TWN Info Service on Climate Change (Apr25/02)
25 April 2025
Third World Network

Loss and Damage Fund Board establishes modalities for start-up phase of USD 250 million

Kathmandu, 25 April (Prerna Bomzan): The 5^th meeting of the Board (B.5) of the Fund for responding to Loss and Damage (FRLD), which met on 8-10 April in Bridgetown, Barbados, successfully decided to establish the “Barbados Implementation Modalities (BIM)” as the start-up phase of the Fund, “consisting of a first set of interventions, for the calendar years of 2025 and 2026 for an amount of USD 250 million”.

[At the preceding 4^th meeting in Dec. 2024, the Board decided (decision FRLD/B.4/D.3) that the early interventions by the Fund or the “start-up phase” will span two years from 2025 to 2026, and requested the Secretariat, under the guidance of the Co-Chairs, to develop a proposal with a range of options and propositions for the start-up phase. The Secretariat’s proposal identified options for the following key areas for the Board’s consideration: (i) bottom-up, country-led and country-owned programming areas (ii) funding modalities (iii) financial instrument(s) to be prioritized (iv) access modalities (v) resource allocation framework (vi) initial approaches for the results management framework and the simplified operational model (vii) tentative implementation framework for the start-up phase.]

The high-profile B.5 meeting saw a special session with Barbados Prime Minister Mia Amor Mottley, besides welcome remarks by the Minister of the Environment, Adrian Forde.

The BIM decision hailed as the key deliverable of the meeting, almost ran the risk of not being adopted, given protracted negotiations between developed and developing countries right until the very end, mainly over two key contested issues: the “scale” of the Fund and the “minimum allocation floor for the small island developing states (SIDS) and the least developed countries (LDCs), that neared a situation of almost losing the quorum of the meeting.

As a last attempt to save the process, a compromise “take it” proposal by the Co-Chairs Richard Sherman (South Africa) and Jean-Christophe Donnellier (France) coupled with facilitation by the host country Board member Henrietta Elizabeth Thompson (Barbados) towards consensus building, eventually resulted in the adoption of the BIM decision which basically was the “package” deal proposed by developed countries on the two issues. (See details below). [Note: The adopted decision is not yet published online. The draft iterations of the decision were restricted documents limited to the Board and displayed on screen during Board’s consideration and final adoption by the Board.]

The other important elements that were decided under the principles and scope are: that the BIM will support bottom-up, country-led and country owned approaches to loss and damage; that the BIM will be implemented in parallel with the development of the longer term operational policies and procedures of the Fund; that the BIM will aim to finance a set of activities, projects and programmes that is representative of the full scope of the Fund; that the BIM will also aim to explore engagement with the private sector, where relevant; that the Fund will finance the BIM through grants and that through BIM, the countries may test interventions whereby those grants are subsequently combined with other financial instruments in deploying different funding modalities.

Fight over “scale” of the Fund: Preamble

The crux of the matter and hence, topmost priority for developing countries centred on the “scale” of the Fund with the status of resources indicating that only USD 319 million as currently available resources and therefore, a paltry amount of “USD 250 million” only could be slated for the two-year initial BIM phase of the Fund.

Further, the Board decided to “review the need for further allocation at its eight meeting, subject to available commitment authority”. The status of resources shows an indicative amount of only USD 388 million expected by 31 December 2025. In terms of the size of interventions, the Board also eventually decided that “an amount in the range of USD 5-20 million may be allocated to each of the activities, projects and programs to be approved during the start-up phase, subject to funding criteria to be approved by the Board”.

In this context of a very small limited Fund currently which woefully falls short of the loss and damage needs at scale, developing countries wanted to reflect the following language in the preamble of the BIM decision: “Recalling the urgent and immediate need for new, additional, predictable and adequate financial resources to assist developing countries to respond to loss and damage, and given this need the expectation that the Fund will evolve to contribute to a response at scale”.

When presenting the developing country constituency proposal, Board member Mohamed Nasr (Egypt) said that it is agreed language from a previous decision [from the 2022 COP 27 decision which established the Fund], and it gives the direction of travel of the Fund while not putting any numbers.

However, developed countries represented by Jan Dusik (European Union) could not agree with the second part of the proposal (on “given this need the expectation that the Fund will evolve to contribute to a response at scale”) and hence it was placed in brackets [denoting no agreement].

