TWN Info Service on Climate Change (Sept24/01)
27 September 2024
Third World Network

Board of Loss and Damage Fund endorses agreements with World Bank and selects first ED

Baku, 27 September (Chhegu Palmuu): The third meeting of the Board of the Fund for responding to Loss and Damage, which convened from 18-20 September in Baku, Azerbaijan, successfully decided to endorse the hosting and the trustee agreements with the World Bank (WB), paving the way for the operationalisation of the much awaited Fund, at the upcoming annual climate talks in November to be held in Baku.

The agreements are key for the operationalisation of the Fund as a WB-hosted financial intermediary fund (FIF), with the WB hosting the secretariat of the Fund, as well as in its role as the interim trustee of the Fund.

The third Board meeting (B.3), which saw opening remarks by the COP29 President-Designate and Minister of Ecology and Natural Resources of Azerbaijan, Mr. Mukhtar Babayev, also took another important decision on the selection of the first Executive Director (ED) of the Fund.

Hailed as the two key highlights of the meeting, both decisions were agreed in “closed” sessions – not open to observers or webcast. Both matters took up the substantial two days of the meeting. The ED selection is learnt to have been wrapped up in the late hours of the second day while the pivotal FIF documentation – hosting agreement, trustee agreement and contribution agreement – was eventually agreed only in the afternoon of the final day.

At the concluding session, when Co-Chair Richard Sherman (South Africa) provided a summary of the achievements of the meeting, he stated about the two key decisions taken by the Board, although “embargoed” and not for public viewing. (See details below). The other Co-Chair of the Board is Jean-Christophe Donnellier (France)

Further, Sherman continued to recap that the Board had among other matters: endorsed its first report to the COP and the Meeting of the Parties to the Paris Agreement (CMA); endorsed the concept note for the first annual high-level dialogue which will be launched at COP29, and also agreed on the date and location of the first dialogue. It also took note of the progress on the additional rules of procedure of the Board and adopted the dates and venues of the Board meetings in 2025.

In terms of the report of the meeting, Co-Chair Sherman mentioned about following the standard practice of issuing the compendium of decisions as soon as possible – that, as soon as the embargo on the two decisions have been lifted, the decisions would be made available for comments from Board members for two weeks, and then adopted by the Board.

As a helpful rundown on the achievements by the Board in the six-month timeline, he summed up the totality of the work and mandates fulfilled, listing the key moments: the Board was constituted at the end of April this year, and have met three times so far; the WB accepted the invitation from the COP/CMA to host the secretariat and the FIF; the Board selected and appointed the Philippines as the host country of the Board; the Philippines has recently signed (28 August) into law the Loss and Damage Fund Board Act, granting the Board the juridical and legal personality in the Philippines; the WB met the deadline of submitting the FIF documentation to the Board by 12 August; the Board has held three formal dialogues with civil society as part of the Board’s formal proceedings and to formalise the role of civil society and active observers; and the Board has approved the arrangements between the Board and the COP/CMA that was submitted by the UNFCCC’s Standing Committee on Finance and expected to be adopted at the COP/CMA later this year.

Sherman also concluded that at this point, the Board has “fulfilled all mandates that the COP/CMA gave us to institutionalise and have this Fund up and running” and thus, it’s a “remarkable start”. He said that when the Board meets at next meeting (i.e. B.4) for the first time in the host country (in December in the Philippines), “we expect to be joined by our first ED and we will start formal discussions on the operational details” of the Fund, adding that at B.2, the Co-Chairs had proposed a “country owned, bottom up process” to structure the operations of the Fund. He further reminded that the Co-Chairs were mandated as well to consider “early funding” in 2025 and 2026.

WB’s FIF documentation and agreements 

The proposal (document FLD/B.3/7) by the Co-Chairs Sherman and Donnellier on the operationalisation of the Fund, listed the following expected actions by the Board: to consider and endorse both the “Agreement on the Hosting Arrangement for the Secretariat of the Fund for responding to Loss and Damage” and the “Trustee Agreement on the terms and conditions for the administration of the Trust Fund for the Fund for responding to Loss and Damage”, as well as the templates of the “Trust Fund Contribution Agreement” and “Trust Fund Contribution Arrangement”; to confirm to the COP/CMA that the conditions set out in paragraph 20 of the COP28/CMA5 decisions can be met during the interim period; to authorise the Co-Chairs to sign the agreements and to track and report on progress made on meeting the conditions during the interim period; and, to launch an inclusive and transparency performance review of the interim arrangements no later than the first Board meeting in 2027.

