A home destroyed by Cyclone Freddy. Credit: GPE/Mbuto Machili/Flickr

Loss and Damage Fund: Delays leave countries waiting and wondering

Vulnerable countries like Malawi are not much closer to understanding how the historic new fund agreed at COP28 will actually work

Annie Kachala, 43, prepares a simple meal for her family of eight in their ramshackle home in Phalombe, southern Malawi. This will be their only meal of the day. Since Cyclone Freddy made landfall one year ago, they have lived in extreme poverty.

“Some days we go to bed with an empty stomach,” says Kachala.

In March 2023, Freddy, the cyclone with the highest accumulated energy ever recorded, struck Malawi. Mudslides and floods ripped through towns and villages in the darkness of night, killing over 1,000 people and making nearly 700,000 homeless. The impacts swept away homes, roads, bridges, hospitals, and schools.

“I saw debris of houses that had been washed away coming straight to the house,” recalls Kachala. “We scrambled to seek shelter at some neighbour’s house which was not in the path of the mudslides. There was no time to take anything.”

Their belongings and source of income were gone in one fell swoop. Kachala used to rely on farming to support her family, but siltation from the floods made her once arable fields inhospitable. The family moved to a temporary camp set up by the government and humanitarian agencies, but they returned home two weeks later because, they say, there was inadequate food and shelter at the site.

Enter the Loss and Damage Fund 

In May 2023, President Lazarus Chakwera estimated that Malawi needed about $700 million to rebuild from the vast losses and damages caused by Cyclone Freddy. The cash-strapped government has struggled to raise such sums, leaving hundreds of thousands of people in much the same position as they were a year ago. However, the government now hopes a new fund may offer a fresh lifeline.

The COP28 climate talks last year saw the operationalisation of the Loss and Damage Fund, a initiative long advocated for by developing countries. Following its launch, countries such as France, Italy, the UAE, Germany, and the UK made pledges to it, totalling $662 million. Although this sum is not even 0.2% of the estimated $400 billion per year required, the creation of a fund through which historic polluters can compensate vulnerable countries for the irreversible effects of climate change was regarded as one of the few unambiguous positives from COP28.

Malawi hopes to be one of the first countries to draw from the fund, though questions remain over how it will operate.

“It is expected that the Fund will be easily accessible, as this is what countries expressed during negotiations,” Michael Usi, Malawi’s Minister of Natural Resources and Climate Change, told African Arguments. “However, we will only know once we apply and see how long it takes.”

Unanswered questions

At COP28, developing and developed nations agreed to set up a board that would be tasked with establishing the new fund’s strategic direction, policies, procedures, governance systems, and frameworks. The board has 26 members, 14 from developing countries and 12 from developed countries.

The board was supposed to have its initial meeting on 31 January, but this was delayed because developed countries failed to put forward their nominations in time. They finally submitted them, over a month late, on 1 March. This has pushed back the timeline for working out key details of how the fund will work.

To begin with, questions remain over the Fund’s host. This was a matter of contention in the lead-up to COP28. Developed countries argued that the World Bank should house the Loss and Damage Fund in order to simplify procedures. Developing countries pushed back, concerned at the World Bank’s culture, speed, accountability, and hosting fees.

The compromise reached was that the World Bank would host the Fund for the next four years, subject to various conditions. The Bank is supposed to confirm if it accepts these conditionalities by June, though it is unclear if it will meet this deadline now given the delays.

Another unresolved issue surrounds how countries will access the fund. Developing countries argue that they should be able to apply directly to the Loss and Damage Fund, but others suggest that international agencies such as the UN Development Programme should act as intermediaries.

The Board will also need to agree how and when finances become available following natural disasters. The Loss and Damage Fund is meant to compensate countries for both extreme weather events and slow onset events, but it is not clear yet under circumstances countries will be eligible to apply.

“There will be additional criteria in terms of triggering points for the fund,” explains Ineza Umuhoza Grace, coordinator of the Loss and Damage Youth Coalition.

Finally, there are unresolved questions over where the money will come from and how often the Fund will be replenished. As things stand, developed countries are merely “urged” rather than obligated to contribute, and pledges are nowhere near the sums needed.

Moreover, as Teo Ormond-Skeaping, coordinator of advocacy and outreach at the Loss and Damage Collaboration (L&DC) says: “These are just pledges. We do not know for certain that they will reach the Fund.” He wants to see the New Collective Quantified Goal on Climate Finance (NCQG), which will be agreed upon at COP29, to include a sub-goal on Loss and Damage that will deliver at least $100 billion a year in new and additional grant-based finance.

“We did not want the fund to be established on pledges alone,” adds Ineza Umuhoza. “We need clear, predictable and new as well as additional finance for action to address loss and damage.”

The long wait

Malawians displaced by Cyclone Freddy have already been waiting a year for a meaningful response to their loss of livelihoods, homes, and communities. The government is hopeful that accessing the Loss and Damage Fund could finally enable it to finance a rebuilding project, though Minister Usi – along with experts – predict that it may yet be another year before poor countries can begin to draw these much-needed funds.

Delays have only slowed this progress, leading to frustrations among developing countries. “We expect the Board to get to work quickly during the first meeting to reduce any further delays that would have communities on the front lines of the climate crisis waiting even longer for the delivery of funds,” says Ormond-Skeaping.

In the meantime, thousands of Malawians continue to contend with poverty and vulnerability to further hazards.

“We were told help is on the way. But it is nearly a year now and no help is in sight,” says Kachala.

This article was first published at africanarguments.org.