Loss and Damage Fund

"Loss and damage" means the harm caused by climate change that cannot be avoided by cutting emissions (mitigation) or by adjusting to the changes (adaptation). Examples are homes washed away by a cyclone, farmland made salty by the sea, or an island community forced to leave its homeland. The Loss and Damage Fund, officially called the Fund for responding to Loss and Damage (FRLD), is a global fund under the UN climate system that gives money to vulnerable developing countries to recover from such harm. It was agreed at COP27 in 2022 and made operational at COP28 in 2023.

Why does it exist?

Think of climate action in three layers. Mitigation tries to stop the fire from spreading. Adaptation is like building a fire wall. Loss and damage is what is left after the fire has already burnt part of the house. Poor countries say they have done little to cause climate change, yet they face growing losses they cannot pay for.

Earlier climate funds, such as the Green Climate Fund, mostly paid for mitigation and adaptation, not for repairing damage already done. One widely cited estimate puts the economic cost of loss and damage in developing countries at $290 billion to $580 billion a year by 2030. The fund was created to fill this gap.

What kinds of loss and damage are there?

• Economic losses: things that have a market price, such as houses, roads, crops, livestock and income.
• Non-economic losses: things that cannot easily be priced, such as lives, health, culture, heritage, ancestral land and a sense of identity.
• Sudden-onset events: quick disasters, such as cyclones, floods and heatwaves.
• Slow-onset events: changes that build up over years, such as sea-level rise, glacier retreat, salt entering farmland and desertification.

Where did it come from?

The demand is more than 30 years old.

• 1991: Vanuatu, for AOSIS, proposed an international insurance pool to compensate small islands for sea-level rise. It was not included in the UNFCCC text of 1992.
• 2013, COP19 (Warsaw): the Warsaw International Mechanism (WIM) for loss and damage was set up. It works on knowledge, dialogue and support, but has no money of its own to give.
• 2015, Paris Agreement: Article 8 formally recognised the importance of averting, minimising and addressing loss and damage. But the COP decision adopting the Agreement (paragraph 51) states that Article 8 does not involve or provide a basis for any liability or compensation.
• 2019, COP25 (Madrid): the Santiago Network was created to connect developing countries with technical help on loss and damage. Its secretariat is hosted by the UN Office for Disaster Risk Reduction (UNDRR) and the UN Office for Project Services (UNOPS).
• 2022, COP27 (Sharm el-Sheikh, Egypt): countries agreed to set up new funding arrangements, including a dedicated fund, for loss and damage. A Transitional Committee designed it during 2023. The decision again said it is based on cooperation and facilitation and does not involve liability or compensation.
• 30 November 2023, COP28 (Dubai): on the very first day, countries adopted the plan that made the fund operational. Initial pledges of hundreds of millions of dollars were announced.

How does the fund work?

• Hosting: the World Bank hosts the fund as a Financial Intermediary Fund (FIF) and acts as its interim trustee (money keeper), at first for four years, until a decision by COP33 in 2028. The fund has its own independent secretariat.
• Board: a 26-member Board takes decisions: 12 members from developed countries and 14 from developing countries, including seats for SIDS and least developed countries (LDCs). The Philippines hosts the Board.
• Leadership: Ibrahima Cheikh Diong of Senegal became its first Executive Director from 1 November 2024.
• Who can get money: developing countries that are particularly vulnerable to the adverse effects of climate change.
• Who pays: the COP28 decision "urges" developed countries to contribute and "encourages" other countries to give voluntarily. So contributions are voluntary, not fixed shares.
• First phase, the Barbados Implementation Modalities (BIM): adopted in April 2025, it is a $250 million start-up phase for 2025 and 2026. It gives grants of $5 million to $20 million per country, with at least 50% set aside for SIDS and LDCs. The first call for proposals opened at COP30 in November 2025.

Where does it stand now?

As of 2025, about $768 million had been pledged, but only around $321 million had actually been paid in. The first call drew nearly 180 requests worth about $2.8 billion, more than ten times the money available. At its July 2026 Board meeting in Manila, the fund put off its first project approvals to its December 2026 meeting.

India's position and Indian examples

India strongly supported the decision to operationalise the fund at COP28. India's stand, based on the UNFCCC principle of Common but Differentiated Responsibilities (CBDR), is that the duty to provide climate finance lies with developed countries, which caused most past emissions. Some developed countries have argued that large emitters such as China and India should also pay.

India did not make a pledge in the initial round. India itself faces serious loss and damage from cyclones on its east coast, Himalayan floods and glacier changes, and sea-level rise in the Sundarbans.

Commonly confused concepts

• Mitigation vs adaptation vs loss and damage: mitigation cuts emissions; adaptation prepares for impacts (sea walls, drought-resistant seeds); loss and damage deals with harm that has already happened or cannot be avoided.
• Loss and Damage Fund vs Warsaw International Mechanism: the WIM (2013) is a knowledge and coordination body without its own money. The fund (2022/2023) actually gives money.
• Loss and Damage Fund vs Santiago Network: the Santiago Network gives technical help (experts, studies); the fund gives finance.
• Loss and Damage Fund vs Green Climate Fund (GCF): the GCF (set up in 2010) mainly finances mitigation and adaptation projects. The FRLD is only for responding to loss and damage.
• Loss and Damage Fund vs Adaptation Fund: the Adaptation Fund (set up under the Kyoto Protocol) pays for adaptation projects, not for recovery from damage already suffered.
• Compensation vs assistance: developing countries often frame loss and damage as climate justice. The official decisions use the language of "cooperation and facilitation" and expressly exclude liability and compensation.

Issues, criticism and the way forward

• Too little money: pledges of under $1 billion are tiny compared with needs of hundreds of billions of dollars a year.
• Pledged vs paid: a large part of the pledged money has not yet reached the fund.
• Who pays: there is no binding formula. Developed countries want a wider donor base; developing countries say this shifts the burden away from historical polluters.
• World Bank hosting: some developing countries worry about bank-style procedures, fees and slow access. Others say the Bank's systems give donors confidence.
• Reaching people: critics want money to reach affected communities quickly and directly, not only national governments.
• Way forward: suggestions include regular replenishment rounds, new sources of money (such as levies on aviation, shipping or fossil fuel profits), faster disbursement for disasters, and including non-economic losses.

Concepts to Know

• Mitigation: actions that reduce greenhouse gas emissions, such as using solar power instead of coal.
• Adaptation: actions that help people live with climate change, such as building cyclone shelters.
• Least Developed Countries (LDCs): the UN's group of the poorest countries, based on income, human assets and economic vulnerability.
• Financial Intermediary Fund (FIF): a fund where the World Bank keeps and manages money on behalf of other partners, while decisions are taken by the fund's own board.
• Trustee: a body that holds and manages money on behalf of others.
• Common but Differentiated Responsibilities (CBDR): the UNFCCC principle that all countries must act on climate change, but rich countries, which caused more past emissions, must do more.
• Atoll: a ring-shaped coral island or chain of islands around a lagoon, usually only a few metres above sea level.