A sectoral approach to the Loss and Damage fund: exploring potential applications and guiding principles

After decades-long advocacy by developing countries, the establishment of a Loss and Damage (L&D) fund during COP27 was monumental. With the fund still in its infancy, we stress the need to understand the differentiation between the types of finance that are suitable for other forms of climate action from those required for addressing loss and damage. We consider potential applications of the funding in the fields of water resources, energy, transport, human rights and human security. Our sectoral analysis allows us to identify both some of the innovative ways in which loss and damage finance could build the climate resilience of societies while also encouraging the transition to cleaner forms of energy, transport and agriculture. We also suggest that loss and damage finance should be delivered in a way that is attentive to and able to redress some of the root causes of vulnerability while also providing developing countries with the support they most need in the face of climate impacts. We offer principles that could guide a high-functioning L&D fund: contribution into the fund, consistent contributions, clarity and governance, turnaround and response times, and transparency. Providing L&D funding should entail commitments to protecting and promoting human rights, and participatory and inclusive fund governance. Ultimately, the fund will need to be reactive to climate events yet proactive in understanding affected communities’ needs so that finance allocated is not just a band-aid solution but addresses the root causes of the vulnerabilities.