At its second meeting, the Board of the Loss and Damage Fund will set the course for what kind of funding mechanism it wants to be

At its second meeting, the Board of the Loss and Damage Fund (LDF) in Songdo will decide on crucial procedures to operationalize the fund swiftly. Key decisions will shape the fund’s future, impacting how quickly it can deliver aid to those affected by climate impacts.

Teaser Image Caption
Flooding in Brazil in May 2024

When the Board of the Loss and Damage Fund (LDF) comes together for its second meeting in Songdo/South Korea from July 9 – 12, during its four days of deliberations it will have to dig deep, dig in and work constructively and ambitiously to deliver on a choke-full agenda of procedural and operational mandates. These are needed to keep the new Fund on track with deadlines, including those mandated for COP29 in Baku/Azerbaijan, let alone to fulfill expectations to have the Fund up and delivering funding to affected people and communities as quickly as possible, if not by the end of 2024 then in early 2025 at the latest. Decisions scheduled at this meeting will set the course for the Fund for years to come, determining what kind of funding mechanism it aspires to be.

Fully operationalizing the new Fund swiftly is necessary, not the least to allay doubters and critics of setting up a new multilateral fund under the UN Framework Convention and Climate Change (UNFCCC)and the Paris Agreement, which included most developed countries, who in the past have argued other already existing players in the emerging financing landscape for addressing loss and damage might be able to do the same job. However, this increases the risk that in the rush for speed some crucial decisions might be taken too hasty or without the necessary in-depth deliberations that could lock the LDF into a sub-optimal pathway from the start. This would also endanger its promise and vision to be a different kind of fund applying lessons learned from short-comings of existing multilateral climate funds, including by prominently focusing on facilitating and simplifying direct access to grant support for affected and marginalized groups already suffering from the compounding and cascading climate impacts of catastrophic loss and damage. 

The Fund’s inaugural Board meeting in early May in Abu Dhabi/United Arab Emirates had mostly focused on jump-starting some important processes to get its own working arrangements and procedures in order, to make sure the Fund has an administrative budget to pay for the work done by an interim Secretariat with seconded staff from the UNFCCC, the UN Development Programme and the Green Climate Fund, and to move ahead with operationalizing the Fund as Financial Intermediary Fund (FIF) with an independent Secretariat to be hosted by the World Bank as mandated by the COP28/CMA5 decision with a set of conditions and deadlines. Several ad hoc subcommittees were set up that worked intersessionally since early May to advance those tasks and deliver to the Board in Songdo a number of procedural options to consider and approve. 

The first Board meeting also adopted a decision on observer participation, underscoring “the importance of inviting the views of observers [….] in Board deliberations on matters related to the provisions of the Governing Instrument on the role of stakeholders in the work of the Board.” Indeed, with potentially far-reaching deliberations and decisions scheduled, specifically on the additional rules of procedure for Board meetings and related proceedings, with the processes for the participation of active observers in the Board’s work and on the access modalities to the Fund’s resources, the LDF Board in Songdo will likely set the course on how participatory, transparent, people-and community-centered a funding mechanism it wants to be – with a danger that a course correction, if the decisions fall short of this ambition, could take years.

Here is an overview of what is on the agenda of the second LDF Board meeting in Songdo, what to expect, and why it matters.

Workplan of the Board

With a total of four meetings scheduled this year (two more are in the calendar for mid-September and post-COP29 in early December), in Songdo the Board will have to approve its workplan for the year with specific milestones and a clear sequence of mandated activities to fill out the skeleton of the Governing Instrument, the Fund’s operating charter approved by COP28, with detailed policies and to comply with the COP28/CMA5 decision specifying the Fund’s set-up as a FIF with a World Bank-hosted independent Secretariat. This is particularly important as most of those activities have to fit into a tight timetable, with a number of deliverables by COP29, where a delay or failure to deliver on initial tasks, including crucially at the meeting in Songdo, has wide ripple effects for when the Fund can begin its funding support.  In Abu Dhabi, the Board did not have time to deliberate on a complex schedule of interdependent Board mandates and the substantial work it required between board meetings, partially because it was forced, due to extreme weather, to conduct its last meeting day short-notice as a virtual session, so it only approved a decision with the priority agenda items for its second meeting. The draft work plan to be approved in Songdo now details the schedule for the development of modalities, policies and needed decisions well into 2025.  

