The agreement to establish an L&D fund was one of the key outcomes of last year’s COP, and the decision included establishing a transitional committee. The committee, comprising representatives from both developed and developing countries, was tasked with meeting throughout this year to discuss the best design for the fund and provide recommendations to the COP.

They initially planned for three meetings but ended up having five due to contentious issues. Until the very last meeting, the discussions were particularly contentious, but eventually, they agreed on a draft recommendation text, which they forwarded to the COP. This was the decision text adopted on the first day.

A major point of contention was the governance of the fund, particularly its hosting. Developing countries favored a standalone fund, akin to the Green Climate Fund or the Adaptation Fund, while developed countries preferred it to be hosted within an existing fund or body.

Ultimately, it was agreed that the World Bank would serve as an interim host for the fund for four years, subject to numerous conditions. For instance, it needs to enable country ownership and ensure accessibility for all countries, even non-members of the World Bank. It needs to ensure greater accessibility. Developing countries introduced all this language to counteract the way the World Bank conventionally operates in order for the fund to be more aligned with climate justice and principles of accessibility and ownership.

Another contentious issue was the contributor base and who is eligible to receive funding. Developing countries advocated for including high-emitting countries like China and Saudi Arabia, but the final text does not mandate contributions, instead encouraging developed countries to contribute voluntarily.

As for eligibility, developed countries wanted to limit recipients to the most vulnerable countries, yet a clear definition was lacking. Developing countries argued that all nations categorized as ‘developing’ should have access. The current text prioritizes particularly vulnerable developing countries, leaving future decisions to the fund’s board. They might consider allocating a certain minimum percentage to Small Island Developing States and Least-Developed Countries, for example.

What was adopted was the draft decision on how to operate the fund. Countries must now nominate board members and convene before 31 January.

The decision text includes details on the fund’s governance, such as its hosting location, the establishment of a board, a secretariat, having the World Bank as an interim trustee and having 12 developed and 14 developing countries as representatives of the board, with no civil society representatives. They decided what criteria for allocation the board could consider when deciding how to allocate funds. They decided that funding will be in the form of grants and highly concessional loans, so not only a grants-based fund – that was something that developing countries really strongly advocated for – but it will still include loans, and this is partly a result of being hosted under the World Bank.

There was some language on country ownership and how to ensure that those who are receiving funds will have autonomy and decision-making power and decide how it is used, and also some language around small grants potentially being offered, so that could be quite promising, but they left the board to decide how countries will be able to access the funds: Will they have to apply? Will they have to submit a project proposal? Will they automatically receive funds after an L&D event occurs? What those procedures are, which actors will be eligible to access funds, and how the fund will enable direct access for local communities has not been decided.

The decision’s timing is unprecedented. It marks the first time a decision was made on day one of a COP in a plenary session. The early pledges, despite falling short of needs, represent a remarkable step forward.

I believe the decision is testament to the success of civil society efforts on this over the last two years. They really framed L&D finance as the climate justice issue for the Global South and called out countries for not delivering as an ethical and moral failing on their part.

That has also led to a lot of media attention and scrutiny on this issue, much more so than anything else really discussed in the negotiations. So that applied additional pressure and made it the litmus test for COP and its success.

There are not going to be any L&D finance negotiations, but it will be discussed in other negotiation items. There’s the Santiago Network on Loss and Damage, which is a technical body meant to provide technical support to developing countries to deal with L&D, and is also due to be operationalized during this COP. There will probably be conversations on how it links to the fund and how we can link these different actors together to channel L&D funding to respond to events, for example.

There are conversations on the New Collective Quantified Goal for climate finance, or what follows the $100 billion goal (established in 2009). They’re starting negotiations on that and are meant to decide on a new goal next year. In that context, it will be interesting to see whether L&D is part of that new goal. Is it officially considered climate finance, and if so, is there going to be a portion dedicated to L&D finance?

The way forward is to start disseminating finance as quickly and urgently as possible, because we know that countries and communities are already facing impacts. It will be interesting to see how that urgency will be reflected in the fund’s structure. Will it take two years, three years for countries to be able to access funding? Do they have to spend a lot of time on proposals and submitting to the fund? Are there going to be other methods for disseminating the funding?

Who will be able to access it is another key question. Are they going to provide capacity-building support so that local NGOs (non-governmental organizations) and governments with fewer resources can actually receive the funds themselves? Is it going to be like conventional climate finance, where governments receive funding for a year to run a project and it ends, or is it going to be more flexible and more like budgetary support to governments to use funding according to their own needs as L&D events occur?

That’s what’s in the years ahead, to decide what it will actually look like in its implementation. Our project, Operationalizing loss and damage finance has already shed light on some of these questions.