Halfway through its inaugural year, the Board for the Fund for Responding to Loss and Damage (FLD) has started making strides. With two meetings underway and the next in the horizon, it is a good time to reflect on the Board’s progress so far what challenges lie ahead.
The process for operationalization of the Fund for Responding to Loss and Damage (FLD) holds a lot of important for Bangladesh as the country could stands to be among the first to access the fund. Following the decision to officially operationalize the fund that was made at the 28th Conference of the Parties (COP 28) in Dubai, UAE, it was anticipated that the process would soon be underway. However, the initiation of the Board’s activities was drawn out longer than expected due to the developed countries’ group delaying the nomination of their representatives for the Board. Delays such as this were not welcome as the task ahead for the Board was formidable in itself without such setbacks.
In order to grasp the gravity of the task assigned to the Board, one needs to appreciate that the FLD has been assigned to fill a critical financing gap that existing funding arrangements have failed to address thus far. This financing shortfall has long left the vulnerable countries, particularly in the Global South in a perpetual state of vulnerability, with intensifying climate variability. Extreme weather event such as cyclones, floods, droughts and wildfire have seen a rise in both frequency and intensity in the recent decades, causing severe economic and non-economic loss and damage. This is compounded by slow-onset extreme weather events like sea level rise, saltwater intrusion, and desertification, adding to the woes of the climate-vulnerable countries, particularly from the Global South.
The fight for the formation of the FLD has been a long politically daunting process, but after gaining momentum over the last few years, it finally resulted in an agreement at COP27 in Sharm El-Sheikh, with a subsequent planning process led by the Transitional Committee (TC).
The First Board Meeting – Setting Priorities
The first Board meeting of the Fund for Responding to Loss and Damage (FLD), held from 30th April to 2nd May at Abu Dhabi, UAE, marked a crucial milestone in operationalizing this Fund. While the Fund and its governing instruments had previously been approved, only the bare structure of the structure was established. It would be the Board’s responsibility to deliver detailed operational policies, procedures, and guidelines to determine the Fund’s functionalities, access modalities, who would receive the fund, and under what circumstances.
Although the first meeting did not culminate in any key operational decisions, it did kick off several significant processes that the Board considered a priority in shaping the operationalization of the fund. The key structural agendas that were prioritized during the inaugural meeting include – the relationship of the Board with the World Bank, the selection of an Executive Director for the Fund, and the establishment of additional rules of procedure for the Board.
World Bank as the Fund Host?
The relationship with the World Bank is critical as the Bank has been invited to host the FLD secretariat. Under this agenda, an ad-hoc sub-committee was established at the meeting, with the aim of meeting crucial deadlines set by COP29, including that of World Bank’s accepting the hosting conditions, and the submission of a host agreement by mid-August. This would allow for the secretariat to independently operate under the helm of the new Executive Director.
Kicking off the Process for Selection of the Executive Director
Another priority highlighted at the first meeting was the selection of an Executive Director, who will be overseeing the day-to-day operations, staff selection, and responsible for ensuring effective implementation of the Board’s decision. A second ad-hoc sub-committee was established at the meeting to initiate the selection process, with the aim to make an appointment by the third meeting in September.
Why Are Additional Rules of Procedures So Important?
The discussion on the need for additional rules and procedures was another important highlight from the meeting, as it would play a vital role in ensuring smooth operation of the fund. This includes structuring decision-making processes and preparatory work, particularly important with the Board’s non-sitting nature. This agenda also encapsulates the civil society observer (CSO) engagement in the Board’s work. Ensuring incorporation of the observers’ opinions, priorities, and voices into the decision-making process and policy considerations will be a critical component of the Fund’s success.
The first Board meeting of the FLD set the groundwork for the Fund’s operationalization, with a significant amount of work scheduled for the next meetings. While the initial steps in the first meeting are technical in nature, they would play a fundamentally important role in ensuring the efficient operationalization of the Fund in supporting the communities and countries most affected by climate change.
The Second Board Meeting – A Cautious Step in the Right Direction
The second meeting of the Board of the Loss and Damage Fund (FLD), held in Songdo, South Korea from 9th to 14th July, made significant progress in establishing foundation for the Fund, by forging key technical details that would be pivotal in shaping up the Fund.
Selection of the Host Country, Executive Director; Official Name of The Fund
The Board made substantial headway on procedural issues, including the selection of the Philippines as the host country for the Fund, the official naming of the Fund as the Fund for Responding to Loss and Damage (FLD), and the establishment of a Terms of Reference for appointing an Executive Director.
Interestingly, the selection of the host country was formally adopted based on consensus, after an informal and closed balloting from nominated countries was facilitated to reach consensus. The selection of Philippines as the host country welcomed by all, including civil society observers, particularly from the Global South. The agenda of the officially naming the fund was also commenced swiftly without much fanfare. The Terms of Reference for appointing the Executive Director, however, was a more painstaking process, drafted by the ad-hoc committee, and needing a thorough inspection by the Board members.
