Opinion paper: The ‘Loss and Damage Fund’ must work for the most vulnerable.
Co-authored by Dr. Agnes Kalibata (President of Alliance for a Green Revolution in Africa) & Amath Pathe SENE (Managing Director of the Africa Food Systems Forum)
As the world converges in Dubai for COP28 today, the urgent need to massively scale up action to address the “loss and damage” from climate change becomes increasingly clear in developing countries. Climate change is now an undeniable reality, causing irreversible losses and damages to the most vulnerable communities, ecosystems, and regions around the world, particularly in Africa. The principle of “Loss and Damage” highlights the need to go beyond adaptation and mitigation and acknowledges the irreversible adverse impacts and the economic losses that is already under way as a result of years of inaction/ denial and lack of attention to climate change issues. Unfortunately, the most vulnerable countries in the world have the least ability to stop or even protect themselves from the impact of climate change. For these countries, a functional Loss and damage Fund will go a long way to help recover from damage and build some form of resilience. Make no mistake, neither this fund nor anything for that matter can bring back life that is lost or recover years of livelihood that is lost in one night of a flood in Rwanda, Kenya, Pakistan or Bangladesh to name but a few. So this is not about reparations.
It is now a very well-known fact that Africa has contributed very little to the climate crisis at less than three percent of global emissions. Nonetheless, it is the continent that suffers the most from the losses and damages induced by climate change and has the least resilience and lowest adaptive capacities.
Home to over 1.4 billion people, Africa is the most vulnerable region in the world to climate change-induced natural disasters including extreme temperatures, recurring droughts, floods including riverine floods, dust storms, and heatwaves, as well as extreme weather events and rising sea levels. These impacts disproportionately affect vulnerable region such as the Sahel, the Horn of Africa and the countries along the Equator but also African communities, primarily smallholder farmers who represent 60 percent of the workforce in food systems value chains producing 70-80 percent of the continent’s food.
Climate change related damages are significantly pronounced in agriculture because of the sector’s dependence on rainfall in Africa. This affects not only livelihoods and food security, but also energy production, water resources, the environment, health, and the gross domestic product (GDP), particularly when the losses force governments to redirect public resources to food imports, social protection and food aid to address humanitarian crises and losses and damages caused by climate shocks. In the affected countries, where agriculture is a key sector (accounting for more than 43 percent of GDP in 2018), these impacts can reduce national GDP by up to four percent per year. Of course, this has now been exacerbated by COVID19 and the global security situation which has reduced average national GDP by up to 10%.
These adverse conditions and more frequent extreme climate events make it increasingly difficult for farmers to produce, store, and market food. Food shortages cause prices to rise and contribute to price volatility. This, in turn, fuels poverty and social and political marginalization, leaving a growing cohort of young people at risk and giving rise to violent extremism. Today, climate change has potentially far-reaching implications for national, regional, and global stability and security in economic, social, and environmental terms.
In the debate on the reform of the global financial system, it is also important to highlight the rising debt levels of African countries and the increasing frequency and severity of climate shocks that are slowing growth and eroding decades of developmental gains. The compounding nature of these challenges has deteriorated these countries’ public finances, weakening their resilience to climate shocks, and limiting their capacity to address losses and damages from climate impacts further. According to the IMF-World Bank Debt Sustainability Framework for Low-Income Countries (LIC-DSF), seven African countries are already in debt distress, 18 are at high risk, and 13, at moderate risk. In 2019, Cyclones Idai and Kenneth drove Mozambique’s public debt to almost 110 percent of its GDP, these difficulties are compounded by the impacts of more recent crises, namely the Russia-Ukraine and the Israel-Palestine wars and increasing dollar interest rates that are seriously undermining efforts of developing nations the most important SDGs of keeping poverty under check and the ability of nations to feed their people (SDGs 1 and 2).
At COP27, in Egypt last year, the decision to create the Loss and Damage Fund represented a historical breakthrough, as it recognized the injustice in the distribution of the burden and responsibility of copying with the impact of climate changes. The stated goal of the Loss and Damage Fund is to provide financial assistance to developing countries to deal with the negative consequences of climate change and help them rebuild the necessary physical and social infrastructure.
Since last year, negotiations have been underway to address many considerations and make this fund operational. Recognizing the urgent need for a coordinated response, it is the hope and expectation of many that leaders at COP28 come up with the resources for the fund’s establishment and define a clear timeframe for its operationalization. We appreciate the amount of work underway to operationalize this fund with the consensus now to host it at the World Bank for a trial period of four years.