Selection of the Host Country of the Board

 As the LDF is supposed to be set up as a World Bank-hosted FIF, the Fund’s Board – unlike in a fully independent stand alone fund like the GCF – is not deriving its own legal personality and legal capacity, meaning the ability to negotiate and sign binding legal agreements, from the LDF. Thus, the Board is looking for a host country that will convey it with legal personality and legal capacity, which is required for the Board to be able to sign the FIF-hosting agreement with the World Bank for the institutional set-up of the Fund. 

At its first meeting, the Board established a 10-member ad hoc subcommittee and tasked it to move the selection process for the host country forward intersessionally based on specific terms of reference, including evaluation criteria that were adopted in Abu Dhabi. These spelled out relevant considerations, including how quickly after the Board makes a decision the necessary domestic legal action (such for example confirmation by a parliament) and the confirmation of the legal status in writing to the Board could be taken. Simplified and expeditious visa entry procedures and appropriate meeting facilities and accommodations so that some if not all of the Board meetings of the Fund could be hosted were also important criteria listed. 

Following the decision in Abu Dhabi, countries were invited to submit a proposal by June 7 to the interim secretariat. Several countries have handed in their host country proposals. These include Barbados, the Bahamas, Antigua and Barbuda and the Philippines which also expressed interest earlier, but also new applicants Togo, Armenia and Eswatini apparently. The ad hoc subcommittee has since reviewed and evaluated the proposals and prepared a final draft report for the Board’s consideration in Songdo, where according to the timeline the decision for the host country will be made. This decision will be likely taken through balloting of only the Board members in a closed Board session, with just the result announced publicly as a consensus decision. This will allow in theory just enough time post-Songdo for the selected country to complete its own domestic legislative process followed by the signing of the host country agreement between the Board and the host country, and thus before the third Board meeting, when the Board should have its own legal personality and capacity to finalize and sign the FIF-documentation with the World Bank. 

There is some apprehension that the decision for the host country could become politicized. Considerations of regional equity (for example the GCF is headquartered in Asia) will likely play a role as well as the strong symbol that having the Board of a fund for addressing loss and damage hosted by a small island developing state (SIDS), with SIDS having fought for such a funding mechanism for decades, could send. It would be important would be to avoid a repeat of the prolonged decision-making quagmire for hosting the Santiago Network. Selecting the host country for the Board in Songdo is one of the decisions that are a must, or otherwise the tower of precariously balanced building block for operationalizing the LDF quickly might topple. 

Matters related to the operationalization of the Fund as a World Bank-hosted FIF  

The COP28/CMA5 decision operationalizing the LDF stipulates that the Fund should be established as a FIF with the World Bank providing trustee services (such as setting up a trust fund to collect pledges turned into confirmed contributions) and hosting the Fund’s independent Secretariat. The latter is dependent on the World Bank fulfilling a set of 11 specified conditions, most importantly allowing for direct access entities (national and subnational organizations and agencies from developing countries) to receive funding instead of just the multilateral development banks (MDBs), UN agencies and the International Monetary Fund (IMF) that the World Bank’s FIF-directive usually allows. While a representative of the World Bank already at the Board’s first meeting in Abu Dhabi publicly signaled that the World Bank would be willing and able to fulfill the conditions, with the Board reinforcing the importance of compliance with the direct access condition through a statement on direct access it delivered to the World Bank, the formal approval and notification by the World Bank’s own Board of Executive Directors accepting the COP28 invitation to host and provide trustee services and expressing the Bank’s willingness and capability to comply with conditions set by the COP28 came only on June 10, and thus  right before the deadline set by COP28 (see Figure below).  In Songdo, the Board will officially welcome the World Bank’s acceptance of the COP28/CMA5 invitation.

