Loss and damage protection Global Shield against Climate Risks

As a result of climate change, extreme weather events such as floods and droughts are becoming stronger and more frequent. Particularly vulnerable people and countries need to get better protection against damage caused by climate change-induced extreme weather events. They are calling for support from the industrialised countries, which have largely contributed to climate change. That is why the G7 and the V20 (Vulnerable Twenty, an alliance of countries particularly vulnerable to climate change) have agreed to set up a Global Shield against Climate Risks.

The Shield saw its official launch at COP27 on 14 November 2022. It assists people and countries that are particularly affected by climate change in improving their financial protection against climate risks. The Global Shield began its work in eight “pathfinder countries” and one region. After the 2022 global climate conference (COP28), other interested countries are invited to apply to be considered for support from the Global Shield via a selection process.

Climate-related disasters have devastating impacts on poor people in particular. They often do not have the means to protect themselves and their homes, fields or businesses against extreme weather and can lose their entire possessions when a disaster strikes.

Svenja Schulze Federal Minister for Economic Cooperation and Development

Dealing with loss and damage

A road in the Caribbean nation of St Lucia was washed away after heavy rain.

The countries of the Global South are the ones worst affected by the consequences of climate change and they often do not have the resources needed to protect their citizens from their impacts.

This challenge is discussed at international climate negotiations under the heading of Loss and Damage. The focus of the discussion is on ways the people and countries that are particularly vulnerable to climate change can be supported financially and technically in dealing with loss and damage.

Parties at COP28 in Dubai agreed the framework for a global support structure for especially vulnerable developing countries. A new fund was established that will play a key role in the support architecture. “Funding arrangements”, both existing and yet to be established instruments for dealing with loss and damage, will also play an important role. The right combination of the fund and the funding arrangements can close protection gaps in national strategies for dealing with loss and damage. The Global Shield against Climate Risks, which constitutes a funding arrangement especially for an approach to extreme weather events, has already done important work to pave the way for this.

Germany is very engaged in (further) developing support programmes for dealing with climate-related damage, with a view to providing protection against climate risks for as many people as possible.

Developing country protection packages

Through its integrating and needs-oriented approach, the Global Shield against Climate Risks helps vulnerable countries to develop viable long-term protection and preparedness measures against climate risks.

The focus is on quick support through pre-arranged finance, in combination with contingency plans drawn up by developing countries. As a result, people and authorities will be able to access the assistance that they urgently need more easily and more quickly when disaster strikes.

In order to ensure that available mechanisms are carefully tailored to the financial needs of the countries in question, comprehensive country protection packages are developed under the Shield. This involves carrying out an in-country analysis and consultation process together with the partner government and further key stakeholders (civil society, private sector, international organisations, bilateral development agencies, research institutions). By analysing climate risks and the climate risk management activities that already exist, the process identifies protection gaps. On that basis, a protection package is developed.

Closing protection gaps

The funding and capacity for implementing the financing measures are provided by the Financing Structure under the Shield, which includes the Global Shield Solutions Platform (GSSP), the Global Shield Financing Facility (GSFF) and the Joint Multi-Donor Fund of the Climate Vulnerable Forum (CVF) and the V20 group.

The Global Shield ensures that the various programmes and stakeholders pursue a coordinated approach, and it mobilises additional funds to meet the growing need for financial resources.

Together with France, Ireland, Denmark, Canada, the US, Japan, Luxembourg and the Commission of the European Union, Germany supports the Global Shield. In total, Germany has so far invested about one billion euros in climate risk financing and insurance.

Still from the BMZ video: Protecting against losses and damages: The Global Shield against Climate Risks — Video: Protecting against losses and damages: The Global Shield against Climate Risks

Financial protection and contingency plans

Various instruments are available that can be used to help disburse money quickly to governments and to particularly vulnerable people when a disaster occurs.

They include, for example, social protection systems, designated disaster reserves in public budgets, loans from multilateral development banks that are disbursed in an emergency, and government bonds for which repayment can be reduced or suspended in a disaster situation. Insurance against rare events with the potential to cause a huge amount of damage can also be a useful instrument.

The basis is provided by contingency plans that a country draws up after analysing its own climate risks. Where are the biggest risks? What efficient protection and preparedness systems are needed to mitigate these risks?

Swift action reduces follow-on costs

Governments can use these preparedness mechanisms after climate-related damage has occurred to quickly restore the foundations for economic and social activities for the population. This fast response is very important because, if particularly vulnerable people do not get quick support when a disaster strikes, there can be long-term consequences. They may be forced to use the money that they have put to one side for investments to buy food instead. Or they may have to sell their tractor instead of using it to replant their fields. The children of these families are often not able to stay in school, because their parents are no longer able to pay the school fees or because they must work in order to contribute to the household income.

The Global Shield against Climate Risks will help to reduce the follow-on costs of disasters, accelerate economic recovery and avert the danger of people sliding into poverty.