[In Dubai last year, COP28 and CMA5 decided to invite the WB to operationalise the Fund as a WB-hosted FIF for an interim period of four years (paragraph 17), subject to the eleven conditions outlined in paragraph 20 and elaborated in paragraphs 21-24 of the decisions, to be met by the WB during the interim period. The interim period starts from the sessions of the COP/CMA at which the Board confirms that the conditions can be met (paragraph 17).

Further, paragraph 19 invites the WB to take the necessary steps to promptly operationalise the Fund as a FIF and to “submit to the Board by no later than eight months the relevant FIF documentation” approved by the WB Board].

The Co-Chairs’ proposal also provides a report on their engagement with the WB during the period between B.2 and B.3 meetings of the Board, with a view to enable the Board to confirm that the FIF documentation ensures that the conditions are met, and to endorse the hosting agreement and the trustee agreement with the WB. The document also contains two annexes carrying the WB’s letters in response to paragraphs 17 and 19 of the COP28/CMA5 decisions.

On 2^nd August, the Co-Chairs received the zero draft of the FIF documents from the WB for initial comments. Thereafter, on 12 August, the WB submitted the documents as required, which were circulated on a “limited distribution” basis (only to Board members), allowing a duration of 10 days for written comments. Submissions were received from 12 Board members and submitted to the WB. The final iteration of the FIF documentation was circulated to the Board on a limited distribution basis on 13 September for consideration at the Baku meeting.

It is learnt that the key issue centred around ensuring fundamental matters are in place to rightly set up the Fund as a WB-hosted FIF. Importantly, the clarity and balance in the agreements in reflecting the independence of the Fund, as well as the distinct roles and responsibilities of the WB and the Board - with the former only providing services of hosting the Fund and its secretariat as well as in its role as the interim trustee of the Fund, while the Board governing and supervising the Fund as its decision-making body, in line with the COP28/CMA5 decisions and the Governing Instrument of the Fund. A related issue was ensuring the independence of the secretariat in line with paragraph 19 the decisions which states, “…with the Fund to be serviced by a new, dedicated and independent secretariat hosted by the World Bank”.

Issues pertaining to the Fund’s resources remained critical – ensuring clarity and comfort in the language around ensuring direct access to resources by all developing countries via primacy of grants; and on spelling out the “contributors” in line with the COP28/CMA5 decisions to avoid any ambiguities in the agreements.

Following protracted negotiations with the WB, according to reliable sources, an agreement was reached in addressing any remaining concerns through the decision text itself, without any further adjustments to the FIF documents, and with the assurance that the agreements with the WB may be amended when needed.

At the concluding session on the final day, when Co-Chair Sherman summarised the achievements of the meeting, he first and foremost stated that the Board has confirmed that the conditions in paragraph 20 of the COP28/CMA5 decision can be met by the WB during the interim period in relation to hosting the Fund, as a FIF and this confirmation will be transmitted to the COP/CMA; and that the Board has also endorsed the FIF related documents – the hosting agreement, the trustee agreement and the forms of contribution agreement/arrangements.

Further, he informed that the decision and the FIF related documents are under “embargo” and after signing of the agreements by the Co-Chairs, the documents will be released publicly on the websites of the WB and the Fund.

Selection of the ED of the Fund

Co-Chair Sherman also informed that the other decision under “embargo” was on the selection of the ED of the new, dedicated and independent secretariat of the Fund, hosted by the WB; that the Board has requested the WB to enter into a contract with the selected individual and once there is confirmation of acceptance of contract, the embargo will be lifted.

Next day, on 21 September, it was officially announced that Ibrahima Cheikh Diong has been selected as the first ED for a four-year term beginning 1 November 2024. Mr Diong currently serves as Special Representative of the President of the Arab Bank for Economic Development in Africa on ESG, and was previously the UN-Assistant Secretary General and Director General of the African Union specialised agency, the African Risk Capacity (ARC) Group.

It is learnt that developing countries as a constituency demonstrated unity and solidarity with a consensus in the final selection of the ED. The Board had agreed to an interim procedure for exhausting consensus in the confidential ballotting process.

Acronym of the name of the Fund – FRLD

It is to be noted that amid the time crunch to resolve substantive agenda issues, the meeting also deliberated about the “acronym” of the name of the Fund which some developing countries considered as a non-issue given that at B.2, the name of the Fund was decided as the “Fund for responding to Loss and Damage” with “responding” in small “r” and hence, the acronym to be straightforward as “FLD” which is actually already in use in the Board’s documents and decisions.

However, after much push by some developed country proponents to elevate “responding” in capital “R”, the acronym was eventually agreed as “FRLD” which was seen as backtracking from previous decisions by the very same proponents.

Co-Chair Sherman when closing the issue, stated as a matter of fact that for the developing country constituency, the “Loss and Damage Fund” has been the “historic”  name for use and reference to the Fund.