use responses to build resilience. 

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It was noted that escalating loss and damage is a common concern of humankind, and a reality for many communities around the world, not only in developing countries but also developed countries. There are co-benefits for action and support to address loss and damage in building resilience and helping vulnerable communities face the uncertainty of the future. The lack of mechanism to address loss and damage and gap in terms of concrete actions was emphasised.

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Other notable interventions included the need for a Loss and Damage finance gap report at least bi-annually or every alternate year. And the critical need to acknowledge science, with many references to WGII’s contributions to the IPCC’s AR6 and the need to recognise both the hard and soft limits to adaptation.  

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New collective quantified goal on climate finance (NCQG)

The escalating costs of loss and damage have made the need for financial support from developed countries  to address loss and damage starkly apparent. The result of insufficient loss and damage finance are being played out in Kenya and in other countries around the world. Under the current mandate to provide climate finance under the Convention and Paris Agreement, the US$ 100 billion goal by 2020 set in 2009, support for loss and damage is not foreseen. This goal was agreed before Loss and Damage was an agenda item within the negotiations, but more importantly, the $100 billion is inadequate for mitigation and adaptation, and will not begin to cover the need for loss and damage finance. With the shortcomings of the politically set US$100 billion goal in both scale and quantity starkly highlighted, the three year process set up at COP26 to agree on a NCQG on climate finance offers the first opportunity in over 10 years to ensure that a finance goal can be set on Loss and Damage post-2025.

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Developing countries made it clear from the start that they wanted the NCQG to include a third pillar: finance to address loss and damage, in addition to the pillars on mitigation and adaptation finance. Having a third pillar means there is a goal on finance to address loss and damage that is enshrined in both the Paris Agreement and the Convention. This would ensure that any commitments on finance to address loss and damage are aligned with the UNFCCC principles of equity, historic responsibilities of developed countries, and the common but differentiated responsibilities of all countries (CBDR). As well as align with the 1.5C goal of the Paris Agreement, allow for progress to be tracked and reviewed as part of an overall post-2025 goal. In effect, this third pillar would be a commitment that a Loss and Damage fund (LDF) would be filled because there would be a goal to meet. 

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However, developed countries vigorously oppose any efforts to expand the mandate of the NCQG beyond mitigation and adaptation support to financing for loss and damage. Efforts by developing countries to enshrine a reference to the scope of the NCQG at COP27 failed, as developed countries maintain that no decisions (including on scale, scope, quality and access features) can be made until the end of the process. The decision from COP27 is therefore largely procedural. Focus needs to be maintained that loss and damage is highlighted throughout the technical expert dialogues to be conducted in 2023.

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Human Rights and Gender

As the climate crisis is a human rights crisis, human rights obligations and principles are key to addressing loss and damage. A human rights-based approach to addressing loss and damage means in the first place that people whose rights have been harmed, have access to effective remedy. This disproportionately includes women, who are more often than men victims of extreme weather events (due to cultural discriminations and exclusions due to gender such as access to information or resources). In addition the unpaid care work they provide, or lack of ownership rights mostly excludes them from compensation payments and it must be considered in talking about non-economic loss and damage. To address this, new and additional, needs-, grants-, and rights-based public finance at scale provided comprehensively for economic and non-economic loss and damage is needed. The establishment of an LDF at COP27 is a major step in this direction. The elaboration of its modalities will be key to ensure that the fund is fit for purpose, that it provides financing in a way that is gender-responsive and directly accessible for affected people and communities It is crucial that this process allows for meaningful participation of and gives voice and vote in decision-making to representatives of those at the frontlines of the climate crisis such as women and girls, Indigenous peoples, persons with disabilities and youth and children. In that regard, the newly established fund can build on the decision that was made at COP27 on the operationalisation of the Santiago Network which, as mentioned before, includes representation of most affected groups on its Advisory Board. It needs to go a step further, giving these groups also power in the final decision-making. 

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An important initiative to further clarify human rights obligations in the context of the climate crisis, including loss and damage, is underway and needs wide support. Driven by Pacific youth, Vanuatu and a core group of States are tabling a resolution at the UN General Assembly to ask the International Court of Justice (ICJ) for an advisory opinion on human rights and climate change. The resolution is expected to be tabled shortly after COP27 and should be voted in the coming months. As such an advisory opinion would drive ambition and contribute to greater clarity among countries with regards to their existing legal obligations, countries should welcome the initiative and vote in favour of the UNGA resolution requesting this Opinion so as to provide the strongest mandate possible to the ICJ.