Figure: Mapping the timeline and required action for a World Bank-hosted FIF and LDF Secretariat

In Abu Dhabi, the Board has given its Co-chairs the mandate to engage with the World Bank intersessionally on the scope, structure and elements of the FIF documentation, including the hosting agreement and the trustee agreement, but requested them to report back to the full Board, and seek its input after each engagement with the World Bank. For the second Board meeting a public update on the process is expected, including for the Board to give guidance on some contentious issues with the potential to derail an agreement. This could come in the form of some clarifying statements such as the one on direct access to the World Bank. 

One issue that is causing headache – and is at the heart of the hosting agreement, which is part of the FIF-documentation the World Bank would have to deliver to the LDF Board before August 12 – is the question of who assumes liability for the Fund’s funding decisions by entering into legal agreements with implementing partners. 

The World Bank argues that it should be the Board, once it receives its own legal personality and legal capacity through a host country agreement, similarly to how it is done in the Adaptation Fund, where its Board enters into legal agreements directly with implementers. In contrast the Board argues that in line with the COP28 decision (paragraph 18) and the mandate in the Governing Instrument in paragraph 35(a) that the independent Secretariat will plan and execute all relevant operational and administrative duties, the World Bank’s legal personality and legal capacity should apply to all operations and transactions of the Fund, meaning that the Secretariat, as in the Global Environment Facility or the GCF, enters into such legal agreements with implementers.  Of course, it is exactly the liability for the perceived risk of financial transactions with direct access entities that is at stake here, and with it if and how this core condition for the FIF-hosting agreement is fulfilled. Would deflecting the liability to funded LDF actions to the Fund’s Board not mean that the World Bank is not willing to fulfill the required stipulation? This is what the LDF Board will have to discuss.

Another issue is some difference of opinion between the Board and the World Bank on the timing of the operationalization of the Fund. While the COP28/CMA5 decision is seen by Board members as operationalizing the Fund, language on the World Bank’s website on the Fund seems to imply that the operationalization would be dependent on the final approval by COP29. However, according to paragraphs 17 and 22 of the decision, COP29/CMA6 would only receive confirmation by the LDF Board that the World Bank can or cannot met the conditions for hosting the Fund, and then with a decision either start the four-year interim hosting period by the World Bank, or take the necessary steps to set up the Fund as an independent stand-alone institution, with potential necessary amendments to its Governing Instrument. It will not have to approve the Fund’s operationalization again, which significant procedural work well under way throughout 2024.

The swift resolution of those sticky issues is the prerequisite for the ability of the World Bank to submit the FIF-documentation, hosting agreement and trustee agreement by August 12 and for the Board to confirm with a decision at its third meeting in September whether the World Bank through its FIF documentation can meet the conditions elaborated in the COP28/CMA5 decision. It would be important for the transparency and public accountability that these deliberations, in Songdo and at the third meeting, are held in an open Board session. 

Process for selecting the Executive Director of the Fund

In parallel to working with the World Bank to finalize the FIF documentation by the August deadline, the first Board meeting started the process for the selection of the Executive Director (ED) of the Fund, who will head the new, dedicated and independent Secretariat, once the hosting agreement is approved (and thus the term of the current interim secretariat will end). An ad hoc subcommittee was established in Abu Dhabi which since then has worked intersessionally to prepare (a) the draft terms of reference for the Executive Director; (b) a draft selection process which details timelines, a job advertisement, selection criteria and whittling down and short-listing candidates; and (c) the terms of reference for a human resources search firm to help the ad hoc subcommittee in the selection process. These are to be presented to the full Board in Songdo for adoption. It will be important for the terms of reference for the ED and the selection criteria to prioritize in particular experience working on and through institutions focused on addressing loss and damage and to look at candidates outside the normal ‘MDB-bubble’ that seems to dominate the candidate pools for multilateral climate funds these days. Specifically the experience working with direct access entities and devolved funding decision-making through developing country national, sub-national and local partners should be a premium consideration. As the LDF is part of the financial mechanism of the UNFCCC and Paris Agreement and accountable to both, more than a rudimentary or ‘passable’ knowledge of both and familiarity with the climate negotiations should also be a must, as well as a strong understanding of and routing in the application of human rights to ensure the LDF approves policies and procedures supporting human-rights-based and people-centered funding and engagement approaches.

