Designing Loss and Damage Fund: Insights from Vulnerable Countries


By Priyanka Gurung, Hemant Ojha, Nusrat Naushin, Prabin M Singh, Basundhara Bhattarai, Purnima Banjade, Ajay Adhikari, Christopher Bartlett, George Koran, Ibrahima Camara, Saleemul Huq, Mizan Khan, and Bhim Adhikari | 10 July 2023


Good initiative, not free from concerns

Science has unequivocally demonstrated that climate-induced losses and damages are unavoidable and will escalate under current climate mitigation efforts (IPCC, 2022). Even in more optimistic scenarios, it is well established that the most vulnerable communities who are disproportionately affected by the impacts of climate change, will bear the brunt of those losses and damages. Therefore, it is encouraging to see that the United Nations Framework Convention on Climate Change (UNFCCC) is actively considering Loss and Damage (L&D) as a third pillar to address the climate crisis (Mohieldin and Mubarak, 2023).

Since the decision to establish a dedicated L&D Fund was made at the 27th Conference of the Parties (COP) to UNFCCC, more than six months have passed. Discussions following this landmark decision have focused on providing new and additional funding for vulnerable countries. Initially, the emphasis was on principles of compensation and reparation, but the consensus shifted towards a broader consideration of financing through global solidarity. To operationalise the funding arrangements and the Fund itself, a Transitional Committee (TC) was formed during the 27th COP. With 24 representatives, including 14 members from developing countries and 10 from developed countries, the TC is deliberating on the funding modalities with the intention of presenting it at the 28th COP later this year (2023). The discourse surrounding Loss and Damage financing has garnered significant attention both within and outside the UNFCCC processes around scope, financing, accessibility, scale, and governance of the Fund.

Despite these significant developments, there are concerns that the Fund may not be delivered in a timely and effective manner, and for its intended purpose. There is a genuine risk that the Fund may be designed without carefully considering the voices of the most vulnerable communities, especially women, the poor, indigenous peoples, and other marginalised populations in the Global South. A Fund designed without local voices will not benefit those most at risk to the escalating climate-induced losses and damages. In such a scenario, it becomes imperative to heed evidence-based insights and listen to the voices of those on the front lines of the climate crisis. Their experiences serve as a poignant reminder to all stakeholders engaged in the design discussion of the Fund about its fundamental purpose and the urgency to efficiently deliver it to those who need it the most.

This policy blog aims to provide key messages derived from the Strengthening Loss and Damage Response Capacity in the Global South (STRENGTH) project, focusing on four vulnerable countries: Vanuatu, Nepal, Bangladesh, and Senegal. Drawing on our preliminary analysis, we present some insights from the four countries, with the aim to contribute to the ongoing discussions on designing an effective and equitable L&D Fund.

Bringing local voices from four of the most vulnerable countries

STRENGTH project selected the four countries to highlight how climate impacts are unevenly distributed globally, hitting vulnerable countries the hardest. These countries in diverse regions of the Global South – the South Pacific, South Asia, and Western Africa, have varying levels of vulnerability due to unique geographic locations and socio-political contexts, presenting diverse climate-induced loss and damage situations. However, despite these differences, all four countries share similar entrenched social structures that perpetuate gender and other inequalities and share similar governance and financing challenges when it comes to tackling climate risks. Given that climate vulnerability and losses and damages are mediated by national and local level socio-cultural and political dynamics of exclusion, it is crucial to explore how UNFCCC Loss and Damage responses can become socially just and equitable.

Of the four case study countries, Vanuatu, a Small Island Developing States (SIDS), stands out as highly vulnerable to cyclones and storm surges, and slow onset impacts such as sea level rise and ocean acidification. These factors have led to significant economic and non-economic losses and damages. Economic losses can be valued in monetary terms and include property damage, while non-economic losses and damages (NELD) cannot be given a monetary value and often go unnoticed, such as loss of culture, biodiversity, ecosystem services, and knowledge. Vanuatu’s climate loss and damage is linked to the occurrences of cyclones, which have become more frequent with an average of 20-30 cyclones occurring per decade (VMGD, n.d.). Losses and damages to this island state are huge and the country as a whole is struggling to manage the risk and save people and ecosystems from an existential threat caused by other nations. For instance, in 2015, tropical Cyclone Pam resulted in economic losses amounting to US$449.4 million, which accounted over 64 percent of the country’s GDP (Australian Aid, 2021).

