On 10 June 2024, the Board of Executive Directors of the World Bank approved the latter’s role as the interim secretariat host and trustee of a fund to respond to loss and damage due to climate change. This historic decision will financially support particularly developing countries adversely affected by climate change.
Since COP28, the World Bank has been trying to operationalise this fund as the World Bank’s financial intermediary fund (FIF) for an interim period of four years. This crucial decision will be a significant milestone in operationalising the Fund together with the Board of the Fund for Responding to Loss and Damage.
The World Bank appreciated the decision of the Board and the function of the Fund in providing much-needed support to vulnerable and poor people and communities in tackling climate change.
It has been a pressing concern for more developed nations that creating a fund would imply them owning responsibility for aiding climate change with their high carbon emissions. Despite initial inhibitions and debates around this issue, the countries agreed to a ‘Loss and Damage’ fund at the 2022 climate talks. From 2023, countries began making pledges towards creating the fund. Italy and the Netherlands, especially, took up the issue eagerly. Italy contributed 100 million Euros, and the Netherlands 15 million Euros towards the fund.
The initial plan of the World Bank hosting the fund was met with hesitation from several members as it was feared that it would end up with donors having too much influence. To maintain the autonomy of the Fund, it was decided that the World Bank would house the fund as a financial intermediary for four years. However, the Board will remain independent from the bank and retain its control over financing decisions and governance structure.
Harjeet Singh, global engagement director at Fossil Fuel Treaty Initiative, said the Bank must now accept the conditions outlined in the COP28 agreement to formalise the hosting and trustee agreements by August. He added, “The next useful step is for the World Bank to swiftly facilitate the receipt of funds pledged to the Loss and Damage Fund.” He urged that the Board adopt important policies to facilitate the earliest disbursement of the fund to affected nations. He further said, “Although the first board meeting of the Fund demonstrated a spirit of cooperation, we must intensify our efforts to operationalise the fund. The success of the Loss and Damage Fund must be measured by how quickly and adequately those facing the harsh realities of the climate emergency receive recovery support.”
The autonomous functioning of the Loss and Damage Fund will help provide financial aid to developing countries in countering the impact of climate change.