A decision at the second Board meeting on these three procedural documents is critical, so that the advertisement for the search for the Fund ED can be launched as soon as possible after the meeting.  The goal will be to have the selection completed at the third Board meeting.

As the Executive Director will be technically a World Bank employee (as will be all staff members of the independent Secretariat), the ad hoc subcommittee has been consulting with the World Bank and its human resources department in drafting the documents and will engage with them throughout the selection process. One of the core considerations for the Board in the process has been to ensure that the Executive Director remains accountable to the Board, and that there is no loyalty conflict between acting on the Board’s mandates and the responsibilities of the Executive Director as a World Bank employee. The designation of the Executive Director with a senior enough rank in the World Bank hierarchy, for example as a Vice President or similar, is meant to act as a safeguard in this respect. 

The process will see the selected human resources search firm take the lead in narrowing down the list of candidates to a short-list, with the ad hoc subcommittee then taking a hands-on approach in assessing and interviewing the shortlisted six candidates. Following similar experiences at the GCF, the full Board will then decide among the three top candidates suggested for consideration by the ad hoc subcommittee. 

Additional Rules of Procedure for the Board

The LDF Governing Instrument lays out some initial rules of procedure for the Board (paragraphs 23-31), such as basic terms of board membership, quorum and what to do in cases when decision cannot be made by consensus. But for the full functioning of the Board, including allowing it to work intersessionally and through committees and panels, and to set up the arrangements and procedures for Board meetings as well as the release and management of Board documents, additional rules of procedures need to be adopted as soon as possible. The first LDF Board meeting in Abu Dhabi thus established a 10-member ad hoc subcommittee to work on elaborating draft additional rules of procedure for the Board to consider and adopt at its second meeting in Songdo.

Importantly, the initial rules of procedure in the Governing Instrument contain also several paragraphs (27-29) that speak to observers and stakeholder input and participation. The Governing Instrument in paragraph 20 notes that the “Board will enhance the engagement with stakeholders by inviting active observes, including youth, women, Indigenous Peoples and environmental non-governmental environmental organizations, to participate in its meetings and related proceedings .” While the active observer engagement in Board meetings and proceedings according to a decision on observer participation taken at the first Board meeting will be handled separately from dealing with the additional rules of procedures (see also next section), the relevance for Board procedural rules for the transparency and accountability of Board proceedings to the interested public and the ability of stakeholders and observers to meaningfully engage cannot be overstated. This is why observers during the first Board meeting pushed for a decision that would underscore the importance of inviting their views through consultations and submissions on Board matters relevant for their participation, such as the additional rules of procedures. 

In addition to an initial consultation with the ad hoc subcommittee after Abu Dhabi, observers representing several of the UNFCCC constituencies also provided some initial input for consideration by the ad hoc subcommittee in the lead up to Songdo. It highlights the importance of early notification of and visa and travel support for the participation of observers from developing countries in Board meetings; webcasting of all meetings as well as allowing for hybrid participation; the prompt, early and complete disclosure and publication of Board documents to observers at the same time as to Board members; keeping executive (closed) session to a minimum; publishing key documents, policies and decisions as a bare minimum in the recognized six UN languages; and setting up intersessional engagement procedures between Board meetings for observer participation and input, including for decision-making in-between Board meetings. With the Board only meetings a few times per year, observer inclusion in intersessional Board proceedings, including the work of committees and panels is fundamental to make meaningful stakeholder engagement a reality. The proposal of the ad hoc subcommittee for the Board’s consideration picks up some, but not all of these demands. 

