Climate loss and damage: practical action

6 Conclusions

Climate vulnerable countries, people and communities affected by loss and damage are finding it difficult to absorb the effects of escalating and now unavoidable climate risks and impacts. Intersectional factors, including gender, undermine many peoples' capacity to absorb and recover from climate induced loss and damage. Recurrent and increasingly severe climate extreme events compound socioeconomic factors like population density, income inequality and the degrading environment.

Climate risks to survival, food security and livelihoods compel vulnerable communities to migrate.^[137] A World Bank study projects that climate change will result in 216 million internally displaced people by 2050.^[138] Determining loss and damage needs and addressing them in such contexts is a high stakes endeavour.

It is important to recognise that the bulk of loss and damage impacts and risks are most often borne by the affected people, households and communities who have contributed so little to the climate crisis. 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.

6.1 Solutions identified

From an analysis of the case studies discussed in Sections 2, 3 and 4, a number of practical solutions for addressing loss and damage have been identified. These are summarised here as related to mobilising public finance and innovative finance models, assessing needs and delivering actions. They will not be universally applicable; however, they serve to re‑emphasise the importance of a comprehensive mosaic of solutions to scale finance for loss and damage, and to tailor interventions to the specific needs of affected communities in different contexts.

Mobilising public sector finance to address loss and damage

i. The MDBs could expand the eligibility criteria for concessional finance to include vulnerability to climate impacts. This would address the perceived inequity felt by countries that have moved from "least developed" to "middle income" status yet still have large proportions of climate vulnerable people in their populations.

ii. The Resilience and Sustainability Trust of the IMF could support losses and damages through, for example, shock-responsive social protection systems, establishing contingency funds, or underwriting affordable insurance products.

iii. Sovereign debt management through cancellation, restructuring and debt-for-climate swaps^[139] would support climate vulnerable countries to achieve the fiscal flexibility to allocate resources to addressing loss and damage.

iv. MDBs could provide grants for loss and damage to cover insurance risks in the most vulnerable cases. This would recognise the limits of insurance and the unaffordability of premiums for many countries.

v. The Bridgetown Initiative launched by the Government of Barbados calls for "a global mechanism for raising reconstruction grants for any country just imperilled by a climate disaster".^[140]

vi. Future allocations of Special Drawing Rights from the IMF could be re-directed from rich, high-polluting nations to climate impacted countries.^[141]

vii. Greater application of debt relief and debt suspension services, such as the Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatments used during the COVID-19 pandemic, could mitigate the risk of spiralling debt caused by cumulative losses and damage.

viii. Loss and damage can be incorporated into National Adaptation Plans and Nationally Determined Contributions so as to inform the mobilisation and allocation of funding through the UNFCCC. The inclusion of loss and damage in the Vanuatu Revised and Enhanced 1^st Nationally Determined Contribution (2021-2030)^[142] sets a good precedent. Twelve commitments are included on addressing loss and damage in the national climate change and disaster risk reduction policy, disaster induced displacement policy and the climate diplomacy strategy.

ix. In the immediate term, governments at national and subnational levels can act now to address loss and damage by providing funds through bilateral channels, civil society organisations for small grants programmes, or through multilateral initiatives that demonstrate value.

Innovative finance for addressing loss and damage

x. The interest-bearing endowment that KfW (the German Investment Bank) has provided for BRAC can set an innovative precedent for generating finance flows from the private sector, via financially competent NGOs, to local groups needing to address loss and damage.

xi. Contributions to public works construction and rehabilitation of community assets can be exchanged for access to insurance for those households unable to pay premiums. However, households that cannot provide labour also need access to subsidised insurance.^[143]

xii. Coherent national policy frameworks are needed to foster innovations in addressing loss and damage that include private sector and marginalised communities. The Nepal National Framework on Climate Change Induced Loss and Damage^[144] is a standout example of emerging national policy frameworks. With COP27 decisions on loss and damage it is anticipated that other countries and jurisdictions will develop their own policy frameworks that can shape and foster innovative ways of addressing loss and damage.

