Accessing finance for addressing climate-induced losses and damages

May 15, 2023

Impacts of climate change and the economic and non-economic losses created by them are among the key aspects to focus on when addressing long-term resilience-building as well as development pathways. 

Among the key highlights at the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) of which Sri Lanka is a party, was the establishment of a fund focused on addressing climate-induced loss and damage. The Fund has as its key aim to support countries most vulnerable to climate-induced losses and damages, and this process is inclusive of the establishment of a ‘Transitional Committee’ which will provide recommendations on how to operationalize the Fund as well as the new funding arrangements. 

Transitional Committee 

The Transitional Committee which focuses on operationalizing the Fund and new funding arrangements has as its mandate to establish institutional arrangements, modalities, structure, governance, and terms of reference for the fund; define the elements of the new funding arrangements; identify and expand sources of funding; and ensure coordination and complementarity with existing funding arrangements. 

The first meeting of the Transitional Committee was held in March 2023 and focused on aspects related to the working arrangements and the workplan for the Committee as well as the purpose and scope of the new funding arrangements. 

Following the first meeting of the Transitional Committee, the first workshop on addressing loss and damage was held in April 2023 which focused on roles of different stakeholders and of institutions funding activities related to addressing loss and damage, at different levels; sources and instruments of funding, including innovative sources; gaps and challenges in addressing and providing support for loss and damage; and ways to address such gaps with a focus on the most vulnerable communities and ecosystems.

Addressing loss and damage at national level

Multiple actors, including government, civil society, financial institutions, academia and think tanks, community-based organisations, and other key actors, play a crucial role in taking action to address climate-induced loss and damage as well as contributing to building long-term resilience at the ground level. 

Among such examples are public finance-based approaches for risk transfer, including insurance schemes in Sri Lanka building on public finance since 1958, which includes a crop insurance covering all farmers, the National Natural Disaster Insurance Scheme, and a loan protection scheme for financial institutions.

Among other examples of national-level approaches to address loss and damage are policies, plans, and institutional mechanisms such as the ones established to address displacement and climate-induced human mobility in Fiji; as well as financial instruments of innovative nature which are aimed at generating climate finance through innovation to ensure that loss and damage impacting the vulnerable countries are addressed.

Sources and instruments of funding

There exist many sources and instruments of funding which could be built on to respond to addressing the needs related to climate-induced loss and damage. Among such options at the national level are national budgets (in countries where there exist national budgetary allocations for addressing the losses and damages incurred); national contingency funds; social protection schemes; disaster risk pools; public insurance schemes; as well as premium subsidies and risk guarantees. 

Additionally, there exist also different options for accessing climate and development assistance; emergency funds which would address extreme weather events and support needed to address the impacts faced; innovative finance options such as climate debt swaps and bonds; as well as social resilience grants.

The second meeting of the Transitional Committee to be held in the coming week will focus more in detail on the related options for funding, including instruments and approaches, which will thereby feed into the recommendations to be made on operationalizing the Loss and Damage Fund at COP28 of the UNFCCC in November/December 2024. 

Note: This article has been published on The Morning as part of the author’s weekly column.

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About the Author
Vositha Wijenayake

Vositha is an attorney-at-law specialising in public international law, with a focus on international environmental law, UN human rights law, refugee law and EU law. She has over a decade of experience in working on climate change, at national and international level. Vositha is a member of the national expert committee on climate change adaptation of the Ministry of Mahaweli Development and Environment, national expert on vulnerability and adaptation measures for the Third National Communication of Sri Lanka to the UNFCCC for the Ministry of Mahaweli Development and Environment, and is a delegate focusing on compliance, adaptation, loss and damage, and gender for the Sri Lankan delegation to the UNFCCC since 2016. She is also a consultant to the UNFCCC national adaptation plans and policy unit, and worked as a country support consultant to the UNDP NAP Global Support Programme. Vositha has an LLM in public international law from University College London, and an LLB from University of London. ‍