Designing a fair and feasible loss and damage finance mechanism

The document argues that progress on loss and damage (L&D) finance has been stalled by disagreements over liability and compensation. It proposes a near-term 'solidarity-based' approach to unlock funding without requiring strict legal liability, while advocating for the eventual creation of a formal L&D mechanism within the UNFCCC. The authors emphasize that L&D finance must be additional to mitigation and adaptation funding and should be distributed based on a needs-based approach prioritizing the most vulnerable populations.

• Efforts to mobilise finance under the Warsaw International Mechanism on Loss and Damage (WIM) have stalled primarily due to political disagreements regarding liability and compensation, with industrialised countries resisting obligations that imply legal liability.
• The authors propose a near-term financing model based on 'solidarity' and 'common but differentiated responsibilities and respective capabilities' (CBRD-RC) to bypass the stalemate over strict liability and provide immediate support to vulnerable communities.
• To ensure equity and effectiveness, the proposed L&D finance mechanism should adhere to five guiding principles: avoiding strict liability in the near term, basing finance on solidarity/CBRD-RC, ensuring solidarity finance does not foreclose legal rights to compensation, maintaining national ownership for accessibility, and ensuring additionality to existing mitigation and adaptation funds.
• There is a critical funding gap for activities that 'address' loss and damage (such as recovery, rehabilitation, and planned relocation), as most current climate finance is directed toward 'averting' (mitigation) or 'minimising' (adaptation) impacts.
• The document identifies several potential financing instruments, including public bilateral/multilateral finance, solidarity funds (similar to the EU Solidarity Fund), national disaster funds, and 'innovative' sources such as air passenger levies or carbon taxes on fossil fuels.
• The authors argue that L&D finance should be distributed using a 'needs-based approach' that prioritises vulnerability, adaptive capacity, and exposure, potentially utilizing regional funding entities to better capture specific local risks.
• While a formal financial arm of the WIM or a new window in the Green Climate Fund (GCF) are ideal long-term goals, they are currently deemed politically infeasible due to the requirement for UNFCCC consensus and existing GCF structural barriers.

APA

Shawoo, Z., Maltais, A., Bakhtaoui, I., & Kartha, S. (2021). Designing a fair and feasible loss and damage finance mechanism. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2021/10/211025c-davis-shawoo-loss-and-damage-finance-pr-2110l.pdf

Chicago

Shawoo, Zoha, Aaron Maltais, Inès Bakhtaoui, and Sivan Kartha. Designing a fair and feasible loss and damage finance mechanism. Stockholm Environment Institute, 2021. https://www.sei.org/wp-content/uploads/2021/10/211025c-davis-shawoo-loss-and-damage-finance-pr-2110l.pdf.

Wikipedia

{{cite report |last1=Shawoo |first1=Zoha |last2=Maltais |first2=Aaron |last3=Bakhtaoui |first3=Inès |last4=Kartha |first4=Sivan |title=Designing a fair and feasible loss and damage finance mechanism |publisher=Stockholm Environment Institute |date=October 2021 |url=https://www.sei.org/wp-content/uploads/2021/10/211025c-davis-shawoo-loss-and-damage-finance-pr-2110l.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shawoo2021designing, author = {Shawoo, Zoha and Maltais, Aaron and Bakhtaoui, Inès and Kartha, Sivan}, title = {{Designing a fair and feasible loss and damage finance mechanism}}, institution = {Stockholm Environment Institute}, year = {2021}, month = oct, url = {https://www.sei.org/wp-content/uploads/2021/10/211025c-davis-shawoo-loss-and-damage-finance-pr-2110l.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }