This paper explores options for loss and damage (L&D) finance under the current and proposed mechanisms of the United Nations Framework Convention on Climate Change and is complemented by a prior paper on The Institutional Ecosystem for L&D. There are a number of drawbacks and benefits to the process of establishing a dedicated L&D finance facility. Challenges include limited time, cost effectiveness, duplication of efforts, and continued political sensitivities to the issue. On the other hand, the benefits of a dedicated L&D finance facility include broadening political support, filling existing finance gaps, avoiding finance constraints, deepening understanding of the issue, and providing more consistent funding.
This paper lists some of the drawbacks and benefits of establishing a dedicated L&D finance facility, weighs the two main options for addressing L&D finance, and outlines key considerations for establishing a L&D finance facility.