1st meeting of Lost, Damage Fund Board adopts key decisions

First meeting of the loss and damage fund board held recently.

Kathmandu, 9 May (Prerna Bomzan):  The highly anticipated first meeting of the Board of the Fund for responding to Loss and Damage, which convened from 30 April to 2 May in Abu Dhabi, UAE, successfully adopted a host of key decisions on its final day.

The two urgent decisions – selection of the host country of the Board and matters related to operationalisation of the Fund as a World Bank-hosted financial intermediary fund (FIF) – marked a prominent start to initiate the Fund’s operationalisation process (See TWN Update).

Led by newly elected Co-Chairs Richard Sherman (South Africa) and Jean-Christophe Donnellier (France), the other decisions adopted were: selection of the Executive Director for the Fund; status of resources; additional rules of procedure; arrangements for observer participation, administrative budget of the interim secretariat and of the Board; workplan of the Board for 2024; and dates and venues of upcoming meetings.

The travel policy and name of the Fund listed in the provisional agenda were removed since the two issues were not considered “ripe enough” for the meeting, as stated by Co-Chair Donnellier (France), who further informed that the issues required more discussion in their respective constituencies in order to come up with a proposal going forward.

(The name of the Fund interestingly is known to be a critical issue, in particular, with the United States’ proposal as “Resilient Futures Fund” at the transitional committee negotiations last year, signalling its intention of disassociation with any past historical responsibility and liability in the loss and damage negotiations.)

(Note: All nine adopted decisions with relevant annexes are not yet published online. The draft decisions were restricted documents [limited to Board members only], displayed only on screen during consideration and final adoption by the Board.)

Selection of the Executive Director for the Fund

On day one, Co-Chair Donnellier (France) introduced the open session with the World Bank (WB) stating that given a FIF Fund, there was the issue of dealing with the “double” nature of the Executive Director (ED) appointed by the Board, as also part of the human resources of the WB, and hence alignment with and incorporation of WB policies and rules on the ED selection.

In responding to the Board’s invitation on the issue, Renaud Seligmann, headed the WB delegation to the meeting, stated that the ED is “accountable to the governing bodies” of the FIF and although selected ultimately by the Board, the ED will still hold the WB contract as an employee. He pointed out that the WB also has to have a say to ensure due process is followed and that the person can meet the human resources criteria. He highlighted that the ED’s terms of reference (ToR) needs to be shared with the WB to ensure it is standard criteria for recruitment. There was also the issue about the “grade” level of the ED to be agreed by the Board, which requires the WB to place the position in its grading structure.

A key point of contention emerged over the selection process when Seligmann mentioned that the selection panel will be “traditionally co-chaired” by a representative each from the Board and the WB who will consult with members, to generate ownership of the process. The WB representative would ensure that due process is followed on the issue.

Following the WB presentation, Donnellier proposed to mandate an “informal taskforce” of volunteers to work with the WB team in order to come up with a ToR for ED selection, as well as the format of the process for consideration of the Board. The Co-Chairs had initially intended to propose a draft decision to nominate a committee to deal with the issue.

Mohamed Nasr (Egypt) strongly objected to the WB co-chairing the whole selection process and for it to have veto power on the names of the candidates, which would essentially render the Board with no role in the selection process. He also made clear that the grading level of the ED is already outlined in the Fund’s Governing Instrument (GI).

Further, Mohammad Ayoub (Saudi Arabia) requested for a closed session that would enable a more fluid technical discussion with the WB. He did not agree to the proposed informal taskforce arrangement pointing out that the relationship of the Board with the WB is not yet legally recognised.

Abdulla Ahmed Balalaa Al Harthi (UAE) stressed on transparency of the selection criteria as well as on inclusivity of the criteria, which should also extend to the committees as working modalities. He emphasised to set a deadline for the selection of the ED whose appointment is a critical role, for the operationalisation of the Fund.

Seligmann maintained that it is important for the WB to be involved in the selection process as a co-chair. He made clear that their senior management will have to appoint the person, given that the ED would have a WB contract, and it needs to be “comfortable” with the selection.

