Financing loss and damage: four key challenges

Loss and damage is a complex and multidimensional phenomenon that is evolving rapidly as the climate crisis intensifies. Across the global South, vulnerable people are being pushed beyond the limits to adaptation. In this briefing, we argue that governments must use a suite of ‘layered’ financial instruments to tackle the complexity of loss and damage risks at national and local levels. This will help to ensure that the right type of finance can be delivered to the right interventions, in the right place and at the right time, in ways that are locally accessible, flexible and appropriately targeted. We also outline four key challenges to consider when designing finance for loss and damage: developing appropriate financing principles; improving access and flexibility; prioritising grants over loans; and ensuring redundancy in the system.