Climate change: How to successfully implement the loss and damage fund

Personal finance

Climate Change: How to Use Losses and Losses Effectively


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People walk through the green area of ​​the Sharm el-Sheikh International Convention Center, during the COP27 climate conference in Egypt’s Red Sea city of the same name that is, November 9, 2022. PHOTO | AFP

One of the biggest victories of the Conference of Parties No. 27 (COP 27) in Sharm el sheikh in Egypt at the end of last year was the initiative to build the deficit and deficit.

This is a huge achievement for vulnerable communities and services in developing countries who happen to be on the front lines of the climate crisis.

The main objective of the fund is to help developing countries with a special emphasis on those vulnerable to the consequences of the climate crisis sustained by losses caused by climate change. events such as droughts, floods, sea level rise and other climate-related disasters. .

The outcome of COP 27 on the establishment of a fund for losses and damages represents one of the most important advances in climate change negotiations in recent times and provides a significant opportunity for the early adopters of climate change.

Insurance companies, financiers and other private entities depending on their strategies and actions will emerge as winners using the loss and loss.

READ: Raising private capital for adaptation projects in Kenya

However, it requires technical knowledge and blue ocean strategy to unlock the value offered by this fund.

This strong agreement is a turning point in recognizing the huge inequalities caused by the climate crisis and COP 27 will give great credit to current and future generations for the successful negotiations that resulted in the fund – historical money.

The fund, when implemented, seeks to provide financial assistance to the most vulnerable countries while moderately affected countries may also request assistance.

The vision of the fund is to establish conditions for developed countries to provide funds for the reconstruction and rehabilitation of poor countries affected by climate and environmental disasters.

Public funding will not be sufficient to achieve the funding objective and therefore the use of private sector funding is needed as seen in other funds such as green bonds. .

However, the establishment of the fund is a matter of political will, the sustainability of the fund needs to answer political and technical questions surrounding the structure, purpose and operation of the fund. the future.

An important question that needs to be answered is what is ‘Loss and damages’. Considering Article 8 of the Paris Agreement, there is no formal or clear definition of what constitutes climate-related loss and damage.

The focus should be on dealing with impacts that cannot be adapted and cannot be avoided.

There is a need to develop a standardized system for controlling weather loss and damage. Likewise. it is necessary to make an analysis of the financial and non-financial requirements and the tools needed for this funding.

A common agreement must be established as to whether the funds earmarked for privatization or a combination of the two will go to the existing public system.

The success of disaster finance will be determined by its ability to effectively provide funds to support countries most affected by the effects of climate change while at the same time being able to take advantage of funding from the private sector.

Technical assistance to the country and the private sector for losses and damages should be an important component of the financing of the delivery of funds for damages and damage.

Some of the challenges I foresee include competing with which specific countries should participate and pay for the countries involved and the number of countries involved.

Could this be an opportunity for the financial sector?

If these institutions can be creative and look at climate change as an opportunity, they must develop products and services that will address the objectives of losses and losses.

This requires the development of financial products that provide solutions for the private sector as a result of losses and damages caused by climate change and the mobilization of resources for the implementation of such products.

The introduction of a loss and damage fund need not divert attention from the more urgent priority of rapidly addressing carbon and climate change.

READ: Kenya receives Sh3.6 trillion in funding from Egypt summit

However, the introduction of the fund is a big step towards justice, for the poor countries that have done little to cause the climate crisis but suffer the worst effects.

Both countries and the private sector need to challenge the notion that climate disaster recovery should be given priority.

Funding for losses and damages is a good initiative, but we should also not forget that climate change mitigation and adaptation is another priority that needs urgent action.

The private sector holds the key to climate action, but governments must provide the necessary environment for the private sector.

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