TWN Info Service on Climate Change (Oct23/05)
31 October 2023
Third World Network

Divergences on funding arrangements related to loss and damage

Delhi, 31 October (Radhika Chatterjee) – At the recently concluded fourth meeting of the UNFCCC’s Transitional Committee (TC4), differences arose over whether criteria should be developed for funding arrangements for loss and damage. Developing country TC members referred to the Sharm el-Sheikh mandate and underlined the importance of mobilizing “new and additional resources” in relation to funding arrangements; however, the developed countries did not quite respond to this aspect during the discussions at TC 4 which convened in Aswan, Egypt from 17-21 October.

Developed countries were of the view that the ‘funding arrangements’ should form a key aspect of financing for the loss and damage needs of developing countries, which they said, would be provided by several existing international organisations like multilateral development banks (MDBs), multiple UN agencies and existing climate funds.

(The mandate of the TC is to come up with recommendations on new funding arrangements. At COP 27, Parties had decided to “establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage, including with a focus on addressing loss and damage by providing and assisting in mobilizing new and additional resources, and that these new arrangements complement and include sources, funds, processes and initiatives under and outside the Convention and the Paris Agreement”.)

Developing countries also highlighted that a lot of such institutions “outside of the UNFCCC” are not accountable to the UNFCCC and proposed developing criteria to identify which institutions would form the pool of the funding arrangements. This, they said would also ensure accountability and establish that the funding arrangements would work in favour of developing countries. They also raised several concerns around the lack of clarity on what constituted the funding arrangements.

Developed countries led by the United States (US), however, rejected the need for setting criteria for identifying which institutions should be a part of the funding arrangements for loss and damage.

The TC members also responded to the Co-Chairs’ proposal of a draft negotiating text on funding arrangements. [The TC is co-chaired by Richard Sherman (South Africa) and Outi Honkatukia (Finland)].

During the discussions, Mohammad Nasr (Egypt) said since the institutions outside of the UNFCCC did not provide support for loss and damage, the Sharm el-Sheikh decision had called for “new funding arrangements” to be established. He emphasized the importance of the Loss and Damage Fund (LDF) to be the main player and called for criteria to be developed to determine who would be part of the funding arrangements.

Nasr also said the idea was not to pick just about any institution but those institutions that were “providing new and additional resources”. “This has to be part of the criteria,” he said. He also said that it would be important to ensure that those who sit around the table as part of the funding arrangements should have some accountability to deliver whatever has been agreed upon. Otherwise, they will just deliver statements and we all go home happy while people are still dying and facing loss and damage, said Nasr. He also called out the irony that the members who were calling for establishing criteria for eligibility (to receive funding from the LDF) were not agreeable to establishing criteria for funding arrangements. Nasr said the crosscutting element was “new and additional” resources and called for clarity on who would be the convener; who would be sitting around the table and doing what; and what would be the follow-up arrangements. He said clarity on these would help operationalize the structure and would be the three main requirements in any outcome on funding arrangements and not what was proposed in the draft text by the Co-Chairs. He expressed disappointment that the Co Chairs’ text did not have a single reference to the new and additional nature of the funds that are to be provided for loss and damage.

(Among other proposals, Co-Chairs in their draft text had proposed the following on funding arrangements

104. The Funding arrangements may also include the convening of a biennial coordination and complementarity dialogue (the dialogue) of the funding arrangement partners, whereby a biennial meeting of the funding arrangements with the participation of high-level representatives from institutions engaged in responding to loss and damage, shall be organized in order to:

(a) Facilitate a structured and timely exchange of relevant knowledge and information, including between the funding arrangements and the fund;

(b) Strengthen capacity and synergies to enhance the integration of measures to respond to loss and damage into sources, funds, processes and initiatives under and outside the Convention and the Paris Agreement by drawing on the experiences of others, exchanging good policy and practice and leveraging research and data systems;

(c) Promote exchange of experiences from countries’ and communities’ perspectives on actions undertaken to respond to loss and damage;

(d) Identify new opportunities for cooperation, coordination and complementarity; and,

(e) Report to the Parties, through the WIM, on the dialogue, including on the follow-up of the implementation of the recommendations on to the funding arrangements and suggesting new ones.

