Financing Massive Loss and Damage: Towards a Mosaic Approach – The World

Finance


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The historic decision on loss and damage (L&D) at the 2022 United Nations Climate Change Conference (COP27) calls for new funds and funding arrangements focused on addressing L&D. It is also tasked with the Transition Commission to prepare recommendations for new funds and funding arrangements for adoption at the 2023 United Nations Climate Change Conference (COP28) in Dubai. This decision reflects a recognition that existing funding arrangements are grossly inadequate to address the growing scale of L&D. Addressing L&D will require strengthening these existing arrangements and creating new foundations and funding arrangements to form a mosaic of solutions across countries, institutions and markets. .

This document is intended to assist the Transition Commission and other stakeholders by providing an initial sketch of that mosaic. We begin by reviewing existing arrangements, modalities and sources of funding to address L&D from UN humanitarian agencies, multilateral development banks and international financial institutions, insurance and bond markets. Second, it proposes reforms to existing arrangements to address major fiscal gaps and bottlenecks. Third, identify elements of a new L&D fund that will complement existing arrangements and operate at scale using innovative funding (including levies and bond issues).

With about six months left until COP28, the Interim Commission will need to work effectively to achieve its mandate, which includes the Fund’s institutional arrangements, modalities, structure, governance, funding sources, existing funding arrangements and determining complementarity. To this end, the paper recommends:

  • Start fundraising by COP28. Innovative financing, in particular, takes longer to secure than traditional donor contributions.
  • Consult with the private sector to determine its role, including the use of insurance mechanisms, risk pools, frontloading, and links between L&D and employment.
  • Determine the form and role of the trigger, including events that start slowly.
  • Consider ways to address non-economic losses such as displacement and forced migration.and
  • Identify the actions, mechanisms and organizations needed to operate the Fund, including internal or external coordination mechanisms.



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