Can L&D Fund break free from current mold of climate finance?

As the Active Observers reminded the Board during recent meetings, the Fund for Responding to Loss and Damage (FRLD) is intended to “fill in the gaps” in the global climate finance landscape. It is supposed to be a hub for innovative or new approaches, to help the most vulnerable countries and communities avoid worsening impacts of the climate crisis.

Yet at its most recent meeting in the Philippines (B7), the only new approach seen was splitting the Board members and Observers into three working groups for half of the three-day event. This meeting was not without important decisions, though. 

BIM in motion

Many of these agreements finally set in motion the operationalization of the Barbados Implementation Modalities (BIM), the FRLD’s pilot initiative with USD250 million of grants available for all developing countries to access.

The launch of the call for proposals to access the BIM will take place at the Belem climate negotiations in November, adding another important event in arguably the most anticipated climate COP in history. After this, developing countries will have six months to prepare their proposals, which can be approved as early as the B9 that will occur in mid-2026.

These proposals can cover different solutions to address economic and non-economic loss and damage (L&D), from responding immediately to impacts of extreme weather events to long-term rehabilitation. They may also focus on addressing priority gaps within the landscape of institutions vis-à-vis needs against loss and damage.

All proposals must be “bottom-up, country-led, and country-owned”, pointing to the need to include national and subnational actors and stakeholders in project design, implementation, and monitoring. These must be reflected in defining and monitoring the expected results of BIM-funded projects.

Procedural decisions were also reached in the process for developing the FRLD’s long-term resource mobilization strategy and setting up a country support system, the latter being in synergy with the Santiago Network. Both of these will be addressed in the Board meetings next year.

Breaking free?

Yet as hard as developing countries and Active Observers tried to push for truly innovative approaches, the decisions reflected ongoing difficulties in breaking from the current models in the global climate finance landscape.

Rapid disbursement as a response to climate emergencies emerged as one of the most contentious topics at B7, with representatives from the Least Developed Countries leading the charge to have it be part of the BIM. Instead, considerations on this will be tackled at B9.

The adopted funding cycle also largely resembles what is being conducted under the likes of the Green Climate Fund, the Adaptation Fund, and the Global Environment Facility. Assuming no rejections, BIM proposals can only be approved as quickly as three months, in contrast to immediate access for the most vulnerable countries.

Another key decision, which enables entities accredited to the GCF, AF, and GEF, such as multilateral development banks to also access the BIM, could limit the options, especially for the Least Developed Countries and Small Island Developing States, to secure much-needed funding. 

The limited capacity of the FRLD Secretariat also poses significant challenges to the efficiency of the BIM operationalization. Among these aspects of the work include developing assessment methodologies for proposals, processing the expected high volume of submissions, and reaching out to developing countries to ensure the designation of national focal points.

The balance between urgency and due diligence has been a prevalent issue during the short lifetime of the FRLD. B7 was no different; while sticking to proven models to ensure urgent operationalization of the BIM is understandable, it also ironically places developing nations at the short-term path of overcoming the same obstacles that have made the GCF, AF, and GEF not as accessible and impactful as they should have. 

Work to be done

It is clear through some of the decisions taken at B7 that some aspects of the BIM operationalization are not intended to prejudge the FRLD’s long-term future. Yet it is also obvious that they will inform its structure, modalities, and impact once the pilot initiative ends.

As critical as the BIM’s success is for the well-being of the most vulnerable countries and communities are, it would inevitably fall short vis-à-vis the big picture of the global loss and damage agenda. The USD790 million of pledges to the FRLD, not all of which is even actual funding, do not even make a dent to the hundreds of billions every year that developing countries require to avoid more extreme climate impacts.

COP30 must not only be the site of the launch of the call for BIM proposals. At the bare minimum, it must also see much higher financial commitments from developed countries, which will also be aligned with the new collective quantified goal on climate finance that does cover loss and damage. Polluters must pay, and not just developed countries.

The next 12 months afterwards will determine the short and long-term success of the FRLD. The next Co-Chairs will have an even taller task ahead of them, with every detail of the BIM, the draft resource mobilization strategy, and other aspects to be scrutinized. The stakeholder engagement policies, including on Active Observers, must not be overlooked, either.

Filling up the Fund is not enough, either. We also need to feel the Fund in terms of its inclusivity and impacts, especially for its intended beneficiaries: the most vulnerable countries and communities. 

Otherwise, the FRLD will fall short of what it is meant to be. It will be more of the same.

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