105. The dialogue may consist of high-level representatives from institutions engaged in responding to loss and damage, including, inter alia:

(a) Representatives of the Fund;

(b) The World Bank and Regional Development Banks;

(c) The International Monetary Fund;

(d) Relevant United Nations Agencies, such as the United Nations Office for the Coordination of Humanitarian Affairs, United Nations Office for Disaster Risk Reduction, United Nations Development Programme, United Nations Environment Programme, United Nations Educational, Scientific and Cultural Organization, Food and Agriculture Organization of the United Nations, World Food Programme, and World Health Organization;

(e) Relevant multilateral climate funds, such as the Fund, the Green Climate Fund, the Global Environment Facility, Adaptation Fund, and Climate Investment Funds; and

(f) The International Organization for Migration;

(g) Representatives of the WIM ExCom, the Santiago network;

(h) Experts on Loss and Damage chosen on the basis of their expertise as well as their representation of different regions and perspectives.)

Co-Chair Richard Sherman (South Africa) explained that the developing countries’ concern stemmed from the fact that activities that were purely adaptation might be re-labelled loss and damage and therefore the need for some kind of standard-setting for better accountability.

Albara Tawfiq (Saudi Arabia) emphasized that the funding arrangements should be consistent with the principles of equity and common but differentiated responsibilities (CBDR) and that they should lead to new and additional and predictable finance. He also said that the LDF Board should be the convener of any high-level dialogues.

Avinash Persaud (Barbados) expressed his concern in relation to other institutions not having the similar access, eligibility and scope remit as the UNFCCC and called on the Board of the LDF to be the central agency coordinating with such institutions.

Matheus  Bastos (Brazil) also spoke the idea of developing criteria to help understand who these institutions are and called for targeted recommendations so that they know who they are talking to. He stressed the aspect about leveraging new and additional resources to developing countries had not been captured in the Co-Chairs’ proposal. He said he did not support a particular paragraph in the Co-Chairs’ proposal which urged countries to “include non-economic losses in their National Adaptation Plans and Nationally Determined Contributions” and requested “donors, relevant funds and organizations to take them into account in their response plans”.

Echoing Nasr’s concerns on the lack of clarity, Bastos added that the text provides for coordination dialogues for funding partners, without clarifying who those ‘partners’ would be. Reiterating Nasr’s point, he said, “[we are] struggling to understand the overall rationale of the funding arrangements universe”, asking the questions who we are talking to”, and “what are we talking about”. He also shared concerns about the inclusion of “pre-arranged finance” as one of the sources of funds in the funding arrangements. He said “we discussed this [pre-arranged finance] through TC meetings’ and “many developing country TC members raised their concerns about that, but they were not addressed here.”

Angela Rivera Galvis (Colombia) also called for clarity on who the UNFCCC’s Parties were talking to and what to expect from the funding arrangements, and said that developing some criteria would be really useful for that. She also called for non-prescriptive recommendations.

Adao Soares Barbosa (Timor Leste) said transparency and communication were key gaps in relation to funding arrangements, and he gave the example that there was very little information on which entity provided resources to which country. He stressed on the importance of loss and damage funding to be new and additional and not a burden for LDCs and SIDS. He said they must avoid loans and besides new and additional being a criterion for the funding arrangements, another criterion should be that the institutions should be “addressing loss and damage”.

Supporting her colleagues from developing countries, Khadeeja Naseem (Maldives) said “We want the funding arrangements to be complementary to the Fund… It has to be new and additional finance.” She further highlighted that it is the Conference of Parties should be the convener of the funding arrangements, and not the Warsaw International Mechanism (WIM).

Christina Chan (US), referring to the US’ bridging proposal, said the funding arrangements “would be an invitation to sources, funds, processes, outside the Convention and Paris Agreement.” “We don’t want criteria developed,” she added. She explained that the idea of criteria sounds limiting as opposed to being expansive for mobilizing greater support. Responding to Tawfiq (Saudi Arabia), she said she did not think CBDR had a role in neither the Fund nor the funding arrangements.

Elaborating on France’s position on the funding arrangements, Jean Christophe Donnellier said, “We are designing a fund where we [are asking] others to cooperate also…”. He further said it was important to have all these institutions in order to mobilise the mosaic of funds to work. He expressed there was a need to work on linkages between the Fund and the funding arrangements, but did not propose specific mechanisms by which that could be done.

Heike Henn (Germany) said the EU would like to like to see a reference to the Global Shield in the funding arrangements.  (The Global Shield is an innovative risk financing facility proposed by the World Bank in 2022). Responding to Nasr’s proposal on making the LDF the central coordinating body of the funding arrangements, Henn said that “The notion of criteria and (the) Fund leading on everything is something that I cannot support.”

The TC is meeting next in Abu Dhabi on 3-4 Nov, where its members are expected to finalise the recommendations. However, this is not expected to be easy given several contentious issues still remain unresolved.