How community-led funding can unleash the potential of the loss and damage fund
After decades of inaction, the world is finally addressing how to pay for the the mounting costs needed to help communities in developing countries contend with the impacts they face from the climate crisis. But the question of how these communities will receive the funding is still an open question.
With worsening climate impacts, costs are estimated to be between $447 and $894 billion annually by 2030 and between $1.7 and $2.6 trillion annually by 2050 in developing countries alone. While all regions of the world are now contending with climate change, communities in developing countries have the fewest resources to respond, resulting in ‘loss and damage,’ which refers to the consequences of climate change that goes beyond what people can adapt to or the resources communities have to recover.
At last year’s UN Conference on Climate Change (COP27), governments agreed to establish a dedicated fund for Loss and Damage, along with a transitional committee to operationalize the fund before this year’s COP28 in December. Now that the committee is more than mid-way through its process, many countries as well as civil society are calling on the Loss and Damage Fund to include a community window as a part of its disbursement mechanism so that communities can easily and directly access funding.
Community windows provide a mechanism for funds to reach the local level and more easily respond to local needs and can test solutions that can scale and replicate in a given context.
How does a community window work and why does the Loss and Damage Fund need one?
Funds make climate finance accessible in specific ways: with requirements and processes around who can access the finance, how, what amount, when and for what purposes. One of the options for earmarking funds is through ‘windows’ that have specific access requirements that help meet specific needs that would otherwise be overlooked.
There are various options for structuring a community window. One is a community window that provides grants directly to local leaders or organizations, without going through national, regional or global intermediaries. Adopting this model of a community window will enable the Loss and Damage Fund to uplift the principles of locally led action and enable local groups — such as non-government organizations, women’s self-help groups and local governments — to directly access climate finance and determine its use.
While a locally led approach does not preclude communities from accessing climate finance through national and international intermediaries, studies show not enough international climate finance is reaching local levels through developing country institutions and that most governments do not know how much is reaching local communities. While efforts from the Green Climate Fund and Adaptation Fund on enhanced direct access provide the Loss and Damage Fund one body of experience to build on, there are limitations.
Enabling communities to directly access loss and damage finance and determine how to prioritize funding will result in a more equitable approach for addressing loss and damage. Because loss and damage, especially non-economic loss and damage — such as loss of culture, language, spiritual sites, education and opportunity — is so personal and context-specific, putting self-determination at the center of the community window is critical.
What experience can inform the Loss and Damage Fund community window?
Among the many funds considered, including the Green Climate Fund, Adaptation Fund, World Bank funds and USAID, WRI analysis has found two examples of funding windows that truly center communities’ needs, priorities and capabilities. These funds shift decision-making power into the hands of community members, including those who are often marginalized:
- The Asian Development Bank Climate Community Resilience Partnership Program, operationalized through the Community Resilience Financing Partnership Facility, was created to focus on the nexus between poverty, gender and climate change at the local level. Although it’s not fully operationalized yet, it’s intentional design and focus serves as a direct example of how to deliver finance directly to communities while working through in-country systems to ensure sustainability and synergy with wider development efforts taking place at the community level.
- Global Environment Facility Small Grants Programme was implemented by the United Nations Development Programme. Since 1992 it has successfully provided small grants to finance projects on a range of related issues such as biodiversity, climate change, and land use.