From an African lens and as we listen to the voices of smallholder farmers and most vulnerable communities, here are key elements worth taking into account at COP28 for the loss and damage fund:
- Speed and urgent action: Setting up this fund is not only a moral imperative but a critical step in addressing the severe, and in many cases irreversible, consequences of climate change. In the past, the various funds created to support the climate agenda took years to become operational, while the impacts of climate change continued to become more ferocious and more frequent and visible. For Instance, The Adaptation Fund was created by COP7 in 2001, but became operational in 2007. So far, it has only disbursed around US$1 billion. As for the Green Climate Fund, after its establishment, some UN agencies took more than two to three years just to get accredited and many African Countries and Institutions still struggle to access the Fund. We applaud the setup of the Loss and Damage Fund at the World Bank hope that it will be adequately capitalized, agile accessible and timely enough to be of value to those that need it.
- Sufficient funding: It is far more expensive to deal with losses and damages than to invest in climate change adaptation or mitigation – not only in monetary terms, but also when we consider the physical and emotional toll of climate impacts on most vulnerable communities, as they watch their fragile asset base being washed away or wiped out. Although governments gathered in Paris in 2015 pledged US$100 billion per year for climate finance, the resources of all climate funds together – including the environmental funds (Green Climate Fund, Global Environmental Fund, and Adaptation Fund) are still well below US$20 billion per year. Therefore, much greater efforts are urgently needed to make good on previous commitments and come up with the resources necessary to support affected regions in rebuilding their infrastructure, restoring ecosystems, adapting to a changing climate, and addressing losses and damages. And if capacities to generate proposals for funding are weak, let the countries’ capacities be supported. While the negotiations are suggesting developing countries to also contribute into the lost and damage fund like the developed countries, let’s note that several African countries are already in debt distress partially induced by climate impacts which they are historically responsible. Hence, from an African lens, at least most African LDC countries, countries under debt distress Small Island Developing States should not be contributing to this fund.
- Strong, robust – but also flexible – mechanisms for compensation: The African continent is committed to the establishment of a mechanism to compensate communities and nations for losses that are unavoidable, despite adaptation and preparedness efforts. This will require the fund to operate based on clear, simple criteria, transparency, fairness, and accountability. Countries should, similar to other World Bank instruments have direct access and not go through intermediaries to access the fund.
- Integrated climate risk management (risk preparedness, risk reduction, and risk transfer): To minimize losses and damages and use of the fund, it is important that the Fund allocates a significant portion of its resources to the most vulnerable countries for integrated climate risk management, which combines risk preparedness, risk reduction, and risk transfer mechanisms. This model is the best way to limit the magnitude of potential loss and damages. In relation to preparedness, the Fund should address the need to strengthen climate information and early warning systems (CIEWS) that provide robust climate data to governments, smallholder farmers, and other relevant stakeholders to enable them to make more informed decisions and adopt effective preventative and adaptive measures to reduce the risks and impacts of climate change and extreme weather events. The Fund should also work with other funds that specifically support risk preparedness as a precondition for accessing compensation. The said climate risk preparedness actions should be combined with climate risk reduction measures aimed at enabling vulnerable farmers to adopt best climate adaptation and mitigation practices using data from strengthened CIEWS help inform farmers’ choices. To make this integration model efficient, climate risk preparedness and reduction should be linked to climate risk transfer (micro and macro agricultural insurance). The Africa Risk Capacity, aSpecialized Agency of the African Union established to help African governments improve their capacities to better plan, prepare, and respond to extreme weather events and natural disasters can play a key role.
- Support during climate disasters and events: Governments should prioritize support for vulnerable populations, including indigenous communities, women, and marginalized groups, who often bear the brunt of climate-related impacts. It is important to develop contingency plans for all vulnerable areas and communities identified.
- Replenishment of the fund: The plans to finance the Loss and Damage Fund should include targets for regular replenishments from countries with high emissions. The fund could also receive resources from partners such as international donors, development agencies, and philanthropic organizations. It should also work closely with other entities that share the Loss and Damage Fund’s vision.
- Private sector involvement: The fund should encourage private sector involvement through public private partnerships, climate bonds, climate insurance, and corporate social responsibility initiatives.
- Governance and administration: In the current global climate change negotiations, parties are suggesting that the World Bank act as the Fund’s interim host. While we know that this is a temporary solution, our proposal is that the Fund be in Africa, at the African Development Bank with clear guidelines on expediency.
Furthermore, an independent oversight body that includes UNCCC, representation of donors and receiving countries would ensure transparency agility, accountability and the desired impact and prevent any conflicts of interest. This body could also perform technical evaluations and validations of the losses and damages and assess the premiums to be paid per country based on clearly defined criteria. Additionally, it is important to ensure proper representation and participation of affected communities, civil society, youth, women, and experts in climate science and adaptation in such a body.
The Loss and Damage Fund should have a robust M&E system to track the effectiveness and impacts of the projects it supports. This should include regular reviews and updates of the Fund’s objectives so as to align them with the evolving