Determining needs

xiii. Support is needed to build capacity for climate risk analysis and loss and damage needs assessments. The SNLD is mandated to coordinate building such technical capacity in countries for addressing loss and damage. A UNDP Milliman collaboration is providing USD 2m per year to 2025 of pro bono services to build developing country governments' capacity in analytical techniques of risk management.^[145]

xiv. There are various tried and tested assessment tools that – with some adaptation – can be used to assess loss and damage needs, both economic and non-economic.

xv. Assessing loss and damage needs in different ways can make the case for integrated ways to address them. For example, social and economic assessment will be required to leverage combined investments in social protection, psychological support, and health care.

xvi. As more cross-border migration is expected, there is a need to undertake further research on the routes that migrants are likely to take from climate hot spots, the burden of disease mortality and disease transmission to which they could become vulnerable, based on their vaccination status and vaccine availability, and how that could be prevented. Assessments of possible well-being and health issues for migrants that move across borders and stay in relief camps should be included.

Delivering actions

xvii. Decentralised finance can help local groups and communities draw down resources easily and flexibly. Quotas per group, community or administrative unit work well rather than competition for resources between them.

xviii. Early experiences in Malawi (SCIAF case study 10) and Bangladesh (ICCCAD, IIED case study 19) indicate that participatory and genuinely representative loss and damage planning at the grassroots level work both to assess needs and to deliver on priority actions. This is corroborated by the work on locally-led adaptation and the principles developed for that type of climate action.^[146]

xix. It will be important to integrate loss and damage preparedness actions into local development processes and protocols, and into territorial planning. Loss and damage integration should be complementary to adaptation planning and disaster risk preparedness.

xx. Awareness raising and technical capacity development for forecasting climate impacts on key infrastructure can help to prepare for current and future loss and damage and to develop response capacity (e.g. early warning systems) – particularly for now-unavoidable impacts and risks.

xxi. National-level policy recognition and direction is required to establish a sustainable institutional incentive structure that brings together agencies responsible for the different elements required in integrated interventions, e.g. insurance, humanitarian response, recovery and rehabilitation agencies, planned migration, livelihoods development and adaptive social protection.

xxii. Adaptive social protection approaches have been deployed in various locations and their role in providing safety nets for people affected by both sudden and slow onset climate impacts is recognised. More recent programmes have combined social protection with provision of weather indexed insurance. However, it is important to note that the primary objective of national social protection schemes is to protect from poverty, and adding climate-adaptive functions can overburden these schemes.

xxiii. A number of legal initiatives have been launched through international courts to clarify the responsibilities of states for climate change. These initiatives could facilitate future climate litigation efforts that seek to hold major emitters responsible for climate-related loss and damage.

xxiv. Innovation in ways to address loss and damage is needed. Willing investors in experiments and learning on loss and damage intervention design and implementation need to be identified and recruited.

6.2 Insights for Practical Action on Loss and Damage

The insights generated at the Conference and published in the summary report are reflected upon here in light of the progress achieved at COP27 on addressing loss and damage. These are proposed to inform how finance and action to address loss and damage can be accelerated, scaled and implemented in a way that is fair and equitable. These have been widely consulted upon and are applicable to funding from and action by all actors working on loss and damage.

The work of Stockholm Environment Institute (SEI), with funding from the Scottish Government, on principles and modalities for operationalising loss and damage finance and previous work on fairness and feasibility,^[147] provide very helpful points of reflection. The SEI work highlights the following principles that can underpin how loss and damage finance can be operationalised: historical responsibility for GHG emissions and the polluter pays principle; equitable and targeted support; grant-based and programmatic finance; ease of finance access; recipient ownership; and transparency and accountability in access and implementation. These principles operate across the following implementation phases: mobilising finance; assessing needs; designing and implementing interventions (incl. resourcing); monitoring, evaluation and learning (MEL); and measures for long term resilience.

6.2.1 Urgency of action

At COP27, Parties agreed that a global Loss and Damage fund is needed, but while it becomes operational a variety of existing financial instruments from public and private sources (see the case studies in Section 2) can be scaled up and expanded upon, and innovative sources of funding are required to better meet the rising needs. This is the mosaic of solutions referred to above.

At the same time, urgency, particularly when assessing needs and disbursing funds, must be tempered by the need to facilitate participation and local ownership, ensuring that no harm is done to affected populations. To this end, a body of evidence is available which draws upon the experience of the humanitarian community in conducting rapid participatory needs assessment and co-designing programmes within complex emergency settings.^[148] Funding agencies can work with implementation partners and affected communities to apply these approaches to addressing the economic, and adapt approaches to better address non-economic, losses and damages that accrue over the longer term beyond the initial humanitarian response.^[149] Deploying adaptive management processes and forming communities of practice can support lesson-sharing and accelerate the pace of effective action.