Alongside GDP numbers, narratives of loss and damage can be also found all around, in research, the media and the policy conversations. Here is a brief story of a local resident in Efate Island, one of many islands that constitute Vanuatu:

“Climate Change is causing sea level rise and high temperature that damages and destroys our beloved coral reef. I have a great passion for fishing. Every day I catch fish for my children and my family. Like most women in my village, I also love to collect seashells to eat but also for making handicrafts like necklaces and bracelets to sell and earn a small income for our household. Sea level rise is degrading the reef flats where I collect shells. The sea is moving inland, making it harder to get to the places we collect shells. The worst is when flooding from the land brings mud onto the reef, completely killing some species of seashells” a woman from Pango Village, Efate Island (Waiwai et al., 2023).

Aftermath of the Category 4 Tropical Cyclone Kevin that hit Vanuatu on March 2023 (Image: Mike Waiwai)

While SIDS experience devastating impacts of cyclones, Senegal, a West African country with dry-land geography, grapples with escalating challenges of varying climate risks such as severe droughts, desertification, and coastal erosion. These challenges have detrimental effects on agriculture and food security. Notably, erratic rainfall and droughts alone contribute to around 50 percent of crop yield reductions in the country (World Bank, 2015). A farmer’s narrative illustrates the challenges faced:

“For some time, we have been facing climatic risks such as the scarcity of rains that persist more and more, high heat and a decline in productivity leading to food insecurity,” a rural resident from Gourel Baydi village in the Tambacounda region (Mutui, 2022).

Similarly, in the geographically diverse South Asia region, Bangladesh, a low-lying coastal country faces the persistent challenges of frequent cyclones and flooding, resulting in significant economic losses, particularly impacting rural households. To illustrate, rural households in Bangladesh spend nearly US$2 billion on disaster preparedness and response alone (Eskander and Steele, 2019). Additionally, between 2000 and 2019, the country experienced climate change-related economic losses amounting to US$3.72 billion (Climate Reality Project, 2021). The loss and damage is well illustrated by the narrative of a South-West Bangladesh rural resident:

Collapsed houses as Cyclonic storm Fani struck Bidyar Bahon village of Mongla in May, 2019 (Image: Syed Zakir Hossain)

Additionally, in the same region, Nepal, a mountainous country, grapples with its own unique challenges of melting glaciers, landslides, and floods, posing significant risks to lives and livelihoods. As an example, the floods in 2017 alone caused economic damages amounting to US$462 million (Rai et al., 2020). To get a feel of how people experience, let’s look at this view of a farmer in Southern Nepal:

“My land was destroyed by floods. Our main source of income was farming. I used to earn 150,000 Nepalese rupees (€1,103) a year. After our land was destroyed, me and my family members were forced to take on daily-paid labour work to make ends meet. We barely had any means to buy food or educate our children after the floods destroyed everything. Later on, we leased some land and started cultivating mangoes and vegetables,” an indigenous woman from Chandrapur Municipality (Wickramaratne and Silva, 2023).

Aftermath of the flood and debris flow in Melamchi in June, 2021 (Image: Yutshu Shrestha)

Eight key messages for an effective and equitable design of the L&D Fund:

While the impacts of climate change vary among the four countries, there are shared insights and lessons that can contribute to the ongoing discussions on designing the L&D Fund. These insights highlight common experiences and provide valuable guidance for shaping the Fund’s design. We have identified eight of these key takeaways, which are outlined below:

1. A dedicated L&D Fund is urgently needed to address loss and damage


About STRENGTH Project

Strengthening Loss and Damage response capacity in the Global South (STRENGTH) is a new Loss and Damage research and capacity building project jointly developed by International Centre for Climate Change and Development (ICCCAD) and Institute for Study and Development Worldwide (IFSD) with support from IDRC Canada. The project’s general objective is to understand and address the knowledge and capacity gaps of most vulnerable countries in the Global South so that they are better able to develop country level L&D policy and implementation mechanisms, considering both national as well as international financing opportunities. The project covers four Tier 1 (T1) countries: Bangladesh, Nepal, Vanuatu, and Senegal where primary research will be conducted contributing to the project’s overall capacity development and research outputs.


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