Other sticky issues the Board will likely have to deal with are how often the non-residential Board should meet per year and if the format of these meetings should be by default in-person and webcast; nominations and replacements for Board members and alternates; and decision-making by voting, in particular how to deal with the Board seat assigned to the EU, seeing that a number of EU members also have separate voting seats; as well as the procedures and circumstances for decisions without a Board meetings.

Participation of Active Observers in Board meetings and related proceedings 

In discussing stakeholder input and participation in the activities of the Fund, the Governing Instrument differentiates between a small number of ‘active observers’ representing some defined groups and constituencies in Board meetings and allowed to join Board members in the Board room with the ability to intervene (paragraph 20), and other interested stakeholders that can register as observers for the Board meetings, who can follow the proceedings either in person on location (but from an overflow room) or remotely through webcasting or a potential hybrid set-up (paragraph 27). The Governing Instrument also foresees the establishment of stakeholder consultative forums (paragraph 28) and the development of mechanisms to promote the input and participation of stakeholders, naming explicitly “the groups most vulnerable to the adverse effects of climate change, including women, youth and Indigenous Peoples, in the design, development and implementation of the activities financed by the Fund” (paragraph 29). 

At its first meeting in its very first decision the Board on an interim basis invited “one representative from each of the nine observer constituencies of the United Nations Framework Convention on Climate Change to observe the proceedings of open sessions of the Board meeting in the room”. Given that a decision on the full procedures for the participation of active observers is only expected as an outcome of the second Board meeting, the same interim arrangements will have to be confirmed by the Board at the beginning of its Songdo meeting.

However, it is unclear how many active observers the Board will ultimately support. Some initial technical input that members from different UNFCCC constituencies provided in mid-June suggested to start out with ideally two active observers, at least one from developing countries, per group explicitly named in paragraph 20 of the Governing Instrument, namely women, youth, Indigenous Peoples and environmental non-governmental organizations, while leaving the option to add in the future active observers representing local communities and climate-induced migrants. A background paper for consideration by the Board suggests in contrast a total of six active observers, with one representative each from the four groups named in the Governing instrument and adding one each from affected communities and trade unions. It is likely to see a number of changes before adoption.  Unclear is also if and how detailed a finalized policy will list roles, responsibilities and participation rights for active observers – and respective obligations for the Secretariat to support effective observer participation – or whether it takes a principles-based light touch approach that gives active observers leeway to define their working modalities in practice over several Board meetings, such as through the designation of alternates, who then could also selectively rotate in and out of the Board room. The right of constituencies and groups to self-select their active observers should in any case be confirmed.

For observers, it is important that the Board makes the substantive leap beyond currently established practice in active observer participation, including in the GCF or the Climate Investment Funds. In a recent consultation with observers on the active observer role in the Fund, the Co-chairs acknowledged the necessity to go beyond business as usual. This must allow as a default the engagement of LDF active observers in all related Board proceedings, such as technical sessions, briefings in the lead-up to and in-between Board meetings, including procedures for engaging intersessionally in the development of operational policies, modalities and procedures, such as through the work of committees and in decision-making without Board meetings. It must also include travel support for active observers, at least from developing countries.

After the Board adopts a Fund policy on active observers at its second meeting, it will consider procedures for the accreditation of observer organizations at its third meeting in September; these must be light touch to ensure that for example community-based organizations and groups not included in the UNFCCC constituencies can also be registered for and attend Fund meetings. The fourth Board meeting in early December will then discuss the establishment of consultative forums to allow for wider stakeholder engagement.

Access Modalities, including development of triggers and indicators to clarify access, including a functional equivalency framework  

At its second meeting, the Board will start the deliberations on access modalities to its funding, with a procedural decision in Songdo likely proposing further work, but operational decisions on specific pathways to funding access, and who can access funding to be taken likely at the third meeting. A background paper for the Board’s discussion provides a research overview of existing practices and approaches, suggesting that further analysis might be needed.  This implies that significant intersessional work will have to be conducted, which must involve observers and in particular stakeholders from affected communities to bring in their expertise and lived experience to ensure that funding approaches in the LDF break new ground and go from ‘trickle down’ to targeted and substantial finance provision directly accessible to vulnerable groups, including women and Indigenous Peoples, who have so far received little direct funding support from existing multilateral climate funds.

