Developed countries hold up negotiations on Loss and Damage Fund as stalemate on location of the Fund undermines trust 

United States and other rich nations are pushing for the Fund to be housed in the World Bank

Recording 
Passcode: 6ZR#18^+
(Please note audio improves considerably after 2:23 minutes)

Full statement from Ambassador Pedro Pedroso Cuesta, Chair of G77+China

19 October 2023, Aswan, Egypt: Negotiations by countries at the fourth and final meeting of the UN Transitional Committee on Loss and Damage here today in Aswan, Egypt, are deadlocked over key differences.

The Transitional Committee mandated with designing the new Loss and Damage Fund has only a day remaining to formally conclude the talks. Countries remain divergent on fundamental issues to operationalize the Loss and Damage fund. These include issues around location, governance arrangements of the fund, sources of funding and eligibility issues, among others.

Developed countries, led by the United States, have insisted that the new Loss and Damage Fund should be set up under the World Bank as a hosted financial intermediary fund (FIF). Under such an arrangement, the World Bank would set up the Secretariat and provide Secretariat services for the new fund against a fee, following the conclusion of a negotiated agreement.  

Given the tightening of guidelines in recent years (2019 and 2022), the Loss and Damage Fund would operate under different arrangements than those of the Adaptation Fund and the Global Environment Facility (GEF). This has raised serious concerns about restricted access to and the legal independence, flexibility and decision-making power of the new fund. 

Ambassador Pedro L. Pedroso Cuesta, Chair of the Group of the 77 and China, briefed the media today (see recording above and his full opening statement) about the state of play and the united position taken by developing countries and the challenges to find a way forward to resolve this deadlock.

He expressed concerns about the inability of a fund under the World Bank to provide legal independence, legal personality, accountability to the Conference of Parties (COP) and CMA, and respond with speed to emergency events. 

Reaction from civil society advocates following the discussion in Egypt: 

Harjeet Singh, Head of Global Political Strategy, Climate Action Network International:
“During this critical meeting on loss and damage finance, it’s alarming to witness wealthy countries cunningly maneuvering to significantly narrow the scope of the new Loss and Damage Fund. This move sidelines hundreds of millions of vulnerable people worldwide. While claiming to prioritise small island states and the least developed countries, these rich nations aim to fracture the unity of developing countries.

“Furthermore, the push for the World Bank’s involvement as a host of the Loss and Damage Fund — an entity notorious for exacerbating crises and perpetuating global inequality — is starkly inappropriate. Its track record of prioritizing shareholders over the disenfranchised is telling. Wealthy nations must confront their longstanding inaction and acknowledge their significant role in the current climate crisis. The world is watching, and history will remember those who obstruct progress.”

Brandon Wu – Director of Policy & Campaigns, ActionAid USA:
“It’s outrageous that the United States and other developed countries are insisting that the Loss & Damage Fund must be housed within the World Bank, rather than established as a new independent entity. Putting the Fund in the World Bank – an undemocratic institution where the U.S. holds a great deal of power – feels like a cynical way of making the Fund more palatable to U.S. interests rather than ensuring it is designed to serve impacted communities in developing countries.

“There are many reasons that the World Bank is a nonstarter as a host for the Loss & Damage Fund. The L&D Fund should have direct access, equitable governance, be fully grant-based, and be innovative and fit-for-purpose. The World Bank would present major obstacles to all of these. We call on the United States to step back from its insistence on the World Bank and ensure that the L&D Fund is designed primarily with the needs of recipient countries, not those of the contributors, in mind.”

Lien Vandamme, Senior Campaigner, Center for International Environmental Law:
“The United States and other affluent nations, which bear the greatest responsibility for the climate crisis, persist in delaying justice for the communities suffering the consequences of climate impacts. This is unacceptable. People whose human rights have been violated because of the climate crisis are entitled to remedy without further delays. While wealthy nations profess a commitment to ensuring that funds reach the most vulnerable, these words remain hollow.
They continue to put forward unjust proposals for the fund’s governance and structure and procrastinate on taking concrete steps to address loss and damage. The climate harms that we are now witnessing are the result of this procrastination throughout the entire three-decade history of climate negotiations and developed countries must end these tactics now.”

Liane Schalatek, Associate Director, Heinrich Böll Foundation Washington, DC:
“The new Loss and Damage Fund should not be hosted by the World Bank. This is part of a clear attempt  by developed countries, especially the United States, with majority shares and voting dominance in the Word Bank Board, to reassert such a shareholder mentality into the new fund. 
We need a clear break with old institutional settings and donor-mindsets to create a new funding approach based on equity and climate justice and prioritizing the human rights and needs of those affected in all developing countries. A World Bank hosted fund cannot ensure the direct access and support for communities that have been made vulnerable to already occurring massive losses and damages due to the inaction of rich countries, led by the United States as largest historic emitter, to fulfill their obligations in taking ambitious climate actions, including in providing adequate financial support for mitigation and adaptation, over the past three decades.
This is our one shot to get the new Loss and Damage Fund right so that it can stand the test of time and evolve and grow. A World Bank hosted fund, because of a continued oversight role of the World Bank Board for required changes, inhibits flexibility and will not allow for this.”

Isatis M. Cintrón Rodríguez – Director Climate Trace :
“We are facing one of the greatest opportunities to establish a fund that is equipped to deliver climate justice to the most vulnerable, a fund to save lives. Our communities deserve justice, we don’t have time to get it wrong. This fund has to respond to the needs of affected and frontline communities. Developing countries have made it very clear that a World Bank hosted fund is not compatible with this vision, nor does it allow for shared governance, speed and direct access requirements. 
We need to build something new that breaks away from old paradigms and creates a landscape that delivers climate justice and remediate a problem we did not cause. In 2017,Puerto Rico lost 4,596 lives and experienced damages of 100 billion dollars in one single event, Hurricane Maria. The structure of a fund under the World Bank would make it absolutely impossible for local communities to have direct access to funds. We can’t turn our back to any single group who has been impacted by legacies of extraction and colonization. This is the moment for innovation and bold decisions from our leaders.”

Lidy Nacpil, Asian Peoples Movement on Debt and Development/Global Campaign Demand Climate Justice:
“Movements in the Global South are demanding reparations and fighting hard to have an independent, democratically-governed Loss and Damage Fund that will urgently respond to the needs of our people and communities. The US and its allies are once again trying to co-opt the entire thing by giving full control of the Loss and Damage Fund to the World Bank, an institution with a bad track record for funding fossil fuels and have implemented decades-long debt-ridden programs in our countries. This is unacceptable!

Having a WB-led Loss and Damage Fund will not benefit the Global South and will only enable governments of rich countries to avoid their obligations to developing countries.” 

Meena Raman, Third World Network:
“Developed countries are not negotiating in good faith. They are imposing the World Bank as host of the Loss and Damage Fund. They are behaving as if this is non-negotiable. This is unjust because this is not negotiations but an imposition in which developing countries have no say. There is no rhyme or reason why this has to be the case, other than in developed countries wanting to impose their governance as majority shareholders with big voting powers. This is unjustified, unacceptable and immoral.”

###ENDS###

For queries, please contact: Dharini Parthasarathy, Global Lead on Communications, CAN, [email protected]