The Loss and Damage Finance Facility: Why and How
A Blueprint for Climate Justice
Published in May 2022, just months before the historic breakthroughs at COP27, The Loss and Damage Finance Facility: Why and How provided a vital, actionable roadmap for international climate negotiators. Co-authored by Dr. Sindra Sharma-Khushal, Liane Schalatek, Harjeet Singh, and Heidi White, this discussion paper was produced cooperatively by Climate Action Network (CAN) International, Christian Aid, Heinrich Böll Stiftung, Practical Action, and Stamp Out Poverty.
At the time of publication, developing countries had spent three decades fighting for a dedicated financial mechanism to address the irreversible impacts of climate change. Despite the devastating reality of "loss and damage" hitting vulnerable communities from the destruction of Cyclone Harold in Vanuatu to extreme heatwaves in India and Pakistan, the United Nations Framework Convention on Climate Change (UNFCCC) lacked a distinct financing pillar to help countries recover. This paper laid out exactly why a facility was urgently needed and, crucially, how it could be designed and governed.
Five Reasons for Urgent Action
The report outlined five pressing reasons why the international community could no longer delay the establishment of a Loss and Damage Finance Facility (LDFF):
The Costs Will Add Up: The economic costs of loss and damage in developing countries are projected to reach between $290 billion and $580 billion annually by 2030. The report called for a "fast start" commitment of $75 billion, scaling up to at least $150 billion a year from public sources.
Litigation Replaces Collaboration: Without an adequate financial mechanism, vulnerable states and communities are increasingly turning to international courts to hold high-emitting nations and fossil fuel corporations accountable.
Erosion of Development Gains: Unfunded climate disasters force developing countries to divert scarce resources away from education, healthcare, and poverty reduction to pay for emergency humanitarian relief.
Erosion of Trust: The repeated failure of developed nations to meet their $100 billion annual climate finance pledge had severely damaged international trust. Establishing the LDFF was presented as the ultimate test of global solidarity.
Delaying Mitigation and Adaptation: When nations are overwhelmed by the costs of immediate disaster recovery and compounding debt crises, their capacity to invest in long-term carbon mitigation and climate adaptation is drastically reduced.
The "How": Governing Principles and Structure
To ensure the LDFF operated equitably, the authors proposed six guiding principles, insisting that finance must be public and grant-based to avoid plunging climate-struck nations further into debt. They also demanded that funding be "new and additional" not simply repackaged humanitarian aid or diverted adaptation funds.
The report detailed a comprehensive operational structure:
Funding Windows: The LDFF should feature distinct windows for rapid-onset events (like hurricanes and floods) and slow-onset events (like sea-level rise and desertification).
Direct Access: It must prioritize simplified, direct access for regional and sub-national entities, bypassing the cumbersome accreditation requirements that plague other climate funds.
Equitable Governance: The decision-making body must feature a majority of members from developing countries, with guaranteed representation for marginalized groups, civil society, and affected communities.
A Historic Impact
The Loss and Damage Finance Facility: Why and How proved highly influential in the lead-up to the 2022 UN Climate Change Conference in Sharm El-Sheikh, Egypt. By providing a concrete, justice-oriented framework, it helped unify civil society and the Global South in their successful demand for the historic agreement to establish a Loss and Damage Fund at COP27.
We invite you to download and read the full report to explore the foundational arguments and operational blueprints that helped change the course of international climate finance.
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