The Governing Instrument envisions multiple avenues for access (detailed in paragraph 49). These are direct access via budget support and via subnational, national and regional entities; international access via multilateral or bilateral entities; access to small grants to support communities, Indigenous Peoples and vulnerable groups and their livelihoods; and rapid disbursement modalities. Most focus so far has been on ensuring direct access, given that this is a central condition for the FIF-hosting agreement the World Bank has to submit by August 12 and the nervousness of the World Bank to take on liability for funding channeled through direct access entities, which its FIF-directive and established FIF-procedure normally do not support. The discourse about the ‘functional equivalency’ of environmental and social safeguards (ESS) and the fiduciary standards of an implementing partner of the LDF with respective World Bank standards (as detailed in the Governing Instruments paragraphs 50 and 67) is supposed to address this to some extent. Such functional equivalency could for example be more easily established through fast-tracking existing accredited entities, including direct access entities, with good standing at existing climate funds like the GEF, GCF and Adaptation Fund, for partnering with the LDF, as all of them have already undergone thorough accreditation assessments. For the Fund to be able to expand the range of potential implementation partners, especially by partnering with subnational and local entities, the Board will have to look at simplified, risk-adjusted procedures depending on size or scope of funding being requested. It is for example unreasonable to expect the same fiduciary standards and ESS to apply to a 50,000 US Dollars small grant given to a community-based organization as for a 50 million US Dollar blended concessional loan intermediated by an MDB. Thus, where the baseline for simplification is set becomes crucial. 

The access modalities for local small grants provision will rightfully receive a lot of focus and attention at the second meeting, as in many ways how the Board will handle this question can be a litmus test of whether the Fund is willing to go beyond business-as-usual in its funding approaches. Civil society advocates have throughout the design process in the Transitional Committee pushed for a Fund-level community direct access small grants window with a substantial, and over time progressively larger allocation. A coordinated civil society sign-on letter pushing the Fund to make this an access priority will be delivered to the Board right before the Songdo meeting. While the Board seems supportive of a dedicated small grants approach overall, the debate will center primarily on whether this can be operationalized through an intermediated program delegated to a partner organization, such as the GEF/UNDP Small Grants Programme at international access level, or through direct access entities such as in the enhanced direct access (EDA) pilots the GCF and Adaptation Fund have, which would then allow for devolved (sub-)national level decision-making on small-grants funding, such as through national steering committees, or whether it could be a Fund-level program with decision-making on individual small grants given to the Secretariat based on an overall approved framework (similar to the readiness funding provided in the GCF).  Detailing the experiences with, and figuring out whether to go through and how to improve or expand on existing small-grants funding approaches will likely require further technical work and intense consultations over the coming months.

Relevant for the approval of all LDF funding, irrespective of access modality, will be to ensure country ownership of funded activities. The Board in discussing access modalities in Songdo will have to take care that it does not equate country ownership, as is currently largely the case, with government ownership as proven with a no-objection-letter agreeing to proposed funded actions. Such a requirement would likely kill in many countries with difficult human-rights contexts direct access to small-grant funding support for many of the most vulnerable communities, who are often marginalized and disenfranchised politically, for example because of their gender identity, ethnicity or indigeneity. All this will require further thought, and intensive consultation among Board members and with observers and rightsholders that go beyond what can be accomplished with the limited time for the access modalities agenda item during the second Board meeting. Rushing a decision there could prove counterproductive and derail the vision and potential of the LDF early on.

Financial instruments, modalities and facilities

The LDF Governing Instruments foresees the development of a Board policy for the provision of grants, concessional resources and other financial instruments, modalities and facilities. While it clarifies that financing support will be provided in the form of grants and highlight concessional loans (paragraph 57), it allows for the potential deployment of a range of other additional financial instruments from guarantees and equity (which the GCF also provides) to insurance mechanisms, risk-sharing mechanisms, pre-arranged finance and other, potentially complex, financial products (paragraph 58). The Fund is also encouraged to facilitate the blending of public finance with private sector finance (paragraph 59). 