In addition to these decisions, which would prove critical for operationalizing the Fund, the Board also adopted a work plan outlining a timeline for its upcoming decisions and milestones. The workplan also retained the flexibility to adjust as needed.
There were other significant issues that were also discussed in the meeting, signaling the beginning of substantive work. Access modalities, specifically, plays an instrumental role in ensuring that the FLD avoids replicating shortcomings of existing funding arrangements which largely rely on international intermediaries. The discussion on access modalities highlighted the Board’s intent on exploring options to allow for direct Fund access by affected countries and communities, through empowering local institutions and first responders best positioned to address loss and damage.
Discussion on financial instruments, another key area of focus, emphasized the need for grant-based finance, with much of L&D, mostly non-economic (NELD), such as loss of livelihoods, housing, and cultural heritage—cannot be retrieved, or can only be addressed fairly through grants. Also, it would be unjust to increase the debt burden of countries already suffering from climate impacts, not to mention contrary to the Fund’s objectives. The discussion highlighted the need for further research and discussions for the Board in future meetings to reach a decision on this.
The discussion on active participation of civil society and indigenous people, which although widely acknowledge by the Board members to be crucial in making the Board proceedings to be inclusive and participatory, did not culminate in any decision beyond a draft, being postponed to the fourth meeting. While this was slightly disappointing, but the recognition of active observer importance in the process is important. Observer engagement will influence not only the Board’s operations but also the assessment of the needs of recipient communities and countries, planning, implementation and monitoring of Fund-related activities. CSOs play an integral role in ensuring that the voices of the most climate-affected are heard which is imperative for the Fund’s success.
Another unresolved agenda was that of travel policy, with discussion on it taking a somewhat political tone and spanning an unexpected length of time. While developed country members raised the matter of ensuring minimized carbon footprint, the developing countries stressed more on ensuring inclusiveness and participation from Global South. CSOs also raised the issue of provision for travel support for their participation. It was agreed that a contingency fund would be used for Board, with emphasis on addressing inconsistencies and need for further discussion to reach a decision.
Ensuring the Fund’s Success and Sustainability – Concerns and Challenges
Overall, the second meeting was successful in achieving progress on many technical issues. However, the Fund’s future effectiveness and sustainability will potentially be determined by certain factors that were not fully explored in this meeting.
The scale of the Fund and resource mobilization, despite not being a dedicated agenda item, was underscored during conversations in and around the meeting. The discussions on access modalities and financial instruments, for instance, seemed to be incomplete or futile without clarity on the scale of the Fund. Although a resource mobilization strategy is expected by the end of 2025, the lack of a substantial financial commitments persists as an immediate and integral challenge. The financial pledges made so far on a voluntary basis do not reflect the persistent need to mobilize resources in billions of dollars to address loss and damage. This does not bode well for the Fund’s future and in delivering the justice it is committed to. Sustainability of the Fund can only be achieved through acknowledging that voluntary pledges will not suffice and it is the responsibility of developed countries to support the affected countries and communities to respond to loss and damage.
Concerns remain about the ability of the World Bank to meet the 11 conditions to host the Fund, despite its acceptance of the invitation. Although the Bank representatives tried to address questions by the Board members and observers in the second meetings, doubts remain about the Bank’s existing structure allowing direct access for countries and communities, and a grants-based Fund. Liability in case of direct access could potentially be transferred to the Board from the Bank. Concerns have also been raised about the high cost associated with the Bank’s hosting agreements. The Bank’s documentation is expected to be reviewed by the Board until mid-August, in order to decide if the conditions are being met. Given the World Bank’s history contrary to the principles of climate justice, with a portfolio focused on loans rather than grants, this decision will be pivotal.
The Board also needs to pay attention so that its policies operate in line with human rights standards, actively promoting equity and justice, particularly for vulnerable groups as Indigenous Peoples, women, and persons with disabilities. While the Board’s work plan includes an accountability framework and safeguards, but it currently lacks explicit references to human rights. There should also be an independent mechanism in place for communities to seek justice and recompense for harm caused by the Fund.
What Lies Ahead – The Third Meeting at Baku
The third Board meeting, scheduled for September 18-20 in Baku, Azerbaijan, is expected to be another pivotal step towards operationalization of the Fund. Decisions on World Bank’s ability to meet the hosting conditions, finalized additional Rules of Procedure, including policy on observer engagement are expected to be taken in the next meeting. Continuation of discussions on access modalities, financial instruments are also anticipated as these will play a crucial role in shaping the future of the Fund. How the decisions unfold on Bank will have far-reaching outcomes on vulnerable communities worldwide, and potentially determine the direction of the global fight against climate change.
About the Authors: Towrin Zaman Raya works as a research associate at ICCCAD.
