By Denise M. Fontanilla
Last week, our country hosted an annual forum of the Standing Committee on Finance (SCF), which was established under the United Nations climate convention back in 2010 to oversee and improve funding for climate action. This year, the committee decided to focus on how to finance loss and damage.
If you’re wondering what loss and damage means, don’t worry. A lot of time was used in the forum to define the issue. But the term in general refers to “irreparable losses (loss of lives, species, or land taken over by rising seas) and recoverable damages (damaged buildings, roads, power lines)” caused by climate change despite reducing greenhouse gas emissions and taking adaptation measures. The graphic below shows a range of potential losses arising from extreme and slow-onset events alike.
As Patricia Espinosa, the new executive secretary of the UN Framework Climate Change Convention, said in her message to the forum’s participants :
“There is perhaps no better place to discuss climate change loss and damage than the Philippines. The Warsaw International Mechanism was negotiated in the wake of a super-charged typhoon in 2013, and the next year saw another such storm. This underlines the need to address how we will respond to current and coming impacts of climate change.”
The participants – from UN bodies, governments, the private sector, and civil society – discussed the array of financial instruments available in response to risks to or actual loss and damage conditions, including insurance and other risk transfer mechanisms, contingency or disaster relief funds, and climate-themed or catastrophe bonds.
Red Constantino of ICSC shared how the Philippines set up a People’s Survival Fund (PSF) to finance adaptation programs particularly of local government units (LGUs). He also talked about how the fund is helping encourage LGUs to create their climate-readiness plans.
An interesting case he raised was a proposal developed by the town of Hinatuan, Surigao del Sur, which was previously hit by typhoons Sendong and Pablo. The town is seeking to access the PSF to relocate around 5,000 households in low-cost shelters, for reasons, according to Constantino, that appear to be more of a loss and damage context.
An analysis of the town’s disaster and climate change risks showed that it is already too vulnerable to storm surges and typhoons. It is also highly threatened by sea level rise and coastal erosion, according to experts and locals alike.
There was impatience expressed occasionally during the forum. The absence of a fund dedicated to paying for loss and damage situations – not just insurance responses – was cited as one reason, but other observers said the problem was more complex than bean-counting statements. Even though risk transfer mechanisms like insurance are far from adequate, it would be folly to dismiss them. Insurance deals with loss and damage and is one among many financial tools that can be deployed, especially in countries like the Philippines that have dismally low levels of coverage.
Liability, including financial obligation, for loss and damage was kept out of the Paris Agreement, which is why it continues to be a key issue for the Philippines and other vulnerable countries. Expect us and our partners to keep track of this in the upcoming climate negotiations in Morocco, where its mechanism will be put under close review.