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Blog | COP29: Paving the Way for Climate Resilience through the Fund for Responding to Loss and Damage (FRLD)

By Juliana Castro Escobar

At COP28 in Dubai, after years of debate, countries reached a milestone agreement to operationalize the Fund for Responding to Loss and Damage (FRLD). This financing mechanism, initially agreed at COP27, aims to support vulnerable countries suffering from climate-induced losses and damages that go beyond current adaptation and mitigation efforts. These losses include both extreme weather events, such as droughts, floods, and cyclones, and slow onset events, such as desertification, sea-level rise, and biodiversity loss.

Negotiators have a unique opportunity to build on the progress made at COP28 by ensuring that pledges to the Fund translate into tangible financial support ready for disbursement in regions that urgently need it. This will require developed countries to step up with highly ambitious financial commitments, so that the Fund can provide timely, effective, and equitable support for vulnerable nations.

Understanding Loss and Damage

The UN refers to loss and damage as ‘the negative effects of climate change that occur despite mitigation and adaptation efforts’. Climate change efforts typically focus on two approaches: mitigation (reducing greenhouse gas emissions), and adaptation (adjusting to current and future climate impacts). However, loss and damage highlights a grim reality: mitigation and adaptation efforts are falling short and the climate crisis has escalated to a point where some of its impacts can no longer be prevented. Whether from sudden extreme weather events or gradual changes like sea level rise, desertification, and glacier melt. These impacts are already destroying lives, livelihoods, territories, and cultural heritage across the world.

Loss and damage debates are especially critical for countries with limited resources and high vulnerability to climate change. Many of these nations, which have historically contributed the least to global emissions, are experiencing – (and will experience well into the future) devastating consequences of extreme and slow onset weather events. The financial burdens from these events paired with limited adaptive capacity and resources, underscores the paramount need for a fair and robust system to support those who bear the highest burden of climate change.

This has raised issues numerous issues related to climate justice, liability, and accountability, and has sparked contentious debates in climate negotiations. Establishing the Loss and Damage Fund requires countries to negotiate their respective levels of responsibility for providing aid, as developed and developing countries each have their own viewpoint on liability with respect to historical emissions.

It wasn’t until COP27 that countries agreed to include loss and damage funding arrangements on the formal agenda, with the watershed decision of establishing a ‘Loss and Damage Fund’. COP28 saw the Fund set in motion, with the World Bank selected as trustee, and initial pledges of $661 million to start operations. Additionally, the Santiago Network on Loss and Damage (SNLD), aiming to provide technical assistance for loss and damage, was operationalised with additional pledges of $2.5 million. However, this initial funding is just a fraction of the estimated $580 billion in climate-related damages that vulnerable nations may face by 2030.

For instance, in 2022 alone, weather, climate and water-related hazards in Africa caused more than $8.5 billion in economic damages, with more than 110 million people affected. For the Loss and Damage Fund to meet the global demand, significantly larger and sustained financial contributions are essential.

“The reality is SIDS and LDCs are suffering more from the impacts of climate change than the countries that emitted the majority of the GHGs responsible for the climate changes. From a climate justice perspective we have a moral obligation to support these countries to repair from climate damages and losses. It must be done in a way that does not lock them into further debt and supports their sustainable development to a climate resilient future on their terms”.
Ellie La Trobe-Hogan – Consultant at E Co.

What’s Next for COP29?

Since COP28, the operationalisation of the FRLD has advanced, with the Philippines confirmed as the host country, Ibrahima Cheikh Diong appointed as Executive director for a four-year term, and the World Bank successfully meeting the conditions to serve as trustee. As COP29 approaches, the presidency has promised to seek further pledges to the fund to enable the first disbursements of funding by 2025. The focus should revolve around securing additional resources and determining reliable funding sources to ensure that the Fund is equipped to support nations most affected by the climate crisis.

Therefore, the following key issues are expected to be defined at COP29:

Funding sources: determining reliable sources of finance is a top priority. This includes traditional sources like contributions from developed countries for humanitarian aid, disaster-risk management and insurance, but also exploring alternative and innovative funding sources. Private sector involvement, levies on high-carbon industries, financial transactions taxes, and taxes on windfall profits of fossil fuel companies need to be debated. Also, funding for the SNLD needs to be agreed to complement the Fund’s programmatic approaches with technical assistance.
Amount and allocation mechanisms: to be effective, the Fund must set ambitious targets that reflect the scale of expected damages. This includes establishing annual funding goals and developing mechanisms to distribute resources equitably across different loss and damage needs, such as rebuilding infrastructure, supporting displaced communities, and preserving cultural heritage.
Eligibility and access: the Fund must establish clear criteria to determine which countries and communities qualify for assistance. The Fund will provide financing in the form of grants and highly concessional loans, considering also direct budget support, insurance and risk sharing mechanisms, as well as performance-based programmes. However, vulnerable countries often face barriers to access these financial mechanisms, so ensuring the Fund improves direct access to resources is essential for its credibility and effectiveness. Additionally, and following the principle of ‘common but differentiated responsibilities and respective capabilities’ under the Paris Agreement putting in place a clear allocation and prioritization mechanism is crucial to make the Fund effective for the most vulnerable, least resourced and responsible, particularly SIDS, and LDCs.
Governance structure: a transparent and efficient governance mechanism is key. This includes defining how funds will be managed, who will make allocation decisions, and ensuring that accountability measures are in place to track progress and prevent misuse.
Coordination with adaptation and mitigation funding: the FRLD must complement, rather than duplicate, existing funding mechanisms. Clear guidelines are needed to avoid overlap with other climate funds. An open question in Baku is whether the New Collective Quantified Goal (NCQG) will include loss and damage, as LDCs are lobbying to dedicate a portion of the NCQG to addressing loss and damage. The fund needs to also facilitate coordination with relevant development banks and climate funds, and the SNLD, among others.

Over COP29, the operationalisation of the Loss and Damage Fund represents a critical opportunity to support climate-vulnerable nations facing severe impacts. By securing sustainable funding sources, defining transparent governance, and ensuring equitable access, COP29 can lay the groundwork for a resilient global response to loss and damage. Achieving these goals is essential not only for climate justice but also for building a future where all nations can better withstand the impacts of an evolving climate.

Sources

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