Further, Sebastian Lesch (Germany) said that it’s a specific BIM decision and hence, to replace the “Fund” by “BIM” in the sentence. In response, Nasr frankly said that such a proposition confirms the concerns that the Fund will only continue for two years, signalling the direction of a very small Fund. The remarks of Nasr was supported by Abdulrahman Rowished (Saudi Arabia), Elena Pereira (Honduras) and Mark Joven (Philippines).

Going back to Dusik’s (EU) remarks, Co-Chair Sherman pointed out that Parties recognised the need to bridge the gap in loss and damange funding in Baku [referring to the New Collective Quantified Goal (NCQG) decision of COP29 in 2024), and that the proposal is not prejudging the resource mobilization strategy. In response to this, Dusik said that they are committed to having a resource mobilization strategy and were part of the NCQG decision, but this was a different process and that its not helpful to devise a language here that belongs to other broader processes.

Antoine Bergerot (France) then suggested to split the proposal of developing countries into two sentences  and furthermore in the last preambular paragraph to add the language “in particular in light of the Fund’s expected scale-up and the resulting evolution of its operating model and capabilities”, with his proposal reading as follows: “Recalling the urgent and immediate need for new, additional, predictable and adequate financial resources to assist developing countries that are particularly vulnerable to the adverse effects of climate change to respond to loss and damage; and [given this need the expectation that the [Fund][BIM] will evolve over time to contribute to a response at scale;]

Recalling that the activities implemented during the start-up phase will not prejudge nor set precedent for the development of the long-term operating model of the Fund,…(g), in particular in light of the Fund’s expected scale-up and the resulting evolution of its operating model and capabilities;”

Nasr picking up on what Dusik stated about the resource mobilization strategy and its scaling up, then proposed alternative language to the disputed second sentence in brackets, reading as follows: “Emphasizing that the resources available through this Fund shall be scaled up including through the resource mobilization process to contribute to response at scale”

As a final compromise from developed countries, Dusik then proposed a new alternative paragraph to the disputed second sentence in brackets, reading as follows: “Recalling in this context, our commitment to adopt by the end of 2025 a resource mobilisation strategy with the objective for scaling up the FRLD’s contribution to responding to loss and damage through contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources, as appropriate”.

He further added, alluding to a “package deal”, that the proposed new alternative paragraph combined with their preferred option 1 of the minimum allocation floor for SIDS and LDCs with flexibility of reference to paragraph 61 and all parameters of paragraph 60 of the Governing Instrument (GI) on allocation of funding is the most they could offer. [See further details on the allocation discussions below].

In response to the new alternative paragraph from developed countries, Nasr asked to add “at scale” after “responding to loss and damage” to which Dusik  said that “scaling up” in the new paragraph is not prejudging and that it was not a choice of having both “scaling up” and “at scale” in it. At this point of time when the situation was nearing the loss of quorum, Thompson (Barbados) appealed for flexibility reminding that the Board cannot leave without a decision given after three years the Board was finally delivering to the SIDS and LDCs, further extending her help with language to reach consensus. She suggested to replace “scaling up” with “escalating” and also keeping “at scale” in the proposed paragraph. Co-Chair Sherman then informed that his Co-Chair Donnellier  is suggesting a clean the text after which the Co-Chairs will present it to the Board “to take”.

Following that mode of work, Co-Chair Sherman came back with a “take it” proposal to the Board with a clean text. The three preambular paragraphs under negotiations were agreed to and adopted as follows: “Recalling the urgent and immediate need for new, additional, predictable and adequate financial resources to assist developing countries that are particularly vulnerable to the adverse effects of climate change to respond to loss and damage;

Recalling in this context, our commitment to adopt by the end of 2025 a resource mobilization strategy with the objective for escalating the FRLD’s contribution to responding to loss and damage through contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources, as appropriate;

Recalling that the activities implemented during the start-up phase will not prejudge nor set precedent for the development of the long-term operating model of the Fund, pursuant to decision FRLD/B.4/D.3, paragraph (g), in particular in light of the Fund’s expected scale-up and the resulting evolution of its operating model and capabilities;”

The language “at scale” thus did not make it into the preamble and the adopted decision, which will remain a fight to be continued in the upcoming resource mobilization strategy.