The Board at its second meeting will have an initial discussion on what other instruments than grants and highly concessional loans it might consider based on a background paper that suggest some crucial principles to be taken into account, including equity and fairness, speed of access, and complementarity and coherence with financial instruments in use by other actors in the broader funding landscape. It is not foreseen that members will agree on a policy on financial instruments already in Songdo. The debate will instead invariably center on what instruments are appropriate for addressing loss and damage, including from a climate-justice perspective and taking into account debt sustainability and the high indebtedness of many of the developing countries already severely impacted by catastrophic loss and damage. Developing country Board members might point out that the character of the LDF is that of a fund, not a bank and that the financial instruments, modalities and facilities the LDF uses should be kept limited in line with this mandate, while developed countries might in particular focus on the role of blended finance and insurance and risk-sharing mechanism as a way to stretch potentially insufficient financial inputs into the Fund and highlight the role of financial innovation, by more strongly anchoring a distinctive role for the private sector, possibly even with a separate facility (for example the GCF has a cross-cutting Private Sector Facility). A similarly contentious debate has happened in the GCF over the years, where a focus on financial innovation and structuring has proved to become a goal in-and-of itself rather than understand as a tool towards intended beneficiary-focused outcomes. This agenda item could also see a focus on direct budget support as a core funding and access modality (with some overlap with the agenda item on access modalities, where triggers for financial release are also to be discussed).  Civil society throughout the design-process in the Transitional Committee and as part of the advocacy for a new fund has made a consistent call for delivery of LFG funding in the form of grants mainly, if not exclusively. 

Arrangements between the UNFCCC and Paris Agreement (COP/CMA) and the Fund 

As an operating entity under the financial mechanism of the UNFCCC and Paris Agreement, the LDF is accountable to and will receive regular guidance from the COP and CMA, including by submitting annual reports to the COP and CMA and responding to guidance on its operational policies, program priorities and eligibility criteria as detailed in the Governing Instrument (paragraphs 11-14). The COP28/CMA5 decision from Dubai tasked the Standing Committee on Finance (SCF) to develop draft arrangements for consideration by the Board. At its last meeting end of May, the SCF adopted initial draft arrangements. Some of the discussions in the SCF focused in particular on whether and how Article 11, paragraph 3 (b) of the UNFCCC on elaborating modalities for the reconsideration of funding decisions will apply. While the draft arrangements reaffirm the Board’s responsibility to set the strategic direction of the Fund, including its operational policies and procedures, the section on Board reporting to the COP and CMA makes clear the need for the Fund to account for all financed activities in its annual submission and mandates explicitly that details on the implementation of specific policy frameworks and procedures should be included annually, such as on resource allocation, complementarity and coherence, and on stakeholder engagement and consultation, as well as on the Fund’s long-term fundraising and resource mobilization strategy.

At its second meeting, the Board will discuss and approve the draft arrangements proposed by the SCF, potentially with some suggested changes. Taking this feedback into account, the SCF will approve the final draft of the arrangements at its 35th SCF meeting in early September and forward it to the COP and CMA. COP29 and CMA6 in early mid-November will then approve the arrangements and provide their first annual guidance to the LDF Board, which should then incorporate actions in response to the guidance received in its 2025 workplan. At its third meeting in mid-September, the Board will submit its first annual report to the COP and CMA, albeit late, as the normal deadline is 12 weeks prior to the annual climate summit. The report will have to be amended post-COP29 with the results from its fourth Board meeting

Arrangements for establishing and operationalizing an annual high-level dialogue 

The LDF is supposed to play a key role in coordinating a global response to addressing loss and damage, including through the Governing Instrument’s mandate to enhance complementarity and coherence between the Fund and broader funding arrangements (paragraph 51). It is tasked to develop a framework that would operationalize an annual high level dialogue on coordination and complementarity (described in Annex II of the COP28/CMA5 decision in paragraphs 11-16). It should bring together no more than 30 high-level representatives from relevant entities for loss and damage funding arrangements, including the MDBs and the IMF, UN agencies, other relevant multilateral climate funds (GEF, GCF, Adaptation Fund and Climate Investment Funds), but also from the Executive Committee of the Warsaw International Mechanism (WIM) and the Santiago Network as well the International Organization on Migration and civil society, Indigenous Peoples, the philanthropic sector and experts. 