On the way forward Donnellier informed that the Co-Chairs would come back with a new proposal after consultations within each constituency.

On the second day, the Board had a closed session with the WB. It is learnt that the WB assured of playing a facilitating, secretarial role without any “undue influence” in the process, which was essentially a key concern of many developing country members. It also maintained its inclusion in the selection panel, reiterating that its senior management needs to be “comfortable” with the candidate/s.

Following discussion with the WB, the Board proceeded to adopt a decision to establish an “ad hoc committee on the selection of the Executive Director for the Fund” composed of 10 members, five each from the two constituencies.

The decision referenced the background paper and its addendum prepared by the secretariat. It mandated the following immediate tasks for consideration and approval by the Board, with WB inputs as appropriate: (i) draft ToR for the ED; (ii) draft selection process for the ED including the timeline for the advertisement and shortlisting of candidates; (iii) draft ToR for a human resources search firm to support the work of the subcommittee; (iv) draft ToR of the subcommittee for its work after the first Board meeting.

On the final day, a decision was adopted on “Terms of reference for the ad hoc subcommittee on the selection of the Executive Director for the Fund”, with the ToR contained in the annex of the decision.

By decision, the Board requested the subcommittee to “prepare with the engagement with the World Bank, for consideration and approval at its second meeting:

(a) the draft terms of reference for the Executive Director of the Fund;

(b) the draft selection process for the Executive Director of the Fund, including the timeline for the advertisement for and shortlisting of candidates;

(c) the draft terms of reference for a human resources search firm to support the work of the Committee”.

Prior to the adoption of the decision, commenting on the role and functions of the subcommittee contained in the ToR, Nasr (Egypt) suggested a language amendment to the last function reading  “implement the selection process adopted by the Board” to “implement the selection process adopted by the Board, with the aim of providing eligible candidates for the consideration of the Board” which was supported by Ayoub (Saudi Arabia), Laurence Ahoussou (Canada), Sebastian Lesch (Germany), Elena Pereira (Honduras) and Sumaya Zakiedeen (Sudan) and captured as final language.

He also urged to add “two” co-chairs for the committee to ensure balance of the two constituencies which was seconded by Djibril Ibila (Benin), Maheshwar Dhakal (Nepal), Pereira (Honduras), Zakiedeen (Sudan) and Al Harthi (UAE). Most developed countries stated that they did not find it necessary to have two co-chairs and that one co-chair would suffice. The final decision was to have two co-chairs.

Status of resources

On day two, Donnellier opened the meeting for comments on the background paper by the interim secretariat which provided the status of pledges (in a table) as of 12 April 2024 standing at USD 661.39 million. Together with USD 131 million for funding arrangements, pledges amounted to the equivalent of USD 792 million. On the status of funds received, the interim secretariat informed that it had already received the sum of USD 10 million pledged by Japan, as a contribution to support the activities of the secretariat.

Jose Delgado (Austria) informed that Austria’s pledge of EUR 10 million to the Fund is not listed in the table of pledges, further sharing about Luxembourg’s pledge of EUR 8 million.

Nasr (Egypt) said that if a decision is for consideration, then there is need to include language on encouraging potential pledges as well as on the process moving forward from pledges to contributions, which the WB had informed the Board on options. Nasr was supported by David Kaluba (Zambia) and Pereira (Honduras), the latter stressing on the “grant” element of the pledges. Kaluba also mentioned that the decision should appreciate developing countries who are contributing as well. Ibila (Benin) underlined the need for fulfillment of the pledges.

Rebecca Lawlor (United States) agreed with Kaluba, and proposed including “developed” and “developing countries” in the decision, and further noted that in the absence of a trustee account, there was no point of converting pledges into contributions. Later, Atsushi Kato (Japan) echoed as well on the need for legal capacity of the Board in this regard.

Nasr (Egypt) reiterated that the WB has highlighted as the option of converting pledges to contributions and he also emphasised on the need for grants as well as in avoiding the earmarking of funds.