Building on existing distribution mechanisms and programmes already in operation within affected communities prior to the disaster can provide an avenue to accelerate the distribution of funds. In 2022 the Scottish Government rapidly mobilised and disbursed funds to communities in Malawi affected by Storm Ana through a trusted partner, SCIAF, who had previously established close working relationships with the affected local communities (see SCIAF case study 10). "Ramping-up" examples such as this can help build momentum toward the huge scale of global finance needed for loss and damage, and act as a precursor and test-bed for the UNFCCC Loss and Damage Fund.

6.2.2 Equitable and targeted

Climate change disproportionately affects marginalised people – including women, children, LGBTQI+, the elderly, people with disabilities and indigenous groups. The assessment of needs and the design and delivery of interventions must consider the ways that climate impacts affect different people differently. It is critical that the knowledge, needs and capacity of those affected by loss and damage are recognised and that their agency in decision-making is facilitated. Locally-led approaches can enable affected people to act as the primary agents of change.

Those mobilising finance, those implementing programmes and those experiencing losses and damages can work together across the different stages of addressing losses and damages. Delivery mechanisms must not exacerbate inequalities and patterns of disadvantage, and the use of gendered and intersectionality-informed needs assessment can be used to minimise elite capture. The Climate Justice Resilience Fund works with partner organisations to deliver loss and damage initiatives that acknowledge and address intersectionality.^[150] One such project by Helvetas (case study 17) has begun developing a gender-disaggregated database of seasonal and temporary migrant workers, to provide an evidence base for further support for climate-forced displacement, including rebuilding livelihoods.

6.2.3 Responsive to Context

The broader socio-economic and political context needs to be considered in the mobilisation of funds, assessment of needs and design and delivery of interventions. This is particularly important where people face intersecting risks and accumulated losses and damages related to conflict, economic instability, climate change and geophysical hazards. When informed by a comprehensive risk assessment that takes account of intersectional drivers of vulnerability such as poverty, food insecurity and poor infrastructure, loss and damage interventions can help to build longer term resilience.

People and communities affected by climate loss and damage in conflict zones are often harder to reach due to the challenges of operating in unstable and dangerous locations. Ensuring the safety of affected people is particularly crucial when supporting relocation and displacement, and climate-induced disasters exacerbate the risk of gender-based violence for women and girls who are more likely to be displaced than men. The Climate and Environment Charter for Humanitarian Organizations^[151] has been developed by agencies specialised in humanitarian work in conflict affected locations.

6.2.4 Adequate to Meet Real Needs

The scale and types of both finance and action must be adequate to the task of addressing particular losses and damages in specific contexts now and into the future. The sums of finance provided need to adequately meet the immediate needs of people and communities negatively impacted by climate shocks, their recovery and rehabilitation needs and their long-term resilience-building requirements.

Adequacy of intervention must cover the full range of needs of those impacted, from infrastructure rehabilitation, provision of food relief, public health support, emergency shelter and livelihoods recovery, to mental health support and grief counselling, and actions to address other forms of non-economic losses and damages. Affected people, households and communities can engage with and lead in defining what "adequate" means. Participatory MEL methodologies can be utilised to assess and ensure the adequacy of processes to address loss and damage. For example, YPSA in Bangladesh (funded with Scottish Government funds allocated at COP27 to CJRF) established community groups that include previously displaced community members to help identify the most vulnerable that should receive assistance first.

The Glasgow Pact included a call for Parties to revise their Nationally Determined Contributions (NDCs). While not obligatory, an increasing number of countries are including loss and damage considerations and responses in their latest NDCs. By costing the interventions needed to address loss and damage in their NDCs, vulnerable developing countries signal the need for new and additional funding and outline how they intend to use it. Vanuatu has made a huge step in this direction with the Revised and Enhanced Nationally Determined Contribution^[152] where addressing loss and damage is centre stage. Practical Action and WWF have considered the value and the resource implications of anchoring loss and damage in NDCs.^[153]

Technical support – for instance through the Santiago Network on Loss and Damage once operational – will be necessary for countries to conduct analyses of the potential scale of losses and damages (both economic and non-economic). These assessments need to consider different climate scenarios, to quantify financial needs in the event of specific shocks, and to put in place financial mechanisms that deliver adequate sums for effective action. Based on these risk analyses, governments could then develop comprehensive loss and damage action plans.

6.2.5 Accessible to All

Finance and interventions must be designed and delivered in ways that actively empower those affected by loss and damage to be able to access funds easily and quickly. The DCF model described in the IIED/NDMA case study shows how local communities can access annually allocated funding for climate action including addressing loss and damage.

