Addressing Loss and Damage conference - practical action: summary report

7. Ways toward practical action on Loss and Damage

This section of the report focuses on the appropriateness of different funding and distribution mechanisms for different types of loss and damage. Gaps in measures to address losses and damages are identified, as are the opportunities to address them by deploying new types of finance, or existing finance, in new ways.

Participants engaged in deliberative dialogues to reflect upon the learning from the conference as a whole and in particular to explore which kinds of finance are most suitable for different types of action to address different types of loss and damage.

Types of loss and damage: climate hazards causing loss and damage are very diverse – heat, drought, floods, storms, cold, etc. Different communities are affected differently depending upon the particular characteristics of their location, including the climate hazards they are most exposed to, their geography and topography, socio-economic characteristics, governance structures, political institutions, levels of health, education and access to resources. Losses and damages will also evolve, due to the accelerating effects of global heating, and the compounding and intersecting impacts of different forms of climate impact upon individual households and communities over time.

Many different types of losses and damages can be identified. This can be done according to the climate hazards causing them, the groups of people and livelihoods affected, the ecosystems exposed to the hazards, and the economic sectors at risk. These characteristics mean that a typology of losses and damages is necessarily complex. The extent of loss and damage significantly depends on mitigation and adaptation measures, where efforts can either avoid loss and damage and where not successfully implemented or not sufficient can lead to unavoided or unavoidable losses and damages. There has been an increase in unavoided and unavoidable climate hazards.^[35] Responses and measures to address loss and damage can be implemented prior to, during and in the wake of the causal climate events.

Gaps in measures to address loss and damage: It is important to recognise that the bulk of loss and damage impacts and risks are most often borne by the people, households and communities affected. They bear the majority of the costs of preparedness, absorbing the impacts and recovering often by investing household revenues gained through remittances and, where available, through selling assets, selling labour (often of young household members), and foregoing other expenditures. At the national level, development funding is often diverted toward contingencies caused by climate impacts. This is due to the significant and increasing adaptation, protection and response gaps (see "A global climate policy framework on Loss and Damage" below).

Measures to address the adaptation, protection and response gaps differ. The Intergovernmental Panel on Climate Change Working Group II has indicated how and where increased investments in adaptation are needed. The protection gap is well known and there is a pipeline of risk transfer and insurance measures being developed. However, the response gap is seen as due to the impacts and risks of escalating unavoidable climate hazards running well ahead of the post-disaster finance measures of relief, rehabilitation and relocation.

Participants identified that non-economic loss and damage is the most often neglected category. In part this is due to the highly context specific and intangible nature of such loss and damage – particularly to people from outside the immediately affected communities.^[36] Non-economic loss and damage is highly gender-differentiated and responses to address it must take this into account.

Therefore, current climate finance mechanisms need to be improved and expanded to support directly addressing economic and non- economic loss and damage. Additionally, innovative funding sources should be established to expand the range of options as not all finance mechanisms fit with every type of intervention. Loss and damage finance sources and types of interventions should be complementary and layered into blended delivery packages.

A global climate policy framework on Loss and Damage

Avert Risk

The more greenhouse gas emissions are reduced, the less climate risk will be faced.

Less action taken = bigger mitigation gap.

Manage Risk

The more livelihoods and wellbeing are adapted to the changing climate, the better the risk will be managed.

Less action taken = bigger adaptation gap.

Transfer Residual Risk

The stronger the social and financial protection provided, the more risk will be transferred.

Less action taken = bigger protection gap.

Retain Residual Risk

The better relief, rehabilitation and relocation support is, the fewer negative impacts will be experienced.

Less action taken = bigger response gap

Failure to act on Mitigation, Adaptation, and Loss and Damage leads to:

Catastrophic impacts borne by vulnerable women, men, children, communities, and ecosystems.

Source: Zurich Flood Resilience Alliance (2022) Closing the gaps: A framework for understanding policies and actions to address Loss and Damage., Policy Brief. October, 2022. ^[37]

Funding and different distribution mechanisms: The quantity of finance channelled for addressing different types of loss and damage is of fundamental importance. Among the few estimates of the absolute amounts needed there are large discrepancies. However, as with other areas of climate action, all agree that as the world waits to address loss and damage the costs are rising quickly.

The quality of the finance is also important. In this regard, conference participants noted that for bottom-up approaches, grants are simple, powerful, and quick, and that direct funding at community level is possible through models and approaches such as the Climate Bridge Fund in Bangladesh and the County Climate Change Funds in Kenya. In the case of co-variate climate related shocks to large populations – such as the recent flooding across different provinces of Pakistan – large-scale mobilisation is required, coordinated by national level agencies with the help of international technical support.

Conference participants concluded that with regard to different types of funding and distribution mechanisms:

• Insurance has uses but also limitations. It is not a suitable mechanism where markets cannot be established, where perpetual impacts render assets as ‘uninsurable’, and where climate vulnerable people cannot access funds for insurance.
• Cash transfers through social protection systems can channel funding to local people quickly once targeting and registration procedures are in place. Some countries (e.g. Mozambique, Ethiopia, Burkina Faso, Chad, Mali, Mauritania, Niger and Senegal) are investing in adaptive social protection systems that can incorporate climate shock responsive measures.^[38]
• Post-disaster finance does not address slow-onset loss and damage well. One-off approaches do not result in transformational change, nor do they build resilience.
• Large finance structures are often slow in delivering finance, other channels such as philanthropy or private funding could be quicker in getting finance to affected populations.

The need for comprehensive approaches to deliver interventions that directly address loss and damage, means that effective mechanisms need to be established for aggregating and allocating finance and for planning and coordinating action at national and local levels. Conference participants discussed that to perform these functions the establishment of some form of national system, mechanism, framework, network or institution is needed. These could take the form of a National Platform for Loss and Damage, similar to, and possibly linked with, the National Platforms for DRR that have been established in some countries under the Sendai Framework.^[39]

In conclusion, there was a general consensus among conference participants that:

• There should be complementarity of finance. Most if not all interventions will layer different measures and will require a blended package of finance from different sources.
• There are large response gaps, and it is not known as yet if any of the innovative sources of finance have the capacity to address these. Innovation is needed to mobilise finance in different ways to address the gaps.
• Triggers for mobilising loss and damage finance for different types of measures need to be agreed (e.g. rainfall and/or vegetation indices trigger deployment of parametric insurance, and this can cascade finance for other response measures). Triggers for slow onset climate events are important to get right.
• Measures for addressing loss and damage need to be designed as precursors for and coherent with those for long term climate resilience e.g. people sheltered from cyclones need to have dwellings and livelihoods to return to.

The conference sought to identify and develop ideas for practical action in addressing loss and damage. Drawing from discussions in the different sessions of the conference and with the support of expert presentations principles for practical action were drafted – see the following section. The Scottish Government and partners will take the findings and recommendations from the conference to COP27 to inform discussions and help increase ambition to directly address loss and damage.

The information generated through the conference – including over 30 case studies – will be used to prepare a synthesis report as a comprehensive compendium of evidence to support policy making for loss and damage. This will be published early in 2023.