Ayoub (Saudi Arabia) reminded that any decision language must be consistent with the UNFCCC and the Paris Agreement. He suggested listing contributors in order of most to least contributions in the decision.

On the final day, two sticky issues almost derailed the decision on the matter viz. on (i) inclusion of “developed and developing countries” in the decision in relation to pledges and (ii) inclusion of language on “encourages further pledges to the Fund.”

On the first issue which was proposed by Lawlor (United States), it was a sensitive issue, given tough transitional committee negotiations on the “differentiation” element of the two group of countries which was recalled by Ayoub (Saudi Arabia), who called for its deletion. On the second issue, Ayoub made it clear that either the language has to read about the conversion of pledges or be consistent with paragraphs 12 and 13 of the COP.28/CMA.5 decision and the GI (which provides for developed countries obligations).

The final adopted decision on status of resources, “acknowledges and welcomes the pledges received to date, acknowledges the role of the COP28 Presidency in this regard, and welcomes contributions by the Government of Japan for the operation of the interim secretariat”. It also “notes the information provided by the World Bank regarding options for transforming pledges into contributions” and “requests for status reports by the interim secretariat on progress in this regard”.

The language on “encourages further pledges to the Fund” was removed from the final decision.

Additional rules of procedure

On day one, Co-Chair Sherman (South Africa) introduced the background paper by the interim secretariat and the proposed draft decision on the establishment of an ad hoc subcommittee and its ToR on the issue.

Under this agenda item, Nasr (Egypt) also raised the issue of addressing the European Union (EU) seat on the Board, represented by the European Commission, which he said is a deviation from the Fund’s GI, where the Board composition provides for a “country” member whereas the EU is a Party. This, he said, carried implications on voting and the double counting when both the EU, composed of its 27 member states, as well as its other members in the Board would exercise their votes.

Marjeta Jager (EU) stated that the EU is a Party to the Convention and the Paris Agreement and that the EU pledge is done by the EU budget and its implementation is under the responsibility of the European Commission.

The other matter raised by Ahoussou (Canada) was the role of “observers” on the issue and the need to include them in the decision, which was supported by Lawlor (United States). In response, Ayoub (Saudi Arabia) and Peter Abraham Jr (Antigua and Barbuda) stated about working on it with a language proposal.

The next day, the final decision was adopted on the “Establishment of ad hoc subcommittee on Additional Rules of Procedure of the Board”, comprising ten members, five each from the two constituencies.

The subcommittee was mandated to prepare the draft rules of procedure in consultation with “Board members and alternate members” and “recommend” the draft for the Board’s consideration “not later than the second meeting of the Board”. It will also “invite views from UNFCCC accredited observers on relevant provisions of the draft rules of Procedure”.

Arrangements for observation participation

At the outset, during the opening of the meeting, Co-Chair Sherman (South Africa) reminded the Board to take an immediate decision for the participation of observers in the meeting, on webcasting and an invitation to one observer from each of the UNFCCC constituencies in the Board room.

He further informed that the Co-Chairs will consult with civil society organisations in relation to enhancing their participation in the process. He assured that there would be “no backtracking” from the provisions of the Fund’s GI.

The revised provisional agenda included the “dialogue with the civil society” in addition to the other dedicated agenda item “arrangements for observer participation in the Board meetings”.

At the dialogue on day one, Board members provided comments upon hearing from the observer constituency representatives, which pertained to more of participation of representatives from climate-induced migrants and other affected communities facing different types of loss and damage. There was also the issue about more representation from the global South. The issue about clear separation between the Board and the observers was also put to the observers for comments.

The next day, the draft decision on “Arrangements for Observer Participation in Board Meetings” was discussed. Sherman also reported back on their lunch meeting with the observers sharing their general approach in the activities of the Fund. In terms of interventions, two representatives would speak on each agenda item.

Nasr (Egypt) pointed out that there was no priority given to developing country voices, which needs to be clearly reflected. Ayoub (Saudi Arabia) also emphasised on observer organisations with particular focus from the global South, touching on the need for their travel support.

