Delegates from 200 countries concluded COP27 yesterday with a landmark agreement to create a historic loss and damage fund, helping vulnerable countries cope with climate disasters triggered by developed countries’ emissions, the COP27 presidency said in a statement (pdf).

The agreement will see developed countries pledge funds to “save lives and livelihoods from climate change related disasters” in climate-affected countries, the statement said.

The caveats: The details for the fund — including who will pay into it, who will be eligible to receive the funds, and how it will operate — have yet to be determined. A transitional committee is set to dot the i’s and cross the t’s over the next year, with the first meeting expected to take place before the end of March 2023, according to a statement.

The loss and damage fund is a significant achievement, insiders tell us: “Climate vulnerable countries demand hundreds of USD bns in climate reparations, while only hundreds of USD mns have been pledged,” general partner at the Climate Resilience Fund Hossam Allam tells Enterprise Climate. Still, “the recognition that polluting countries owe climate-damaged ones reparation is a major step forward,” he adds.

It still may not be enough: Developing countries need some USD 1.7-3.4 tn in climate finance annually for climate action, but financing currently stands at less than USD 425 bn, the IFC’s VP of cross-cutting solutions Emmanuel Nyirinkindi told Enterprise Climate on Friday. “We’re still very far away from what’s required,” notes Khalid Hamza, head of Egypt at the EBRD.

THE HOST COUNTRY TOOK HOME A “W”-

Egypt’s NWFE energy pillar could provide a model for unlocking private sector finance: The USD 500 m in low-cost, concessional funding committed to the energy pillar of Egypt’s Nexus on Water, Food and Energy (NWFE) initiative is expected to unlock over USD 10 bn in private sector finance for renewable energy plans and investments, EBRD’s Hamza tells Enterprise Climate. Both US President Joe Biden and climate envoy John Kerry noted that this is replicable and a very significant outcome of COP27, he adds. “At least there’s a good example of how to approach these issues, which is basically to think very hard about the key impediments to unlocking private sector funding,” Hamza adds. The decarbonization-focused NWFE program secured nearly USD 10 bn in funding pledges.

Other substantial funding agreements secured by Egypt include:

• Egypt and Germany inked nine agreements worth EUR 160 mn — with much of this earmarked for climate-friendly projects.
• Egypt now needs to lock in funding for the green hydrogen and wind power projects worth up to USD 119 bn that it signed initial agreements for during COP27. (Reality check: The nature of a land grab is that not every plot will be settled. It will not be surprising if a good chunk of this figure ultimately doesn’t materialize.)
• The EBRD will provide a USD 80 mn loan to get Egypt’s Fertiglobe-Scatec-OC-SFE ammonia plant up and running.
• Egypt will see some funding from the World Bank’s Climate Investment Funds out of the USD 350 mn it has pledged to invest in sustainable agriculture in emerging markets.

OTHER BIG AGREEMENTS-

#1- The US, EU and other countries, as well as MDBs, stepped up on adaptation funding:

• Half of the USD 32 bn committed in climate finance by the World Bank over the past year will be allocated to adaptation, according to president David Malpass.
• The Netherlands will contribute EUR 1.8 bn by 2025 to emerging markets and over EUR 100 mn to the Africa Adaptation Acceleration Program.
• France, Germany, the Netherlands and Denmark — will provide over EUR 1 bn for climate adaptation in Africa, as a “starting point,” EU climate policy chief Frans Timmermans said last week. Other EU countries might join in later, said Timmermans.
• The US doubled its pledge to its “adaptation fund” for poorer countries to USD 100 mn, and pledged a further USD 150 mn to support climate change efforts in Africa.
• The UK is investing over GBP 100 mn to help developing countries implement climate change adaptation measures.

#2- Funding pledges for resilience or climate disasters fared well:

• More than 85 African ins. companies have joined forces to create the African Climate Risk Facility (ACRF) to underwrite USD 14 bn of cover for climate risk by 2030.
• G7 countries announced a EUR 210 mn “Global Shield” initiative that will pay out ins. to the V20 group of 58 nations most vulnerable to climate change — of which Lebanon, Morocco, Palestine, Tunisia, and Yemen are all members.
• The Coalition for Disaster Resilient Infrastructure launched a USD 50 mn multi-partner Infrastructure Resilience Accelerator Fund to provide technical assistance and capacity building for emerging economies.
• UK Export Finance will provide sovereign loans with Climate Resilient Debt Clauses for climate-vulnerable nations, allowing low-income countries and small island developing states the chance to defer debt repayments in the event of severe climate shocks or natural disasters.

#3- There were large multi-year pledges for general climate finance:

• The UAE-based bank Mashreq plans to increase its sustainable financing to USD 30 bn by 2030.
• The Arab Coordination Group — a “strategic alliance” of regional development funds and the OPEC Fund for International Development that coordinates climate finance — pledged to provide at least USD 24 bn in climate finance by 2030.
• The EBRD and EU signed an agreement with QNB Al Ahli to provide USD 20 mn in on-lending for youth-led green MSMEs under the Green Economy Financing Facility.
• The African Union, African Development Bank Group and Africa50 launched the Alliance for Green Infrastructure in Africa, committing some USD 500 mn in funding to help deliver another USD 10 bn in capital for green infrastructure projects on the continent.

#4- Decarbonization saw funding pledges in the USD bns:

• KSA is contributing USD 2.5 bn to its Middle East Green Initiative in the next decade.
• The International Renewable Energy Agency closed in on its USD 1 bn funding goal for its Energy Transition Accelerator Financing platform.

#5 Food security saw some of the biggest global investments:

• The US-UAE Agriculture Innovation Mission for Climate (AIM for Climate) doubled its investment commitments to USD 8 bn (pdf) and increased its scope.
• The IFC is launching a USD 6 bn global food security platform, targeting some at-risk Arab countries including Yemen, Iraq, Lebanon, Libya and Tunisia.
• The European Investment Bank (EIB) will lend the UN’s International Fund for Agricultural Development EUR 500 mn to onlend to small-scale farmers.

#6- And the region is getting in on carbon markets and credits:

• Egypt launched a USD 1 bn carbon market fund to invest in low-carbon projects that issue carbon credits.
• The EGX announced the launch of Africa’s first voluntary carbon market in mid-2023.
• US climate envoy John Kerry announced a new carbon offset plan — dubbed Energy Transition Accelerator (ETA) — to allow companies to claim carbon credits by investing in renewables projects in global growth markets.

CORRECTION- 4 December, 2022

An earlier version of this story incorrectly stated that the loss and damage fund will see pay-ins of USD 100 bn per year. The financial details of the fund have yet to be determined.