Loss and Damage: Building resilience to crisis

In November, states will gather in Egypt to discuss action on climate change, as the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP27) meets in Sharm El Sheikh. A key focus of their discussions will be on paying for climate adaptation and mitigation and the commitments to finance action made by the richest countries (high income countries or HICs), who have been most responsible for carbon emissions and their impacts.

Of growing importance to the Global South is the issue of loss and damage financing. ‘Loss and Damage’ (L&D) refers to the consequences of climate change impacts which cannot be, or have not been, mitigated or adapted to.

• Loss refers to things that have been lost such as lives, ways of life or historical sites, or economic or material losses that could be replaced if there is money to do so, such as a failed harvest or destroyed infrastructure.
• Damage refers to things that may be able to be repaired or recovered such as disability or ill health, or damage to roads and buildings.

Averting, minimising and addressing?

The United Nations has committed to averting, minimising and addressing the worst impacts of climate change. However, communities receive little support for the losses and damages they are already suffering under existing finance mechanisms for mitigation (emissions reductions) and adaptation. Households and national authorities are having to bear these costs, with limited humanitarian resources contributing only a small amount of support. The growing interest in L&D is a result of these gaps.

Figure 1: Most international climate finance is focused on averting and minimising climate impacts

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► For more on L&D and climate financing, see Chapter 2 of the Global Humanitarian Assistance Report 2022.

As the worst impacts of climate change begin to compound and multiply crises, populations are turning toward the humanitarian system for response and recovery. Of the US$6 billion of official development assistance (ODA) with the purpose of climate adaptation (including dual mitigation/adaptation objectives) in 2020, US$270 million was spent on humanitarian interventions. This is equal to 1.7% of total humanitarian ODA, or 0.2% of total ODA for that year. Money for climate adaptation purposes is not typically put toward humanitarian response and recovery projects – that is the function of humanitarian aid. As climate crises increase in number and intensity, it is likely that the pressure on the humanitarian system will grow, in the context of a year which saw the second-highest gap by volume ever in humanitarian financing – in 2021 only 56% of identified funding requirements were fulfilled.

Further, overall adaptation financing meant to build resilience continues to fall short. Only 12% (US$1.3 billion) of funding disbursed from multilateral funds like the Green Climate Fund (GCF) goes to fragile and conflict-affected states, despite these states being most in need of international support to respond to climate change. In countries like Pakistan, where recent flooding affected 33 million people, killing over 1,300 and leaving many struggling to get timely and adequate assistance, a supportive L&D infrastructure would have a transformative impact in terms of a community’s resilience to crisis.

Loss and Damage brings the right people to the table

Possible L&D financing could mitigate the harshest effects of these climate-relevant and climate-induced crises by providing an oversight function to mechanisms like insurance, humanitarian relief, social protection and other longer-term assistance for migration and displaced persons. Critically, advocates are calling for this finance to be new and additional, not a replacement for any existing ODA or climate finance. An L&D finance facility could also be a proving ground for a new approach to a stagnating humanitarian system, where funding has failed to keep pace with need.

L&D is fundamentally about climate justice. A key principle of L&D is that the costs associated with rising temperatures should be borne by those who have done the most to contribute to climate change. It is both a form of compensation and an investment in people whose lives and livelihoods would be impacted by extreme weather events and the changing natural landscape resulting from rising temperatures. In order to work, it relies on creating a space at the table for communities to share the impacts of loss and damage. Most importantly, this includes the non-economic losses and damages, such as impacts on mental health, the loss of common cultural and traditional landmarks and the damage to natural ecosystems that support resilience. To be most effective, L&D financing must be needs-based and locally-led, with decision-making capacity resting with those who are most impacted. In common with humanitarian response, the ability to effectively track financing is critical to enabling transparency and accountability to affected people.

The impacts of climate change are worsening and people already experiencing humanitarian crises will see the devastating effects intensify. The classification of a crisis as climate-relevant, climate-induced or the result of another humanitarian cause does not change the outcome: food insecurity, loss of shelter, loss of safety. Alongside sufficient finance for mitigation, adaptation and humanitarian response, new and additional L&D finance could embed resilience into a humanitarian system heavily weighted toward response and recovery. And, as crises increase, it is a resilience that we can no longer do without.