World Bank should not host loss and damage fund, say critics

A transitional committee tasked with drawing up terms for a loss and damage fund ended talks without consensus following EU and US insistence that the World Bank act as host for the fund.

The G77 – a coalition of more than 130 developing countries – and China have called for an independent standalone or UN-administered fund to cover climate losses in developing states.

Failure to reach an agreement ahead of Cop28 would set the ground for “very rocky negotiations” at the annual climate summit, said Preety Bhandari, senior adviser at the World Resources Institute.

This was the fourth meeting of the 24-member transitional committee responsible for operationalising a loss and damage fund. Talks stalled over disagreements about who would administer, be eligible for, and contribute towards the fund.

Establishment of the loss and damage fund was a key achievement of last year’s Cop27. It creates a legal obligation for advanced economies to provide financial compensation to the nations most vulnerable to climate change.

According to the UN, loss and damages include the negative consequences that arise from climate-related events, such as rising sea levels, desertification, ocean acidification, and extreme events such as bushfires and crop failures.

Pedro Luis Pedroso Cuesta, chair of the G77, told the press that the World Bank is not independent enough to administer the fund, as the US is the largest shareholder and primary decision maker in choosing its leadership.

Lien Vandamme, senior campaigner at the Centre for International Environmental Law, said developed countries “which bear the greatest responsibility for the climate crisis, persist in delaying justice”. She added that their “unilateral push to set up the loss and damage fund under the World Bank” is “inconsistent with the principles of climate justice”.

According to Vandamme, a World Bank hosted fund “would lack independence, fail to provide communities direct access to funds, and risk further indebting nations”.

During the talks, Diann Black Layne, chair of the Alliance of Small Island States and director of Antigua and Barbuda’s Department of the Environment, suggested that the World Bank’s high hosting fees may prevent it from being competitive enough to attract private capital.

She emphasised that many small island nations already bear unsustainable debt and would not benefit from the World Bank’s typically loan-based approach.

Her words echo discussions last month during the UN’s Climate Vulnerable Forum, which outlined the next steps of the emergency coalition on debt sustainability and climate prosperity.

A fifth round of talks is set to take place this weekend in hope of reaching a consensus ahead of Cop28. Christina Chan, senior adviser to the US climate envoy, said that the US is working to “address concerns” and far from being “obstructionist” is “clear and consistent” on the need to deliver an operational fund.

According to Vandamme, wealthy nations must be prepared to let go of this “unrealistic proposal, and set up a standalone, rights-based and resourced fund” if negotiations are to progress.