Why the loss and damage fund is a step in the right direction

The COP27 is introducing for the first-time measures on climate finance for vulnerable countries most affected by the climate crisis, the so-called loss and damage fund.

Related SDGs

The COP27 in Egypt has agreed to a ground-breaking deal introducing for the first-time measures on climate finance for vulnerable countries most affected by the climate crisis. The so-called loss and damage fund, which was first discussed at last year’s COP26 in Glasgow, will be ready for launch in 2023. While financial details still need to be decided on, its adoption marks a significant step in a decades-long discussion on how to compensate those that have already been severely impacted by the effects of climate change. In addition to establishing new funding arrangements as well as a dedicated fund, governments have agreed to establish a ‘transitional committee’ to make recommendations on how to operationalize both the funding arrangements and the fund at next year’s COP28.

But despite addressing some of the inevitable consequences of global warming so far, we think that the decisions to set up a loss and damage fund neither should nor will deflect attention from the importance of continuing the fight against climate change and urgent emission reductions. In fact, both should be viewed as two sides of the same coin.

Preventing global temperatures from rising further remains paramount

Although there had been fears in the run up of COP27 that it might be dropped, the target of preventing global temperatures from rising 1.5°C above pre-industrial levels was still mentioned in the final declaration. Having said this, the 1.5°C target is no end in itself but a necessity if humanity wants to avoid certain tipping points, beyond which life on earth would become so unbearable and no loss and damage fund regardless of its size cold make any difference.

The fight against climate change and its consequences are two sides of a coin

In our view, fighting the climate crisis and its consequences are two corresponding issues. Thus, many of the 17 Sustainable Development Goals (SDGs) of the UN Agenda 2030 and our derived investment themes touch both aspects. And investing in Climate Stability will comprise of companies that support renewable energies as well as those that help make cities resilient to the effects of climate change.

Helping those that are most affected

The effects of climate change can already be felt across the globe today, but particularly so in emerging countries (i.e., the recent floods in Pakistan, loss of monsoon or heat waves). Therefore, setting up a loss and damage fund is long overdue, but is only one element on the road to a more sustainable future. For instance, while developed economies may be able to switch to fossil-free energy production within a couple of years, for emerging economies this will be a much bigger challenge and require significant financial and technological support.

What can investors do?

By investing across a broad range of topics directly or indirectly related to climate change, we believe investors can make a real difference. The radiTheme Climate Stability encompasses three Sustainable Development Goals: SDG 7 addresses the provision of affordable and sustainable energy for all, SDG 11 aims to make cities and communities more resilient and sustainable, and SDG 13 aims to promote rapid action against climate change and its devastating impacts, which includes adaptation, climate policy and awareness-raising.

We at radicant believe, that to achieve these goals by 2030, we must all work together to change the way we live and mobilise capital for a sustainable world. #closethe2030gap.

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