The future of loss and damage - Takeaways for Pakistan from the latest Loss and Damage Fund Board Meeting
In late September, the Board of the Fund for Responding to Loss and Damage met for the third time in Baku, Azerbaijan – news largely unreported in local media. The phrase ‘loss and damage’ featured in almost every climate-related headline in Pakistani media in November 2022, in the wake of the most intense flooding experienced in the country in decades, which caused USD 14.9 billion worth of damages and USD 15.2 billion worth of economic losses in the country and led to Pakistan’s strong advocacy for loss and damage funding as the G77 chair at COP27. Surprisingly, this momentum behind loss and damage advocacy in popular discourse has since entered a lull, overshadowed by conversations on building resilience through nature-based solutions and incentivising green investment.
Despite this diversion of attention, the progress being made by the Board to prepare the Fund for resource disbursement by 2025 is more significant than ever for Pakistan and other Global South climate-vulnerable countries. The decisions being made in board meetings of the Fund for Responding to Loss and Damage (FRLD) have the power to promote or subvert the ability of the Fund to provide support for vulnerable communities, the very aim for which it was created. Against the backdrop of extreme weather events throughout 2024, including flooding, heatwaves, and unseasonal snowfall, resulting in the loss of lives and damage to homes, infrastructure, and crops, Pakistan must remain active and consistent with its advocacy on loss and damage funding, especially as COP29 approaches.
What is the Fund for Responding to Loss and Damage (FRLD)?
In November 2022 at COP27, governments reached a breakthrough agreement to provide “loss and damage funding” for climate-vulnerable countries by establishing a dedicated fund. Parties also agreed to establish a ‘transitional committee’ to determine the structure and operationalisation of such a fund (Decisions 2/CP.27 and 2/CMA.4). These developments are the result of over three decades of advocacy by the Alliance of Small Island States (AOSIS) which have been seeking funds for loss and damage since 1991.
The Transitional Committee (TC) met five times between March and November 2023 to develop recommendations on institutional arrangements, modalities, structures, governance, terms of reference, elements of new funding arrangements, and coordination and complementarity with existing funding sources. Ali Waqas Malik represented Pakistan during the fourth and fifth meetings of the Committee in Egypt and the UAE, respectively. The TC’s recommendations were presented at COP28 in the UAE and adopted alongside an agreement to operationalise the Loss and Damage Fund.
Many important decisions regarding the Loss and Damage Fund were made at COP28 towards the end of 2023. It was agreed that the Fund would be managed by a Board, which would select an Executive Director of the Fund and a host country for the Board. Recognising the time commitment involved in creating a standalone fund, developing countries conceded to allow the World Bank to host the Financial Intermediary Fund (FIF) for an interim period of four years, granted certain criteria were met. One being the Bank’s ability to provide ‘direct access’ to funds without having to go through intermediaries like multilateral development banks or the United Nations. As a Financial Intermediary Fund or FIF, the Fund is a partner trust fund established and used by the international community to pool funding from multiple sources for a specific global development challenge. As Host of the FIF, the World Bank will take on the role of hosting of the FIF Secretariat while the Board continues to retain complete decision-making authority over financing decisions, eligibility criteria and risk management policies of the Fund.
The Governing Instrument of the Fund was also adopted at COP28, which highlighted the objective of the Fund to assist developing countries particularly vulnerable to climate change in responding to the economic and non-economic loss and damage associated with climate change. It elaborated that the Fund would possess international legal personality and appropriate capacity to exercise its functions and outlined the composition and functions of the Board of the Fund. While the Governing Instrument clarifies that developing countries particularly vulnerable to climate change impacts would be eligible to receive resources from the Fund, it remains relatively vague on operational and access modalities, leaving those up to the Board to develop and approve.
What progress has been made in the Third Board Meeting?
Since COP28, the Board of the Fund has met three times in the UAE (April/May 2024), South Korea (July 2024), and Azerbaijan (September 2024), respectively. A significant development made during the third board meeting earlier this month is the approval of the hosting and trustee arrangements with the World Bank. The Board confirmed that the World Bank met the conditions required to host the Financial Intermediary Fund (FIF) and the Secretariat of the Fund, including that its hosting is consistent with the Governing Instrument of the Fund.
While this is welcome news as it indicates progress towards resources being made available through the Fund by 2025, matters relating to the World Bank as Host of the FIF were dealt with in a closed session in Baku, raising questions about transparency. Similarly, the text of the hosting agreement and the trustee agreement were not made public for civil society to issue comments before being adopted. While we know that the text of the agreements was edited to align it with the Governing Instrument after Board Members indicated a need for alignment between the responsibilities of the World Bank as Host of the FIF and the Governing Instrument, civil society and rights holders were not allowed to scrutinise the agreements which will only be made public upon signature.
