Civil society organisations expressed concern over the scaling down of a fund agreed at the COP climate talks in 2022 to help vulnerable nations cope with climate risk.
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At the close of the fifth meeting of the loss and damage fund board in Barbados on Thursday, board members from rich nations moved to reduce the fund’s amount from around US$300 million to US$250 million to be allocated for climate vulnerable countries for its pilot phase.
This is likely to be handed out in 2026, just over three years since the fund was agreed at COP27 in Egypt after years of resistance from rich polluting nations.
Although wealthy countries most responsible for the climate emergency have pledged a combined total of almost US$800 million, only US$321 million has been paid into the Fund for Responding to Loss and Damage (FRLD).
A disbursement of US$300 million to poor countries for the pilot phase might not leave the fund with enough reserves for emergency cases for instance when countries are hit by storms, noted board member representatives from Austria and Japan at the meeting.
Developed jurisdictions Germany, the European Union, Denmark, Norway, United Kingdom and France also wanted a minimum allocation of 50 per cent of the fund for Small Island Developing States (SIDS) and the Least Developed Countries (LDCs) in the pilot phase.
Image: L&D Collaboration, Source: UNFCCC
Such decisions are a “tactic that developed countries have repeatedly used to try to limit which developing countries are able to receive support from the FRLD” said the Loss and Damage Collaboration, a global network of more than 200 researchers, activists, artists, and lawyers advocating for climate compensation for developing countries.
“The issue is that developed countries did not want the text to say that the fund will be scaled up from this startup phase to the hundreds of billions a year it needs to disburse,” Teo Ormond-Skeaping, advocacy and outreach lead of the Loss and Damage Collaboration, told Eco-Business.
“If there is no mention of the amount getting bigger for the startup fund, then there is a risk it could stay that small,” he said.
Ormond-Skeaping added that rich nations are “weaponising” the 50 per cent allocation to try to stop developing countries like China and Saudi Arabia from receiving climate aid, which rich states deem to have large enough economies to deal with the climate crisis.
Philippines board member representative Mark Joven said that the US$250 million from the startup phase of the loss and damage fund should also be made available for “rapid response” to extreme weather events climate-vulnerable countries may face in emergency cases. Image: L&D Collaboration
Liane Schalatek, associate director of Washington DC-based nonprofit Heinrich-Böll-Stiftung, where she spearheads the foundation’s work on climate finance, said board members are just being cautious about the possibility of not receiving new pledges over the course of the next two years.
Since the pledge of US$650 million was made for the fund in COP28 in Dubai, only about US$110 million has been received additionally, signaling a slow pace of new pledges.
At the close of the meeting, the decision text indicated that the US$250 million under the startup phase could be scaled up on the eighth meeting in April 2026. But with this amount, it is likely that the proposals and financing requests coming in will exhaust the funds, from a minimum of 10 to a maximum of 50 projects at US$5 million each to stretch the amount, added Schalatek.
Developing states pushback on country partners in fund allocation
Deciding on who will be the recipient countries’ partners for the implementation of the loss and damage fund was another thorny issue at the meetings.
Egypt, Timor-Leste and Brazil opposed the idea of only going through financial intermediaries such as multilateral development banks, the International Monetary Fund, and United Nations agencies. There should be direct access for communities to the fund, said the envoys of the developing states.
Brazil went further to emphasise that the such partners would not expedite the startup phase of the fund but “kill it”.
Contributor countries usually channel the funding for developing countries either through multilateral institutions or direct access accredited agencies which mobilise climate finance in a country.
In the international access modality, financial resources are managed by multilateral agencies like the Asian Development Bank (ADB), World Bank, European Bank for Reconstruction and Development, or bilateral institutions like United States Agency for International Development (USAID), Japan International Cooperation Agency, among others.
The direct access modality allows recipient countries to access funding through their national institutions, exerting stronger ownership.
“Working with these partners means accepting their timelines and rules, many of which will make it very hard for countries to undertake loss and damage interventions in the two-year timeline of the startup phase because of the process of disbursement made under these partners,” said Brazil’s envoy Liliam Beatris Chagas de Moura.
The process that MDBs, UN agencies and international financial institutions have been reported to be so slow that it could take them more than two years to approve the release of money, which is longer than the startup phase.
Brazil board member representative Liliam Beatris Chagas de Moura said the listed partners for funding access will not expedite the start-up phase of the fund but “kill it”. Image: L&D Collaboration
From the previous board meeting in Manila, Philippines in December, a “blanket accreditation” approach was adopted, where those accredited under multilateral funds like the Green Climate Fund, Global Environment Facility, and Adaptation Fund can also be permitted under FRLD.
However, some of these entities are banks that still finance fossil fuels and equity investors whose motivation is maximising shareholder returns, which could compromise the well-being of communities and ecosystems, said John Leo Algo, national coordinator of Aksyon Klima Pilipinas, a nonprofit network of 40 civil society organisations like Greenpeace Philippines, WWF Philippines, and the Manila Observatory.
“There has to be a screening process that avoids these potential conflicts of interest and other factors that would hinder the work of the FRLD,” he said.
The fund board has had four meetings previously in the Philippines, United Arab Emirates, South Korea and Azerbaijan. The next board meeting will be in Cebu in the Philippines in July.
