A Dangerous Retreat on Multilateralism: TC5 Recommendations for the Loss and Damage Fund side-step Climate Justice.

A Dangerous Retreat

on Multilateralism:

TC5 Recommendations

for the Loss and

Damage Fund side-step

Climate Justice

By Julie-Anne Richards
06 / 11 / 2023
Reacting to the lack of obligations for developed countries to pay their fair share into the Loss and Damage Fund in the penultimate draft text of the recommendations that the Transitional Committee would send to COP28 from TC5, Avinash Persaud of Barbados makes it clear that developing countries did not want to accept a retreat to voluntarism where developed countries are only "urged" to provide Loss and Damage Finance. Image credit: UNFCCC.

After an action packed and fraught year the final meeting of the Transitional Committee (TC) charged with making recommendations to COP 28 about how to operationalise the Loss and Damage Fund has closed. Recommendations, including a draft governing instrument, were agreed. But it was a close thing. With some ugly UNFCCC sausage making on display1.

The fifth meeting of the TC was hastily convened after TC members were unable to reach an agreement at the end of what was supposed to be their last meeting in October. Following a year-long process that, in addition to the five TC meetings, included two workshops, a dialogue, and a ministerial meeting.

It would be a mis-characterisation to say that the outcome from TC5 met the expectations of all who participated in that process. The recommendations that will be forwarded to COP 28 largely side-step the calls for climate justice made at the workshops, dialogues and submissions by civil society and impacted communities. It, rather reverts to “business as usual” —or is that “avoidance as usual” in the case of rich countries. 

Firstly, there is no indication of what scale the new Fund will operate at. There is nothing in the draft decision and governing instrument to provide any guidance. We estimate that at least USD $400 billion is needed each year for loss and damage —the majority of which should be channelled through the Loss and Damage Fund. Developing countries have called for the Loss and Damage Fund to be able to program USD $100 billion a year. But, due to pressure from developed countries —both the UK and Australia argued in open sessions at TC5 for no scale to be mentioned— it’s been quashed. 

Further, developed countries are “urged” and “invited” to provide funding. This is a very long way from their responsibility as wealthy countries for the majority of the climate pollution that is causing the loss and damage that is impacting developing countries now. Yet even this extremely weak language was too strong for the US, with Christina Chan stating she did not support the text after it was agreed at the meeting’s close. Avinash Persaud, Barbados, called out an earlier version of the text as an unacceptable “retreat to volunteerism”. That would seem an accurate summation of this version as well. Only the final version came teamed with a side of US denialism.

One potential bright spot is that it appears there is agreement that the Loss and Damage Fund will be an operating entity of the financial mechanism of the UNFCCC (the Convention) —which would mean that the equity principles of the Convention such as historical responsibility would come into play. However, the language in the TC text (paragraphs 4 and 10) is somewhat murky in deciding the Fund is “an entity entrusted with the operation of the financial  mechanism of the Convention that also serves the Paris Agreement”. We need a lawyer's help here, so watch this space.

It is welcome that the Board of the Loss and Damage Fund will have the ability to develop resource allocation systems, taking into account the priorities and needs of developing countries, with a minimum allocation to Least Developed Countries (LDCs) and Small Island Developing States (SIDS). It’s also welcome that knowledge from vulnerable people and Indigenous communities will be taken into account in assessing loss and damage. There are no clear windows identified —our favoured approach and the approach contained in the LDC submission— but nor are there sub-funds, which would have allowed developed countries to determine where their funds would be allocated to, therefore undermining the role of the Board and shifting from “needs driven” to the politics of “donor driven”.

Which leads to the Board composition. It's positive that there are (slightly) more developing country members (16) than developed country members (14) —this really is a minimum—however it is a huge oversight that there is not one Board position allocated to impacted communities, Indigenous peoples, or civil society.  Rather, there are some very wishy-washy statements about “effective participation of observers” and “consultative forums”. This lack of genuine engagement of communities on the front line of climate impacts is truly, truly concerning.

Further to this, the governing instrument lacks any mention of human rights and rather in the objectives and purpose speaks of “culturally sensitive and gender responsive approach”. All well and good, but why not clearly embed human rights into the way the Fund will operate. If the Loss and Damage Fund is to run for the benefit of the marginalised on the frontline of climate impacts, these are essential safeguards.

The final substantive point to be made here is a doozy. It is whether the Loss and Damage Fund is being set up to meet the needs of communities and countries on the frontline of climate impacts, or whether it is being set up to meet the aspirations of the World Bank. Developed countries have insisted the World Bank host the Loss and Damage Fund at every turn. Including during TC4, where Diann Black-Layne, Antigua and Barbuda, described the behaviour as “pure gangster behaviour”. The World Bank is entirely inappropriate to host the Loss and Damage Fund, for reasons too numerous to fully enumerate here. Chief amongst them: 

• The World Bank has helped cause the climate crisis and, in fact, is still funding fossil fuel projects!

• The World Bank business model involves providing loans, which are not appropriate for loss and damage and have pushed developing countries into debt distress (disappointingly loans are included in the TC5 outcome).

• The World Bank typically works via intermediaries, such as MDBs and UN institutions, and therefore does not provide direct access to countries nor small grants to civil society. 

This last point has been addressed in the TC5 outcome, with a set of conditions that the World Bank would have to meet in order to host the Loss and Damage Fund, including that it must allow direct access for countries and small grants for communities, must be accountable to the COP and CMA rather than the World Bank policies.

The final, damning point against the World Bank is it’s exorbitant overhead fee, which is set at 24% of the secretariat's costs! That means that if the Loss and Damage Fund were to program $100 billion a year, the World Bank would get $1-2 billion of that. This is truly gangsta behaviour! Whilst the TC5 outcome includes a condition that the “cost recovery methodology that is reasonable and appropriate” that is far too wishy-washy and could result in far too high a proportion of funds that should go to front-line communities, being spent on business class flights and posh hotels for World Bank employees. If developed countries are really concerned about “efficiency” the World Bank would not be their preferred option!

Whilst an “exit clause” has been included in the TC5 decision, it is far too weak and would need to be significantly strengthened. The World Bank for four years would be bad enough - to be stuck with it in perpetuity would be diabolical!

There is a petition to name the Loss and Damage Fund after Professor Saleemul Huq —a giant of loss and damage who sadly passed away last week. Professor Huq spent his life campaigning for climate justice and always finding a way forward. For the Fund to deserve his name, it needs to truly meet the standard of climate justice and deliver for the people on the front line of climate impacts.

End Notes:

1. By “on display” I mean “glimpsed” as the meeting was held largely behind closed doors. Whilst the delegate from the Netherlands actually called for the whole meeting to be closed, civil society were able to attend (and watch online) a very small part of it. Not the model of transparency once would hope for in the establishment of a Loss and Damage Fund meant to serve the marginalised on the frontline of climate impacts.

Julie-Anne Richards is the Loss and Damage Collaboration’s Strategy Lead. She has two decades of experience working on the climate crisis, has written extensively on loss and damage, and campaigned with civil society and in collaboration with vulnerable countries on the need for loss and damage finance.

This article has been Funded by the Rosa-Luxemburg-Stiftung New York Office with support from the German Ministry for Economic Cooperation and Development (BMZ). The publishers are solely responsible for the content of this publication; the opinions presented here do not reflect the position of the BMZ. We also note that views and any errors, are the authors alone and that the content of this brief does not necessarily represent the views of all the members of the Loss and Damage Collaboration (L&DC).