Operationalizing finance for loss and damage: from principles to modalities

This report feeds into ongoing negotiations and discussions on loss and damage finance by exploring different options for how it can be operationalized. Drawing on the climate and development finance literature, including new analyses since COP26, as well as on insights from a diverse group of stakeholders, it demonstrates the finance need and identifies key gaps in existing systems (Section 1); lays out a set of principles to guide loss and damage finance and ways to operationalize them (Section 2); and examines the applicability of those principles to a new loss and damage finance facility (Section 3). It concludes with recommendations for COP27 and beyond.

Key findings that emerge from this report include:

1. Loss and damage financing must take a people-based approach that centres the needs of vulnerable and marginalized communities. 
2. There is a need to utilize and learn from existing structures, rather than starting from scratch, particularly at the national level. 
3. Financing that is grants-based and programmatic, not project-by-project, and that targets the local level is likely to be most effective and equitable for reaching those most in need, especially in situations of emergency. 
4. While the separation between finance for mitigation, adaptation, humanitarian aid, development and loss and damage makes sense at the global level, it is likely that these activities will have overlaps at national and local levels. 
5. Although this report primarily focuses on the key gap of addressing loss and damage, our findings are also relevant for financing structures for averting and minimizing loss and damage.