Accessibility requires that finance providers themselves identify and remove obstacles. This may entail reviewing and revisiting their risk analysis and disbursement processes, building the capacity of recipients and putting in place additional safeguards as required.

Being accessible in two directions is important. From the bottom up, in terms of ensuring funds are accessible to the people that need them, and from the top down, so those organisations and people able to contribute to finance have the opportunity to do so.

Direct access to funds, support through untied grants, allocations not based upon competitive processes for distribution, and using participatory methods at the insider/outsider interface are all critical for accessibility. Finance providers can also develop technologies and mechanisms to transfer funds more quickly and in a more targeted manner to respond to the needs of recipients.

Finally, accessibility is informed by the "non-burdensome" principle that avoids creation or compounding of indebtedness. At the national level, countries need non debt-generating finance primarily delivered in the form of grants. At smaller scales, eligibility criteria that are inclusive and that account for the capacity of their target recipients should minimise financial and administrative burdens.

6.2.6 Historical Responsibility and Polluter Pays

The UNFCCC sets out the importance of historical responsibility and the principle of common but differentiated responsibilities and respective capabilities, in light of different national circumstances. This is reaffirmed in Article 2 of the Paris Agreement. As Shawoo et al.^[154] set out, the principles of historical responsibility and polluter pays should guide contributions and could be a vehicle for restorative justice. In line with these principles, the authors identify the following as potential examples of finance flows: climate damages tax on the extraction of coal, oil and gas; international airline passenger levy; reallocation of Special Drawing Rights from developed to developing countries; and annual reduction in fossil fuel subsidies by G20 countries, with the funds being used to support efforts to address loss and damage. The call for an Advisory Opinion on climate change from the International Court of Justice by Vanuatu could set the stage for action to hold major polluters accountable for anthropogenic climate change. The Alliance of Small Island States (AOSIS) are also calling for polluting companies like fossil fuel producers to pay for the loss and damage caused by climate change via taxes or voluntary contributions.

6.2.7 Creative Communication and Shared Learning

The issue of whose voices and experiences are listened to is important. The people and communities at the frontline of losses and damages need to be heard and learned from. By listening to others with experiences of loss and damage we can learn about impacts and risks, as well as build a better picture of solutions that can draw down funding support. Frontline communities are keen to shift the narrative to solutions that address their loss and damage.

People in Dhaka, Bangladesh are using theatre to make and tell stories of their lived experience of climate change.^[155] The La Ruta Del Clima case study 11 shows how stories from a diversity of groups who are experiencing economic and non-economic loss and damage due to climatic impacts are shared. Using stories helped to contextualise climate change; it showed how climate impacts perpetuate inequality and vulnerability and interact with extractive dynamics, and allowed further exploration of the experiences and perception of those most affected.

6.2.8 Transparency and Accountability

Providers and recipients of finance for addressing loss and damage should be forthright about the flows and use of funds. Taking advantage of existing national systems of tracking finance is important. Use can be made of self-reporting based upon participatory monitoring, evaluation and learning.

Once finance is accessed by countries, using established national financing channels that are known to work to get the money to where it is needed is sensible. People who need support in addressing losses and damages need direct access to resources so they can make their own allocation decisions. Local ownership can also be used to confront existing power structures that may exist between governments, private sector, civil society and local communities in a way that ensures that all stakeholders are equitably represented. In this way, local ownership supports the distributional, procedural and transformative aspects of climate justice.

Monitoring, evaluation and learning are critical both for bottom-up accountability, i.e. how measures are reported to funding bodies, and for downward accountability, i.e. how those responsible for financially supporting and implementing measures to address losses and damages are held to account by those facing the impacts and risks of losses and damages.

The UNFCCC can and should embody and deliver global transparency and accountability for all climate action under its remit, including action to address loss and damage. For instance, enhanced NDCs can be used to demonstrate need and inform the allocation of loss and damage finance. The Global Stocktake is to be used to collate evidence both of the incidence and severity of losses and damages, but also of the measures being taken to address them. This will require inputs from climate vulnerable countries and support for the articulation of their loss and damage needs (coordinated under the Santiago Network for Loss and Damage). A Loss and Damage Gap Report is proposed as a critical input to this process.

6.2.9 Far-sighted and 'Do No Harm'

The 'Do No Harm' approach applies to the UNFCCC Loss and Damage negotiation process. The G77 and China group of Parties have pledged to do no harm to the proposals of sub-groups, even where these are not unanimously supported.