At the concluding session of the Glasgow Dialogue during the meetings of the UNFCCC subsidiary bodies in Bonn in early June with a focus on funding arrangements, many parties made it clear that they would like to see in particular a strengthened exchange between the co-chairs of the LDF, the WIM ExCom and the Santiago Network, with developing countries requesting the quick operationalization and capitalization of the LDF as the core of better coordination and complementarity  in funding arrangements, while developed countries highlighted many activities and advances by actors outside of the UNFCCC and Paris Agreement.

As the annual dialogue is supposed to be co-convened by the UN Secretary General and the Fund, and given that high level representatives of many of the entities to be included in such a dialogue will be at the UN General Assembly (UNGA) session from September 10-24 in New York, it is likely that the first annual high-level dialogue could be convened there. This would require, though, that the Board can adopt such a framework at its second meeting in Songdo and set the time and location of the dialogue. The exact timing of the high-level dialogue must also take into account the dates already set for the Board’s third meeting (from September 15-19), which could be convened in Baku, Azerbaijan at the invitation by the incoming COP29 presidency.

Other matters under consultation by the Co-Chairs

The agenda for the second Board meeting lists two issues that the Board might spend some time on, with suggestions on a way forward from the Co-Chairs based on consultations they have led over the last weeks. The first one, and likely contentious, is a travel policy that will determine the principles, scope and eligibility of covered individuals from developing countries for travel arrangements made by and paid for by the Fund’s secretariat for participation in Board meetings and related proceedings (such as in-person meetings by committees, panel or consultative groups or fora). A background paper benchmarking eligibility and scope of similar policies under other climate funds and the UNFCCC was prepared for the first Board meeting in Abu Dhabi, but not discussed. While cost-effectiveness is likely to be brought forward as a core principle and argument for limiting eligibility and scope of the support by some developed country Board members, the issue of fairness and equity in representation and effective participation will also have to be considered. At issue is in particular whether advisors and how many advisors per eligible developing country Board member and alternate member might be supported. At stake is also whether the travel policy allows for supporting the participation of observers from developing country in Board meetings and related proceedings, including especially for active observers from developing countries, which should be anchored in the travel policy’s scope to be in line with the Fund’s mandate in paragraph 27 of the Governing Instrument to allow for the effective participation of observers in its meetings.

A second issue that could provoke a spirited exchange is settling and agreeing on a name for the Fund, which in official documentation is so far referred to as the ‘Fund for responding to loss and damage’ (FLD). During the Transitional Committee design process, the United States had suggested to refer to the Fund as ‘Resilient Futures Fund’, thus avoiding any explicit reference in the name to loss and damage, as a way to increase financial contributions to the Fund, presumably including from the United States (which has so far pledged support of only 17.5 million US Dollars to the Fund). The United States and other developed countries have highlighted throughout the design process that there is no financial support obligation for addressing loss and damage and that any financial contributions to the Fund are entirely voluntary in nature. Developing countries on the other hand by pushing for the Fund to be an operating entity of the financial mechanism of the UNFCCC and Paris Agreement, equal in status to the GEF and GCF, have sought to elevate funding for addressing loss and damage as a third pillar of finance provision in addition to mandated support for mitigation and adaptation. Thus, the discussion about the name of the Fund is really ‘nomen est omen’ with relevance for respective red lines in the ongoing discourse for a new collective quantified goal on climate finance, with a decision expected at COP29.

This article was first published here on 3 July 2024 by Heinrich-Böll-Stiftung Washington DC, USA | Canada | Global Dialogue