A Push For Loss and Damage Finance at COP27

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A Push For Loss and Damage Finance at COP27

Photo by Salvacampillo via ShutterStock

Loss and damage severely threaten the human rights of affected people, communities and future generations in vulnerable countries. Loss and damage is a climate justice issue. It is causing unprecedented human suffering around the world. This is a strong enough reason for developed countries to act, and COP27 will be the best stage to bring this to the forefront.

11 October 2022 – by Shreyans Jain

Climate change is real. It is causing upheaval in global biogeochemical cycles, resulting in the increased frequency and intensity of extreme weather events. The loss and damage associated with the adverse effects of climate change are leading to massive economic and non-economic losses and making less endowed countries vulnerable to abject poverty and deprivation. Widespread destruction of infrastructure, loss of livelihoods, biodiversity and ecosystems is forcing impacted countries to part with their development plans and divert their scarce resources towards humanitarian relief and recovery. It is unfortunate, however, that most developed countries, despite their historical and current greenhouse gas emissions, are following a cavalier approach to addressing the issue of climate justice even as the scale of finance required for global climate action is fast increasing.

In 2009, at the COP15 Summit in Copenhagen, developed countries committed to jointly mobilise USD 100 billion a year for climate finance to address the needs of developing countries. In 2015, the COP21 Summit in Paris extended this goal through 2025. Since then, the world has witnessed several hydrometeorological (floods, storms, heatwaves) and climatological (droughts, wildfires) disasters, largely attributed to climate change. Meanwhile, world leaders continue to assure those at the receiving that they can trust in international cooperation and global solidarity, while hiding their culpability for climate inaction.

Loss and damage severely threaten the human rights of affected people, communities and future generations in vulnerable countries. India, for instance, is ranked seventh in the Global Climate Risk Index and is exposed to severe climate change-induced economic losses. As per the National Disaster Management Authority estimates, 58.6% of India’s landmass is vulnerable to earthquakes of moderate to very high intensity and 12% of the land is prone to flood and river erosion. Out of 7,516 km of coastline, 5,700 km is exposed to cyclones and tsunamis. 68% of the cultivable land is at risk of drought, and 15% of the landmass is vulnerable to landslides and avalanches. It is estimated to have suffered an average annual loss of about USD 87 billion from extreme weather events such as tropical cyclones, floods and droughts in 2020. At the recent COP26 Summit in Glasgow, India’s call to developed countries to provide climate finance of USD 1 trillion was richly applauded. However, the questions about the liability to pay for loss and damage remained unanswered.

Contextualising Loss and Damage Finance

The United Nations Framework Convention on Climate Change (UNFCCC) does not provide a process for systematically collecting, recording and reporting information on financial needs related to loss and damage. Besides, finance for averting, minimising and addressing loss and damage is not recognised separately by bilateral and multilateral development finance institutions. As a result, developed finance is clubbed with climate finance and reported as finance associated with loss and damage. This is unreasonable, to say the least, as private non-grant capital, by virtue of its commercial orientation, cannot be termed international climate finance. Any pledge or multi-year commitment about promised sums in the future that is not backed by credible action is a recipe for the “greenwashing” of finance associated with loss and damage.

Article 8 of the Paris Agreement recognizes the importance of averting, minimising and addressing the loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events, as well as the role of sustainable development in reducing the risk of loss and damage. The UNFCCC framework clearly outlines the responsibility of developed countries to support their vulnerable counterparts through funding, technology transfer and insurance. However, despite increasing demand for a dedicated vehicle for financing loss and damage, no significant decisions have been made under the UNFCCC that provide clear guidance in this regard. The operating entities of the UNFCCC’s financial mechanism, such as the Global Environment Facility, the Green Climate Fund etc., are designed to measure outcomes largely from a mitigation and adaptation perspective. The accredited entities implementing projects through these mechanisms do not necessarily have the capacity or resources to support an appropriate loss and damage response.

In most instances, vulnerable countries have sought financial assistance to address the socioeconomic effects of climate change or to complement their disaster risk reduction and adaptation measures. The lack of principles prioritising countries with low capacity to respond to climate change, vis-à-vis countries facing an existential threat, has provided donor countries with a convenient alibi to delay climate action. Due to diverse interpretations of vulnerability, recipient countries are seldom able to reach consensus and end up taking mutually contradictory positions in climate negotiations.

Making Concerted Efforts

In 2013, the Warsaw International Mechanism was established to address climate change-induced loss and damage in vulnerable countries. In the 2015 Paris Agreement, loss and damage was afforded a self-standing article. While this did provide political legitimacy to the issue of loss and damage in climate negotiations, it was intentionally separated from the USD 100 billion commitment to avoid claims of liability and compensation arising from the historical responsibility of developed countries for climate change. COP27 presents the developed countries with a historic opportunity to take immediate action to fulfil internationally agreed climate objectives and compensate for the shortfall by establishing a properly capitalised loss and damage finance facility.

The mobilisation of finance for such a facility must be guided by a climate justice-oriented approach based on the principle of common but differentiated responsibility (CBDR) and respective capabilities. This finance should be new and incremental and comprise only the grant-equivalent element of any claimed disbursement. Furthermore, a process should be developed to ensure tracking, recording, and reporting information on loss and damage and the related financial needs of affected countries. The disbursement of funds should be needs-based, gender-responsive, and guided by the principles of local-level ownership, transparency, and accountability. Lastly, any provision of scaled-up financial resources for loss and damage should aim to balance the response for rapid onset events like floods and slow-onset events like sea level rise, taking into account country-driven strategies and priorities.

Loss and damage is a climate justice issue. It is causing unprecedented human suffering around the world. This is a strong enough reason for developed countries to act.


Shreyans Jain is a sustainability consulting practitioner with Accenture. He holds an MBA in Finance and Economics from the Indian Institute of Management Lucknow and a bachelor’s degree in Electronics and Communication Engineering from Delhi Technological University.


Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Energy Tracker Asia.

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