Being cognisant of and acting to address the projected escalation in future risks of loss and damage, particularly the unavoidable increases in hazards, is important. The impacts of disasters will compound over time and eventually become insurmountable: longer-term projects that build resilience can break this cycle.

Acting on loss and damage in ways that are not deleterious to future generations is crucial. In the urgency to address loss and damage the danger of longer-term harm may be overlooked. Far-sighted approaches also offer narrative shifts from relief and response towards a more sustainable approach that incorporates slow onset events. Indonesia, for example, has published a Long-Term Strategy for Low Carbon and Climate Resilience 2050.^[156] Case study 12 outlines a project committed to creating a water-safe future for the world's cities. Research in 97 C40 cities facilitated calculation of flood and drought risk by 2050, and the risk of population exposure and accompanying costs. The project gives technical assistance to develop, organise, and coordinate water management strategies.

6.2.10 No Additional Indebtedness

The costs of responding to loss and damage should not become a burden for affected groups who are often the least responsible for climate change. Finance needs to be available at appropriate timescales and quantities. Two primary levers can be used to ensure that action to address loss and damage does not increase the debt burden already faced by affected countries, communities and individuals: debt cancellation/relief, and grant-based (rather than loan-based) programme funding.

The UNFCCC Loss and Damage Fund agreed at COP27^[157] to assist countries "particularly vulnerable to the adverse effects of climate change" will need to consider how to avoid increasing indebtedness. The Transitional Committee will be able to recommend ways to do this including the large-scale provision of grant finance. For other sources of finance where conditionalities preclude grant-based finance, vulnerable countries will need access to concessional finance on favourable terms.

There is growing recognition of the role of debt cancellation/relief in achieving climate justice goals, underlining the structural inequity in the availability of existing finance. Examples provided by Jubilee Scotland in their case study include the Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatments.

As a direct result of addressing the impacts of the 2022 floods Pakistan has signed a $475 million loan agreement for flood relief with the Asian Development Bank. This increases the 2022 loan total to USD 2.7 billion with the agency. It is reported that Pakistan has been trying to approach allies to seek financial support, and a ninth review of the International Monetary Fund for a 2019 bailout programme has been pending since September 2022.

Grant-based rather than loan-based programme funding means that affected countries, communities and individuals are not driven further into debt by having to repay more than the value of the finance that is provided. Where this is provided as longer term programmatic finance, action and interventions to address loss and damage can be delivered more strategically over the medium to long term. An example of this is shown through the actions of philanthropies such as CIFF who have experience of grant-based action through their delivery of the Global Methane Hub and who also backed the V20 fund, which builds on the GEF's Small Grants Programme and is aligned with climate justice principles.

6.3 Concluding remarks

The political economy of addressing loss and damage is tilted against the most vulnerable. Climate vulnerable people have little economic or political power to demand that a protection floor is put in place. Climate vulnerable countries have found it difficult to push through loss and damage decisions at the UNFCCC. However, COP27 represents a transformative change and there is growing acceptance of the need to address loss and damage faced by the most vulnerable.

The scale and pace at which loss and damage is occurring clearly demonstrates the limits to climate adaptation at the current level of climate risks and impacts. However, recent assessments of the effectiveness of internationally funded adaptation interventions^[158] and an analytical review of maladaptation^[159] show that investments in climate adaptation are inadequate to effectively manage or even reduce climate impacts. If successful, the proposal by AOSIS to include loss and damage in the Global Stocktake^[160] will help to calibrate how well current adaptation measures are minimising loss and damage.

The Transitional Committee requires evidence on how the current landscape of funding can be mobilised to inform its recommendations for the operationalisation of the UNFCCC Loss and Damage Fund.^[161] Similarly bilateral and other funders seeking to fund measures to address loss and damage need to be aware of where the priorities and gaps are. The mapping of the loss and damage landscape discussed in Section 5 of this report outlines some of these gaps and priorities. Non-economic loss and damage is a particularly neglected category. In part this is due to the highly context specific and less tangible nature of such loss and damage – particularly to people from outside the immediately affected communities.

At the global level the MDB reforms, discussed at COP27 and set out by Prime Minister Mottley of Barbados in her address to the general debate of the General Assembly's seventy-seventh session,^[162] would enable the release of trillions of dollars needed to comprehensively address loss and damage. Maintaining the momentum on reforms to the Multilateral Development Banks and International Financial Institutions, alongside establishing the Loss and Damage Fund, should not deter other public and private funders from taking action as losses and damages continue to accrue for communities at the frontline of the climate crisis.