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Global Shield

When is a mosaic not a mosaic? When it's a carefully crafted plan for delay. The G7 and V20 launched their Global Shield, to replace the InsuResilience Initiative at COP27. It was widely criticised for indications it would focus too heavily on insurance; that developed countries would use the Global Shield as an excuse to not make progress within the UNFCCC; and, that by building up the Global Shield, developed countries were hoping to escape the equity principles of polluter pays and historic responsibility, of the UNFCCC.

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The concern that the Global Shield would divert funds from efforts to address loss and damage under the UNFCCC, including under the Santiago Network, was borne out at COP27, as indicated in the graph below, with roughly 70% of commitments on Loss and Damage was allocated to the Global Shield, whilst the Santiago Network - to give one example - has very little funding which could delay it becoming operational and will certainly prevent it from providing on-demand and comprehensive  technical assistance. 

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To restore trust it will be important for rich countries to demonstrate they are willing to make progress within the UNFCCC; to ensure fairness, equity and effectiveness it will be important for Global Shield partners to institute a cap, of say 20%, on insurance as a proportion of Global Shield spending and ensure that the majority of spending is on programs that are more effective and fair at addressing loss and damage. For more see our paper here.

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Spring forward together

The fact that developed countries agreed to establish a fund on Loss and Damage at COP27 - though far too little, too late - is cause for optimism and provides a basis for progress. But so much more needs to be done to address loss and damage at the scale of the needs in vulnerable developing countries. 

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The political space was moved on loss and damage, albeit too slowly when compared to need, on the back of mountains of work done by vulnerable communities themselves, civil society in supporting their calls, the leadership of UN Secretary General Antonio Guterres, and First Minister of Scotland Nicola Sturgeon who made it acceptable for other leaders to talk about reparations and climate debt, and even more countries to be swept along with this tide. The steps taken at COP27 have expanded further the space to engage on Loss and Damage. This growing political will is not a moment too soon, as there is great urgency and few resources. 

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However, we must be careful to ensure these relative baby steps towards climate justice don’t disguise backwards or sidewards steps. Whilst more developed countries have committed finance for Loss and Damage, very little of this finance is new and additional and most has been pledged to the Global Shield. With the decision for a Loss and Damage Fund at COP27, pressure must continue during 2023 to ensure that the process to operationalize the Fund  focuses on mobilising a variety of sources, with developed countries’ public finance contribution at the core, and polluter pays levies on the fossil fuel and other polluting industries. We need to be mobilising hundreds of billions a year to meet the needs on the ground for addressing loss and damage as many countries, including the Maldives, have called for. That will require transformation both inside and outside of the Convention. 

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Finance is urgently needed to operationalise the Santiago Network so it can start providing technical assistance to vulnerable developing countries. The needs are particularly acute in the wake of the COVID-19 pandemic as increasingly frequent extreme weather events reduce fiscal space for sustainable development and programs to support wellbeing and livelihoods of citizens. 

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However, there are reasons for optimism. In the second week of the COP, 13 members of US Congress, led by members of Congress Ilhan Omar and Jamaal Bowman, called for the US as the largest historical contributor to climate change to live up to their “moral and strategic responsibility to provide comprehensive support for countries facing climate disaster, including debt forgiveness and reparations.” and encouraged John Kerry to “throw the United States’ support” behind establishing a Loss and Damage finance facility under the Convention to channel new, grant-based public finance supplementary to mitigation and adaptation finance. 

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We give the last word to Barbadian Prime Minister Mia Motley who, in a moving speech during the opening of the high level segment, told political leaders: 

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We have the capacity to transform . . . But the simple political will that is necessary not just 

to come here to make promises, but to deliver on them. And to make a definable difference in the lives of people to whom we have a responsibility to serve seems still not to be capable of being produced. I ask us how many more and how much more must happen? 

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This decision is just the springboard. There is much, much more to do including to scale up mitigation ambition and action to keep 1.5℃ alive and provide adequate finance to meet the full spectrum of the needs on both adaptation and addressing loss and damage. We need all hands on deck in all parts of the world and on all fronts. 

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Notes

We use Loss and Damage (capitalised) to describe the policy agenda; and loss and damage (non-capitalised) as the impacts of climate change not avoided by mitigation and adaptation. 

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Further Reading‍

Full background on the loss and damage negotiations from Lyndsay Walsh and Teo Ormond-Skeaping in the briefing The Cost of Delay: Why Finance to Address Loss and Damage Must be Agreed at COP27.

More detail on the Global Shield and insurance: Is Climate Insurance a Global Shield, or does climate-related loss and damage require a different approach? Co-authored by Julie-Anne Richards, Eva Peace Mukayiranga and Erin Roberts.