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Your location: Home > Adaptation > Groups & Committees > Loss and Damage Executive Committee |
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Financial instruments
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Action Area 7 of the initial two-year workplan of the
Executive Committee:
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Encourage comprehensive risk management by the diffusion of information related to financial
instruments and tools that address the risks of loss and damage associated with the adverse effects
of climate change to facilitate finance in loss and damage situations in accordance with the policies
of each developing country and region, taking into account the necessary national efforts to
establish enabling environments. These financial instruments and tools may include: comprehensive
risk management capacity with risk pooling and transfer; catastrophe risk insurance; contingency
finance; climate-themed bonds and their certification; catastrophe bonds; and financing approaches to
making development climate resilient, among other innovative financial instruments and tools
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Active calls for input and invitations
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Relevant work undertaken under the UNFCCC
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●  Invitation to public institutions, funds and private investors to provide relevant
information on: (i) Efforts that your organization has undertaken or plans to undertake to
incorporate climate risk and resilience into development projects and into investment criteria and
decisions; (ii) Research and development efforts that your organization has undertaken on financial
instruments and tools that address the risks of loss and damage associated with the adverse effects
of climate change.
● Call for
inputs in response to the key messages in the context of Action Area 7 of the initial two-year
workplan, including making recommendations for addressing any gaps and challenges
● Call for
submissions on best practices, challenges and lessons learned from existing financial
instruments. See submissions received to date >>>
Please submit inputs to loss-damage(at)unfccc.int.
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● Side event
'Breaking new ground: Risk financing for slow onset events' (9 November 2017 during
COP23)
● Information paper on best practices, challenges and lessons learned from existing
financial instruments at all levels that address the risk of loss and damage associated with the
adverse effects of climate change (August
2016)
● 2016 Forum of
the Standing Committee on Finance on financial instruments that address the risks of
loss and damage (5–6 September 2016, Manila, Philippines)
● Technical
paper on gaps in existing institutional arrangements within and outside of the Convention to
address loss and damage, including those related to slow onset events (2012)
● Synopsis of the technical paper
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+Risk transfer and risk pooling
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Risk transfer and risk pooling schemes help risk holders (at the micro, meso, national, and
regional levels) to spread losses widely across time, stakeholders, and/or geographical areas
in the case of sovereign risk holders. Risk pooling enables risk holders to gain efficiency
by bundling risk which can take various forms like funds, reserves, index- based schemes etc.
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Financial instrument
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Submissions
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Relevant page numbers
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African Risk Capacity
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USA (212 kB)
CIGI (1447 kB)
EU (128 kB)
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pages 3-4
pages 4-6
pages 8-9
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Africa Disaster Risk Financing Program
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EU (128 kB)
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page 11
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Caribbean Catastrophe Risk Insurance Facility
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GFDRR (242 kB)
CIGI (1447 kB)
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page 4
pages 4-6
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Climate Insurance Fund
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EU (128 kB)
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page 10
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Conditional Cash Transfer
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UNDP (296 kB)
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page 2
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Disaster Risk Financing Analytics
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EU (128 kB)
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pages 10-11
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FoodSecure
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WFP (194 kB)
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pages 3-5
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Global Index Insurance Facility
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EU (128 kB)
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pages 11-12
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Impact Insurance Facility
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ILO (117 kB)
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pages 1-6
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InsuResilience
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EU (128 kB)
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page 7-8
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Livelihood Protection Policy
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MCII (800 kB)
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page 4
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Livelihood Recovery Package
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CARE International (497 kB)
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page 9
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Loan Portfolio Cover
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MCII (800 kB)
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pages 3, 5-7
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Pacific Catastrophe Risk Insurance Pilot
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GFDRR (242 kB)
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page 3
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Turkish Agricultural Insurance System
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Turkey (202 kB)
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pages 3-4
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Village Saving Loans Associations
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CARE International (497 kB)
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pages 2-3, 6-7
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Additional relevant information
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Information paper (578 kB) (pages 6-8, 15,17,20)
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General description
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Comprehensive Risk Management
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Insurance
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Case studies
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+Catastrophe risk insurance
+Catastrophe bonds
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Catastrophe bonds, also known as cat bonds, are high-yield debt instruments which are usually
insurance-linked, in order to secure cash flow in case of a disaster to those most exposed
and at risk of severe financial losses as a result of the changing climate. They include a
special condition that states that if the issuer suffers a loss from a particular pre-defined
catastrophe, then the issuer's obligation to pay interest and/or repay the principal is
either deferred or completely forgiven.
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Financial instrument
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Submissions
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Relevant page numbers
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Caribbean Catastrophe Risk Insurance Facility
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GFDRR (242 kB)
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page 4
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MultiCat Program
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GFDRR (242 kB)
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page 2
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Additional relevant information
+Social protection schemes
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Social protection involves interventions from public, private, voluntary organizations, and
social networks, to support individuals, households and communities in preventing, managing,
and overcoming the hazards, risks, and stresses threatening their present and future
well-being. Schemes can include the provision of safety nets in the case of both extreme and
slow onset climate-related events, through conditional or unconditional cash transfers
or food or cash-for-work programmes. They are usually channeled through national
government funds.
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Financial instrument
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Submissions
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Relevant page numbers
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Conditional cash transfer
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UNDP
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pages 2-3
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Community self-management
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CARE International (497 kB)
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page 6
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Social security schemes
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EU (128 kB)
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page 5
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Additional relevant information
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Information paper (578 kB) (pages 9-10, 23-24)
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General description
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FAO (222 kB) (pages 4-5)
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IAA (297 kB) (page 4)
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Examples
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EU (128 kB) (pages 3, 9-10)
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+Innovative financial instruments
Abbreviations used: European Union (EU), United States of America (USA), CARE International
(CARE), Centre for Climate Change Economics and Policy/Grantham Research Institute on Climate Change and
the Environment (CCCEP), Centre for International Governance Innovation (CIGI), CINCS LLC, Climate Action
Network International (CAN), Climate and Development Lab, Brown University/International Centre for Climate
Change and Development (CDL/ICCCAD), Climate Bonds Standard, Food and Agriculture Organization of the
United Nations (FAO), Global Facility for Disaster Reduction and Recovery/the World Bank Group (GFDRR),
International Actuarial Association (IAA), International Labour Organization (ILO), Loss and Damage
Network, Munich Climate Insurance Initiative (MCII), United Nations Development Programme (UNDP), Vivid
Economics, and World Food Programme (WFP).
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Inputs received further to the
invitation to public institutions, funds and private investors
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