Minimum allocation floor for SIDS and LDCs: Principles and Scope

On this related key contested issue which also lingered until the very end, the following were the three options for consideration as the negotations evolved, with option 1 proposed by the developed countries; and option 2 proposed by the developing countries [Note: the Barbados Response Action Plan is the proposed name preceding the BIM, in previous iteration of the decision]; and option 3 as an attempt to bridge views, proposed by Co-Chair Donnellier. The options proposed were as follows:

Option 1: “Further decides that the funding for the BIM will incorporate the elements for a resource allocation system as per the paragraph 60 of the Governing Instrument, with a minimum allocation floor of 50% for SIDS and LDCs”.

Option 2: “Further decides that the funding for the period of the Barbados Response Action Plan will incorporate the elements for a resource allocation system as per the paragraph 60 of the Governing Instrument, considering the limited resources currently available, aiming to achieve a minimum allocation floor of 50% for LDCs and SIDS, while safeguarding against the overconcentration of support provided by the Fund in any given country, group of countries or region, and in accordance with para 61 of the Governing Instrument will be dynamic and reviewed by the Board”.

Option 3: “Further decides that the funding for the BIM will incorporate the elements for a resource allocation system as per the paragraph 60 of the Governing Instrument, with a minimum allocation floor of 50% for SIDS and LDCs that the Secretariat will aim to achieve, while safeguarding against the overconcentration of support provided by the Fund in any given country, group of countries or region, and in accordance with para 61 of the Governing Instrument will be dynamic and reviewed by the Board”.

From the outset, developed countries were very firm about setting the minimum allocation floor for LDCs and SIDS as an exclusive parameter of paragraph 60 of the GI which speaks to allocation of funding and resisting the proposal by developing countries of “aiming to achieve” the minimum allocation floor, debating that “aiming” is an intention and therefore, cannot be the minimum floor. [It is learnt that some of the developed country Board members even wanted a higher percentage as high as 80% as the minimum allocation floor for the SIDS and LDCs].

Towards the end, developed countries however started signalling the flexibility of also considering  paragraph 61 of the GI which states that the “allocation system will be dynamic and will be reviewed by the Board”. Finally, while negotiating the “scale” of the Fund [as mentioned in the preceding section on the ‘Fight over the scale of the Fund’] and when presenting their final compromise proposal on it, they pointed to a package deal combining it with option 1 of the minimum allocation floor with flexibility of reference to paragraph 61 and all parameters of paragraph 60 of the GI.

When Co-Chair Sherman presented the compromise “take it” proposal for the adoption of the BIM decision, he informed that the language on the minimum allocation floor was an attempt by Thompson (Barbados) towards building consensus.

The agreed and adopted language on the minimum allocation floor reads as follows: “Further decides that the funding for the BIM will incorporate the elements for a resource allocation parameter as per paragraph 60 of the Governing Instrument, with a minimum allocation floor of 50% for SIDS and LDCs, considering the limited resources available, while safeguarding against the overconcentration of support provided by the Fund in any given country, group of countries or region, and in accordance with para 61 of the Governing Instrument will be dynamic and reviewed by the Board”.

Mandates for B.6: Operational elements and process

The Board requested the Secretariat, under the guidance of the Co-Chairs, to develop for the Board’s consideration and adoption at B.6 (8-10 July, Cebu, Philippines), the following:

i. An initial project and programme funding criteria, initial project/programme cycle, and results management framework for the BIM;

ii. The terms of reference for the call for proposals and/or funding requests for activities, projects and programs that is representative of the full scope of the Fund pursuant to Section II of the GI, including a template for requests;

iii. A modality to operationalise access through entities accredited to the Adaptation Fund, Green Climate Fund, and Global Environment Facility, pursuant to paragraphs 49(b) and 49(c) of the GI;

iv. An approach and criteria to developing partnerships with other entities that form part of the funding arrangements…, including the various roles of national entities, MDBs, UN Agencies and International Financial Institutions;

v. Draft guidelines regarding paragraph 48 of the Governing Instrument on the designation of a national authority or national focal point;

vi. Modalities for complementarity and coherence with the Santiago Network and consider how this collaboration may serve to provide technical assistance’ and

vii. Proposal for the operationalization of direct access via direct budget support,…while taking into consideration the needed flexibility in the BIM phase.