On the final day, a decision was adopted on “Arrangements for Observer Participation in Board Meetings” referencing the background paper by the interim secretariat.

The decision mandates the interim secretariat to prepare three papers: a paper on the “participation of active observers in Board meetings and related proceedings” (paragraph 20 of GI) for consideration by the Board at its “second” meeting; a paper on an “observer accreditation process” (paragraph 27 of the GI) for consideration by the Board at its “third” meeting; and a paper on the “establishment of consultative forums” (paragraph 28 of the GI) for consideration by the Board at its “fourth” meeting.

The decision further requests the interim secretariat to consider the views expressed in the first meeting in preparing the three papers, as well as to “reflect adequate and enhanced representation of observers from developing countries”. (The word “equitable” was replaced by “enhanced” to highlight and denote “more” representation from developing country observers which was underscored by Nasr, Zakiedeen, and Ayoub).

Additionally, a footnote was added to paragraph (a) of the decision which now reads:

Paragraph (a):  “Underscores the importance of inviting the views of accredited UNFCCC observers in Board deliberations on matters relating to provisions of the Governing Instrument on the role of stakeholders in the work of the Board”. Footnote: “deliberations under other agenda items may expand the scope of stakeholders to be invited to provide views”.

The footnote solution was proposed by Nasr (Egypt) responding to comments from Lawlor (United States) that observers need to be broader than the accredited ones to the UNFCCC. He reminded that the issue of observers is also being dealt under the additional rules of procedure; so the proposed footnote is a reflection of any update under other agenda items, which was seconded by Ibila (Benin) and also agreed to by Lawlor.

Upon adoption of the decision, Ayoub (Saudi Arabia) made a statement on the record underlining the need to have more representation from developing country observers as well as the need to ensure that the seats are shared by the observer representatives.

 Administrative budget

The adopted decision on “Administrative Budget of the Interim Secretariat and of the Board”, approved USD 162,168 for the Board; USD 2,627,177 for the interim secretariat; and USD 914, 262 as a contingency budget.

Workplan of the Board for 2024

This agenda item was only opened on the final day and after much deliberations on the different priority issues by members, also having considered the background paper by the interim secretariat, a final decision was adopted on “Workplan of the Board for 2024”, which lists the following issues to “prioritise work” on during the “second meeting”:

(i) Selection of the ED of the Fund; (ii) Additional rules of procedure; (iii) Matters relating to the operationalisation of the WB-hosted FIF; (iv) Access modalities, including in relation to the development of indicators and triggers to clarify access, and operational modalities for the Fund, including a functional equivalency framework; (v) Financial instruments, modalities and facilities; (vi) Arrangements for establishing and operationalising the annual high-level dialogue; (vii) Participation of active observers in the Board meetings and related proceedings; and (viii) Issues under consultations by the Co-Chairs.

The footnote to “Issues under consultations by the Co-Chairs” reads: “Travel policy and name of the Fund and other items under Co-Chairs’ consultations”.  The “other items” denotes the contentious issue about the EU seat in the Board which Nasr (Egypt) reiterated and reminded as an issue under consultations.

The decision also “requests the Co-Chairs to present a workplan for 2024 with a clear sequence and specific milestones, for adoption by the Board at the second meeting of the Board…..”.

Dates and venues of upcoming meetings

Prolonged discussion ensued on the dates and venues of the upcoming second, third and fourth meeting in the year based on the options provided in the background paper on the workplan for 2024.

The final decision adopted “welcomes the offers from the Philippines and the COP29 Presidency to host meetings of Board” and “requests the interim secretariat to consult with the COP29 Presidency to identify a suitable location in Azerbaijan for the third meeting of the Board, and to conclude the necessary arrangements for the hosting of the meeting, if possible”.

The dates of the upcoming three meetings this year are decided as follows: second meeting (9-12 July); third meeting (15-19 September); fourth meeting (2-5 December).

The decision further “requests the interim secretariat, in consultation with the Co-Chairs, to identify suitable venues for hosting the remaining meetings for the year”. – Third World Network