Ministers of finance from countries at risk have agreed to use philanthropic money to show how a funding mechanism could be set up to help victims of the climate crisis.
A group of countries in need is working together to develop an international partnership. international funding mechanism for victims of climate disasters.
The V20 group, which includes 48 developing countries, has agreed to test a funding mechanism to address the effects of climate impacts on lives, livelihoods, infrastructure, and property. They will draw on resources from the V20-Climate Vulnerable forum fund.
In a communique, the groups said “growing loss and damage due to insufficient adaptation responses” and a gaping hole in climate protecting finance was “fast emerging and major macroeconomic concern for the V20”.
The facility will help demonstrate how international support can be used to help communities recover after climate disasters.
The Children’s Investment Fund Foundation and the Open Society Foundation have respectively committed $1m and $500,000 towards the facility and the group is seeking further donations, including from G7 and G20 countries.
“Loss and damage is already happening whether it’s resourced or not” and local communities in vulnerable countries are bearing the brunt, Sara Jane Ahmed, the group’s finance advisor from the Philippines, told Climate Home News.
“Our intention is to show that there are potential ways forwards to deal with this economic issue,” she said.
Cop26 climate talks saw the development countries unite behind a request for a loss and damages finance facility. However, the US and EU resisted the proposal as they feared that they would be held responsible for their historic emissions and for contributing to the climate crisis.
Instead, developing nations had to settle for “a dialogue” to discuss arrangements for funding activities that would “avert, minimise and address loss and damage”.
Many V20 nations are not able to delay the creation of a Loss and Damage Fund. Their climate vulnerability and lack of access to finance to deal with it is made worse by the Covid-19 pandemic, ballooning interest rates, and rising food, fuel, and fuel prices.
Speaking on behalf of the V20 Bangladesh presidency, Abul Kalam Azad, special envoy at the Climate Vulnerable Forum, told the meeting of finance ministers on Friday that treasuries were already allocating significant and growing proportions of public budgets to fund loss and damage in affected communities.
“The issue of loss and damage is closely related to the adequacy or the lack of adaptation finance, which goes beyond the realm of climate justice and human rights, having a direct relevance to the current global priority of securing supply chains,” he said.
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Ahmed said that climate disasters in countries vulnerable to climate change have caused disruptions in supply chains. This made it an economic case for trading partners supporting the creation of a loss funding facility to minimize disruption.
Ahmed said that humanitarian aid is a good way to provide relief assistance and food supplies for countries in need, but it doesn’t address the infrastructure problems.
According to Sihle zikalala, premier in Kwazulu-Natal, the costs of repairing the damage caused by the flooding that claimed 448 lives in Durban and surrounding areas, are estimated at 12 billion rands ($760m).
Insurance could be a solution. The facility will include climate-smart insurance for small and medium-sized businesses.
The V20 stated that it recognizes the importance of regional and domestic insurance markets in the long-term. The new funding mechanism would support their deployments and subsidise premiums.
It is being designed in collaboration with the group’s members and other small nations with the aim to scale-it up and give recipient countries agency in deciding how the money is best spent.
“Current financing schemes are not fit for the reality. Currently, countries can apply for funding for specific projects. However, it is important to be flexible in responding to requests. [climate disasters],” said Ahmed.
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The V20 expects to present its facility design during the Cop27 climate talks in Sharm el-Sheikh, Egypt, in November. It hopes that some funds will have been disbursed to V20 communities affected by climate impacts as part of pilot project.
In the joint statement, ministers called for “finality” on bespoke and additional funding for loss and damage at the next climate talks.
“We call on Cop27 to establish an international financing mechanism for climate change loss and damage in solidarity with victims least responsible for, and least equipped to withstand, the increasingly extreme shocks driven by climate change,” the statement reads.
The group further agreed to commission a study into its members’ existing expenditures in recovering from climate disasters.
Bangladesh’s special envoy Azad said the study would help “build evidence” for the design of the loss and damage fund and that of the “global shield” initiative proposed by G7 president Germany to protect vulnerable nations from climate risks.
Source: Climate Change News