As critics of the plan to host the fund at the World Bank pointed out, the bank is not known for offering the kinds of grants that loss and damage requires. The kinds of “bankable,” return-generating projects able to court private investors in the ways World Bank initiatives tend to prefer are relatively scarce when it comes to loss and damage. Countries already struggling under enormous debt burdens, moreover, could find themselves deeper in the hole if forced to ask for more grants to build back from climate-fueled storms, floods and fires.
Liane Schalatek, who leads the Heinrich Boell Foundation’s work on climate finance, worries that—even though fund is officially independent—its interim secretariat could be overwhelmingly staffed by people coming out of multilateral development banks (MDBs), who sharing those institutions’ preference for loan-based aid and partnerships with the private sector. “That cannot be the operating model for a loss and damage fund,” she told me. “It’s important for it not to have a banking approach.” Instead, a loss and damage fun, she told me, needs to offer “largely grant-based support.”
Oxfam has found that upwards of 90 percent of the climate financing offered by multilateral development banks between 2019 and 2020 came in the form of loans. “If you’re doing everything like an MDB then you might as well have set it up under an MDB,” Schalatek added, reiterating that the fund will be officially under the auspices of the United Nations Framework Convention on Climate Change and the Paris Agreement.