Recourse believes that the World Bank is not an appropriate host for the UNFCCC Loss and Damage (L&D) Fund, given is role in funding fossil fuels, its lack of democratic accountability, historic failures in implementing environmental and social protection, and its preference for investing in the private sector that that emphasizes profit ahead of human need and sustainable development.
Given the growing reality of climate devastation in many vulnerable countries around the Global South, it is essential that the UNFCCC L&D Fund is operationalised and funded with urgency. However, the agreement of the Transitional Committee co-Chairs text that will be submitted to COP28 falls woefully short of expectations. It requires developing countries to compromise their urgent demands, overlooking their calls for an independent fund under the auspices of the UNFCCC and for developed countries to be required to contribute to the fund. The proposal now says that contributions to capitalise the fund will be ‘voluntary’ from developed country Parties, other Parties and from innovative sources. This represents a significant watering down of the responsibility of historic polluters to provide the finance to support developing countries to respond to the climate crises hitting their countries.
In solidarity with many CSO observers to the negotiations, especially those from the Global South, Recourse is particularly disappointed that the wealthy nations have insisted that the World Bank Group (WBG) should act as ‘interim’ host for the Fund. Given the current proposal, Recourse has concerns that:
- While hosting the L&D fund to respond to catastrophic climate impacts, the WBG continues to actively invest in the acceleration of climate change through its support for fossil fuels, and especially gas, and funding financial intermediaries who are financing new coal power.
- The WBG has often failed to implement its own environmental and social protections when funding projects,for example in the case of its backing of coal power plants in the Philippines. This demonstrates that the WBG is not fit–for-purpose to manage the L&D fund that is meant to support countries to respond to climate crises at scale.
- The WBG’s increasing focus on a private-sector-led first approach to financing is a concerning trend, that emphasizes profit ahead of human need and sustainable development. This approach is at odds with the nature and purpose of the L&D fund.
- The WBG is not a democratic institution, as power and decision-making is significantly concentrated in the hands of the major shareholders, and especially G7 nations. As such it is not well-placed to adequately respond to the needs of climate vulnerable developing countries requiring inclusive and accountable access to the L&D fund.
- It is essential that the interim hosting of the fund by the WBG be mandated for a strictly limited period, and does not become normalised in the WBG system, as happened to the Climate Investment Fund (CIF) and the Global Partnership for Education, which are heavily constrained by the WBG bureaucracy. The final agreement on the L&D Fund must make explicit the exit strategy from the WBG hosting arrangement after four years.
- Recourse condemns the removal of vital human rights and UNFCCC principles from the decision text. The L&D funds should be accountable to the UNFCCC and guided by its principles, including upholding the equity principles of common but differentiated responsibilities and respective capabilities (CBDR-RC), as well as social and environmental safeguarding, and the protection of human rights.
- There needs to be clear operationalisation of the requirement for ‘all developing countries to directly access resources’ and ‘small grants funding for communities’, which responds to vulnerability and need.
- Wealthy nations should urgently contribute their fair share of funding to capitalise the L&D fund in addition to climate finance and development assistance commitments.