| Climate Community Resilience Partnership Program | Small Grants Programme | |
|---|---|---|
| Governance | * Funded by a multi-donor trust fund. * Established in 2021 and designed for 10 years of implementation. * Operationalized through the Community Resilience Financing Partnership Facility and administered by the Asian Development Bank. * Scale of funding for 10-year program thus far: over $66 million. | * Funded by the Global Environment Facility. * Established in 1992. Implemented by the United Nations Development Programme. * Scaling of funding since inception: over $724 million. |
| What is Financed? | Grants to build resilience that explicitly tackle the nexus between poverty, gender, and climate change at the local level. There will be grants made through a dedicated Gender Window, with funds earmarked specifically for supporting women-focused investments and block grants made through existing government programs and/or fiscal transfer systems. | Grants directly for projects that focus on biodiversity, climate change mitigation and adaptation, land degradation and sustainable forest management and international waters and chemicals. |
| Who is Financed? | Support for countries and communities in Asia and the Pacific to scale up community-led investments, including local governments and communities —especially grassroots women’s groups — for pump-priming of innovative concepts for delivering transformational adaptation solutions at the community level. | Local communities including Indigenous people, civil society organizations, non-government organizations, community-based organizations and Indigenous peoples organizations. Also, other not-for-profit organizations such as professional associations and unions. |
| Community Stewardship of Funds | The grants given through the Gender Window prioritize investment projects where the primary stakeholders are women throughout the project cycle, from planning, design and implementation, through to monitoring, evaluation and learning. There will be several different options for operationalizing the block grants through government programs but will be implemented by the local government in partnership with communities. | Makes grants to projects that are designed, implemented and owned by communities, and with benefits that directly accrue to them. Integral elements of the grants include community empowerment and participation, capacity building, gender and inclusion of youth and Indigenous peoples. |
| Approach to Scaling | These grants will test ideas, solutions and approaches, and have an explicit focus on the lessons learned which will inform Asian Development Bank’s own investments and indirectly inform government policies and programs. The grants to local governments and communities will also be complemented with technical assistance related support to local governments and communities, so that relatively small projects build resilience of wider systems. The program intends to explicitly encourage close collaboration between stakeholders to ensure that resilience solutions have local political traction and inspire scaled-up actions in the region and globally. | Each country has a voluntary and multi-sectoral National Steering Committee that contributes to efforts to upscale and replicate the best practices identified in the country’s grant portfolio. These committees often include several government sector agencies, the United Nations Development Programme, the private sector and civil society organizations. |
| Where it's Financed | All developing member countries of the Asian Development Bank. Priority may be given based on financing partner priorities. Currently, priority countries are Bangladesh, Cambodia, Indonesia and Nepal. | The Global Environment Facility’s Small Grant Programme is active in 127 countries including 40 least-developed countries and 37 small island developing states. |
These examples represent a high standard of community-responsive and locally led climate finance community windows. If this high standard of local determination is not immediately attainable in the structure of the Loss and Damage Fund, there are examples of community windows wherein local organizations provide critical insight, guidance and even oversight.
For instance, the Climate Investment Fund’s Dedicated Grant Mechanism for Indigenous Peoples and Local Communities enhances the role of Indigenous peoples and local communities in protecting the forests they depend on. The mechanism supports community-led, context-specific programs that draw on local expertise to advance sustainable forest stewardship and elevates Indigenous voices in local national, and global climate action.
The mechanism also operates at the national level with projects designed according to the context and priorities of communities in that country. Before receiving approval and funding, each project must have a steering committee composed of Indigenous peoples and local communities leading and overseeing the project. Although local communities and Indigenous peoples inform the national context and project design, and are included in the projects’ steering committees, the projects are often implemented by international or national institutions (for instance, World Wildlife Fund, Rainforest Alliance and International Union for Conservation of Nature country offices).
What are the benefits of a locally led community window?
Given that climate-induced loss and damage is experienced in such a personal and communal manner, especially in the case of certain types of Loss and Damage such as non-economic loss and damage, it is integral to include a mechanism for communities to directly access funds through the Loss and Damage Fund and have control over how the funds are used. Experiences from the Climate Community Resilience Partnership Program and Small Grant Programme show that:
- Community windows enable climate finance to be more inclusive. A community window provides a mechanism whereby local-level actors have direct access to resources and meaningful engagement in identifying and implementing efforts to address loss and damage. It represents a more equitable and just approach that accounts for contextual reality and communities’ own capacities.
- Community windows enable a way to address loss and damage that closely responds to local needs and realities. Community windows foster community ownership, capacity-building, and buy-in. Having agency over how climate finance is operationalized can have very positive long-term effects and better place these communities for sustainable development in the face of future climate impacts.
- Investing in community-led solutions allows for scaling and replication of benefits. The Small Grant Programme’s National Steering Committees include a range of government sector agencies, private sector players, and civil society organizations that contribute to scaling and replicating the best practices identified in the country’s grant portfolio. The Climate Community Resilience Partnership Program explicitly sees small grants made through its Gender Window as ways to test innovative approaches that can be replicated and scaled, and experiences can be leveraged throughout broader Asian Development Bank investments.
Examples of grants-based community windows are already demonstrating potential that can build confidence in this relatively newer form of funding communities. The Small Grants Programme has proven over multiple decades that this type of mechanism works well for increasing access to climate finance, strengthening communities' capacities, and ensuring local priorities and needs are at the center of the finance investments without sacrificing effectiveness — in fact, quite the opposite.
A grants-based community window of the Loss and Damage Fund needs to be supported by broader, systemic investments in in-country systems that enable communities to be organized and absorb funding, and interventions to fit within a much broader set of efforts around resilient development. Within the Loss and Damage Fund itself, this means interacting with and being complementary to the other potential windows that are established, for instance, windows that support national loss and damage plans.
With the approach of COP28 and the establishment and operationalization of the Loss and Damage Fund, it is critical that local communities — who are most directly impacted by climate impacts and have the most to lose — are meaningfully integrated into loss and damage finance architecture.