World Bank controversy sends loss and damage talks into overtime

Developing countries are outraged by a proposal to host a climate loss and damage fund at the World Bank, painting it as a US power grab

World Bank controversy sends loss and damage talks into overtime

Campaigners at Cop27 call for a loss and damage fund to be set up (Photo credit: Kiara Worth/UNFCCC)


The president of the next UN climate summit, Cop28, has told government negotiators they must agree how to set up a new loss and damage fund before leaving the Egyptian city of Aswan.

The United Arab Emirates’ Sultan Al Jaber addressed the 24 members of the transitional committee by video link on Friday morning, the last official day of talks.

At Cop27 in Sharm el-Sheikh, governments tasked the committee with working out what a new loss and damage fund for climate victims should look like and present their proposals to Cop28 in November.

The fund is supposed to channel money to people who have suffered loss and damage caused by climate change. This could mean rebuilding homes after a hurricane or supporting farmers displaced by recurrent drought. Failure to reach consensus risks delaying support to those in need.

But developing countries were incensed by a proposal to host the fund at the World Bank, painting it as a US power grab. And rich-poor divides persisted on how to define the “vulnerable” groups eligible for funds and who gets to control spending.

Al Jaber accused the negotiators of dragging their feet and told them not to leave this task to ministers. “I expect you to deliver,” he said. “If I don’t see real and tangible results, that will not be acceptable.”

The committee was supposed to have three meetings this year but added a fourth to try and resolve deep splits between developed and developing countries.

As open negotiations resumed on Friday afternoon, that extra meeting was expected to run into extra time. Al Jaber said the Egyptian hosts could facilitate “extra hours or even an extra day in Aswan”.

Deal with the devil

Pedro Luis Pedroso Cuesta is a Cuban diplomat and chair of the G77+China bloc, which represents all the developing countries.

Speaking from Aswan, he told reporters on Thursday: “At this late hour, a small group of nations responsible for the most significant proportion of the stock of greenhouse gases have tried to bargain potential support for a Fund on one side with eligibility and administrative arrangements.”

Pedro Luis Pedroso Cuesta represents 136 developing countries (Photo credit: UN Geneva)

Referring to the 16th century tale of Dr. Faustus, who sold his soul to the devil, he said: “Accepting this Faustian bargain now would break the Cop when we need the greatest internationalism and solidarity to solve climate and other global challenges”

He told reporters that he did not want to single out any country but “since you’re asking, we have been confronted with an elephant in the room – and that elephant is the US”. He said they came to the talks with a “fixed idea” that the World Bank should host the fund.

World Bank controversy

Developing nations have argued that the World bank is too slow, inefficient, unaccountable and lacks the organisational culture to tackle climate change.

World Bank officials addressed negotiators questions in a closed-door meeting in Aswan on Tuesday but Cuesta was not impressed.

He said that consultations with the Washington-DC based bank had “displayed clearly” that it was “not fit for purpose in relation to what we’re looking for” and the fund should be set up as part of the United Nations instead.

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He pointed out that the World Bank only added tackling climate change to its mission last week and said this showed they lacked the “operational culture” of climate action.

With the World Bank as host, he said, the fund would not be legally or operationally independent from the bank.

“We know the history”

The bank was set up by the US and its allies after the second world war and the US is still its biggest shareholder and chooses who leads it. “We know the history. We know the politics. We know the manipulation,” said Cuesta.

He added that, under the bank, the fund also wouldn’t be accountable to all governments through the Cop climate talks and the United Nations Framework Convention on Climate Change.

Developed countries have argued that setting up a new independent fund would take longer than having the World Bank host it. But Cuesta said it would be “naive” to believe that speed is  rich nations’ real motivation.

The talks’ co-chairs released a draft text on Friday morning. Climate Home has seen it and it includes four options.

The fund could be hosted by the World Bank, with or without conditions. It could be an independent institution or there could be an open process to select the fund host.

Who benefits?

The second main division is over which countries are prioritised for funding. Developed countries want the funds to be allocated “based on vulnerability”.

There is no clear definition of vulnerability and Cuesta said this criteria would impede the fund’s ability to respond to recent climate-related floods in middle-income countries like Pakistan and Libya.

Developing countries fear that in practice “vulnerability” criteria mean funds will be restricted to just the world’s least developed countries (LDCs) and small islands developing states (Sids).

The 46 LDCS are mostly in Africa and parts of Asia. Major nations like China, India, Brazil, Nigeria and South Africa are neither LDCs or Sids.

A map of the world’s least developed countries, as defined by the UN. The map does not include Sids. (Photo credit: Unctad)

Further splits include developing nations wanting a target of $100 billion of funding a year by 2030 to be included and developed countries wanting to earmark budgets for slow onset events, recovery and reconstruction and small countries.

Negotiators have almost agreed one thorny issue though. The US had pushed for the fund’s board to include seats for nations that paid into the fund, sparking accusations that they were trying to rig the board in rich nations’ favour.

Friday morning’s draft said there would be 12 board members from developed countries and 14 from developing ones. There could also be non-voting members representing indigenous peoples and climate-induced migrants, although negotiators have yet to agree that.

Update: Negotiators worked until 1.30am but left Aswan without agreement. They will meet again in Abu Dhabi on November 3-5 to continue discussions.

Read more on: Climate finance | Cop28 | Loss and damage | UN climate talks |