After days of intense negotiations in Sharm el-Sheikh, countries at the latest UN Climate Change Conference, COP27, reached agreement on an outcome that established a funding mechanism to compensate vulnerable nations for ‘loss and damage’ from climate-induced disasters.

“This COP has taken an important step towards justice. I welcome the decision to establish a loss and damage fund and to operationalize it in the coming period,” UN Secretary-General António Guterres said in a video message, underscoring that the voices of those on frontlines of the climate crisis must be heard. The UN chief was referring to what ended up becoming the thorniest issue at this COP, shorthand for the annual Conference of Parties to the UN Framework Convention on Climate Change (UNFCCC).

Developing countries made strong and repeated appeals for the establishment of a loss and damage fund, to compensate the countries that are the most vulnerable to climate disasters, yet who have contributed little to the climate crisis.

Negotiators  at the summit agreed on a package of decisions that covered some of the most difficult items of the agenda, including a loss and damage facility – with a commitment to set up a financial support structure for the most vulnerable by the next COP in 2023 – as well as the post-2025 finance goal, and the so-called mitigation work programme, that would reduce emissions faster, catalyze impactful action, and secure assurances from key countries that they will take immediate action to raise ambition and keep us on the path towards 1.5°C.

Yet, while agreement on these issues was seen as a welcome step in the right direction, there appeared to be little forward movement on other key issues, particularly on the phasing out of fossil fuels, and tightened language on the need to limit global warming to 1.5 degrees Celsius.  

Observers have warned that new language including “low emissions” energy alongside renewables as the energy sources of the future is a significant loophole, as the undefined term could be used to justify new fossil fuel development against the clear guidance of the UN Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA). 

COP27 convened over 35,000 people, including government representatives, observers and civil society.