By the end of the third board meeting, the Board also announced Ibrahima Cheikh Diong’s appointment as the Fund’s inaugural Executive Director. Diong, a Senegalese and American national with three decades of experience in climate change, finance, and development, will serve a four-year term set to end in November 2028. According to Richard Sherman, FRLD Co-Chair, the selection of a developing country leader as Executive Director of the Fund will be useful for driving the Fund’s bottom-up, country-driven approach. Diong’s experience as UN Assistant Secretary General and Director General of the African Risk Capacity (ARC) Group, which supports African governments in improving their capacities to plan, prepare, and respond to natural disasters, illustrates his expertise in leading organisations created to support low-income developing countries respond to the impacts of climate change. He has also served in advisory roles to the government, including Minister and Special Adviser to the President of the Republic of Senegal, Director General of International Cooperation of Senegal, and Permanent Secretary of Energy of Senegal, which will help him engage with governments during his tenure as Executive Director of the Fund.
Given the confidential nature of the information relating to the selection of the Executive Director of the Fund, Board Members and Advisors were required to sign confidentiality forms, and Observers (from constituency groups) were asked to leave the meeting room. Despite the lack of involvement of Observers in the selection of the Executive Director, Rights-Based Constituencies issued an open letter to the Co-Chairs of the Board about the importance of selecting a Director who embodies the principles of justice, equity, and inclusion and who is committed to championing the rights of vulnerable communities and countries. This is especially important given that the Executive Director will set the tone for how the Fund operates in its first four years. In the past, Diong has advocated for urgency in developing the loss and damage fund and reform of the climate finance architecture to include the voice of climate-vulnerable countries. One can only hope that he is able to follow through on his promise to serve countries and communities disproportionately affected by the impacts of climate change during his term as Executive Director.
Earlier in the year, during its second meeting (B2), the Board approved a bid by the Philippines to serve as the host country for the Board, granting the Board legal personality and enabling it to enter into its hosting agreement with the World Bank. In the same meeting, the Board also approved the name of the fund as the Fund for Responding to Loss and Damage. At the time, Board Members disagreed over the acronym for the Fund, with some supporting the acronym ‘FLD’ while others advocated for the use of ‘FRLD’. The acronym FRLD for the Fund was finally approved at the third board meeting earlier this month. It was chosen because it highlights the active role of the Fund in addressing loss and damage by including ‘R’ for ‘Responding’ to loss and damage.
Why is this important for Pakistan?
Loss and damage funding will continue to be an essential instrument in Pakistan’s toolkit to survive the impacts of climate change, especially as each increment in global warming intensifies multiple and concurrent hazards, as warned by the IPCC in its 2023 Synthesis Report. Throughout the past year, Pakistan has experienced climate-induced disasters, from devastating flooding to extreme heat, which have substantially weakened the ability of communities to recover and rebuild following disasters. In August, several districts in Balochistan, including Kalat, Ziarat, Awaran, Kachhi, Loralai, Sohbatpur and Lasbela, were declared calamity-hit after heavy monsoon spells caused rivers to overflow, leading to a loss of lives, flooding of rice fields and damage to infrastructure. Soaring temperatures this summer also claimed the lives of at least 500 people, with many more suffering heatstroke in Karachi and other districts in Sindh.
In the aftermath of such disasters, communities often depend on funds from philanthropists and rescue and relief operations of Humanitarian Partners, especially when the government displays lethargy in its disaster response. Fund mismanagement aside, the scale of losses and damages experienced in Pakistan today is so high that without additional international funds, a significant financing gap will continue to exist. As a result, it is almost impossible for the Global South to stay on target to achieve international goals, including the Sustainable Development Goals, when most available resources are diverted towards climate emergencies every few months. Pakistan must centre its advocacy on loss and damage around this reality.
COP29, which is quickly approaching and set to begin on 11 November 2024, will provide Baku as a backdrop for the COP29 Presidency to work with donor countries to actualise nearly USD 800 million in pledges. At COP29, Pakistan must redouble its advocacy, as it did at COP27 in 2022, to campaign for additional pledges from developed countries and the swift conversion of pledges into actionable resources. Furthermore, Pakistan must centre the voices of those on the frontlines of the climate crisis in Pakistan in their advocacy. Farmers, fisherfolk, and communities most acutely impacted by the 2024 extreme weather events in Pakistan must be consulted, and work must be done to develop proposals on how the Fund’s support can reach these vulnerable communities. This is especially important given that Board Members expressed interest in receiving suggestions on access modalities from CSOs in B3.
