Climate Damage Fund Arrangement Sketched out Before COP28, as World Bank Prepares to Preside, Amidst Controversy
The Loss and Damage Fund, a significant outcome of the 27th Conference of the Parties (COP27) in 2022, marks a significant step towards addressing the impacts of climate change on vulnerable countries. Here's an update on its status and operationalization.
At COP27, the decision to establish the fund was hailed as a breakthrough, reflecting years of efforts by small islands and other at-risk nations to elevate the issue of loss and damage in international climate negotiations. As of mid-2025, the fund had received pledges totaling $768 million from primarily developed countries, with about $339 million having been paid. This is significantly below the estimated annual needs of developing countries.
Moving forward, at COP28, parties adopted decisions to operationalize the fund, including announcing initial capitalization pledges. The Board of the Fund for responding to Loss and Damage (FRLD) has been working on laying the institutional foundation of the fund, focusing on balancing foundation-building with delivering finance for loss and damage.
The Barbados Implementation Modalities (BIM) were established, outlining a set of interventions for 2025 and 2026, totaling $250 million. This includes procedures for decision-making and policy frameworks to underpin the fund's operations.
However, challenges remain. Critics argue that the decisions made will undermine the Fund's ability to meet the needs and priorities of affected peoples and communities of the Global South, potentially reaching trillions of dollars a year by the end of the current decade. Developing nations have built up mistrust in rich countries due to years of unmet financial pledges, including a 2009 pledge to deliver $100 billion annually by 2020 that remains unmet.
Developing countries have argued that industrialized nations, responsible for about 80% of historical greenhouse gas emissions, should pay for the damage they caused. Lien Vandamme, Senior Campaigner at the Center for International Environmental Law (CIEL), believes the Fund fails to deliver on justice, equity, and human rights. Vandamme stated that the continued denial by wealthy historic polluters of their responsibility to pay for climate harms is out of touch with reality.
The agreement includes a provision making payments to the Fund voluntary, which has drawn criticism from developing nations and climate justice advocates. The Transitional Committee, consisting of 24 members, agreed upon a framework for an international fund for climate-ravaged countries. The US pushed for the World Bank to host the Fund on a four-year interim basis, but developing nations initially expressed opposition to the idea.
All eyes are now on world leaders and negotiators who will take up the Committee's recommendations at COP28, set to begin on November 30 in Dubai. The agreement will be sent to COP28 negotiators, and the critics argue that these decisions will be crucial in determining the Fund's ability to meet the needs of the most vulnerable countries.
As the Loss and Damage Fund moves towards operationalization, the question of sufficient funding and equitable distribution of resources remains a pressing concern. The Fund is intended to help vulnerable countries deal with harm caused by global warming, and it is crucial that it lives up to its promise.
[Image: Flickr/COP28 UAE]
For more on COP28 and the expectations and necessary actions, read our article, "What Can We Expect From COP28, And What Must Happen?".
- The Loss and Damage Fund, a significant outcome of COP27 in 2022, is a step towards addressing climate change impacts on vulnerable countries, with $768 million pledged as of mid-2025, but significantly below the annual needs of developing countries.
- At COP28, parties aim to operationalize the fund, announcing initial capitalization pledges, and the Board of the Fund for responding to Loss and Damage (FRLD) is working on laying its institutional foundation.
- Challenges remain, as critics argue that decisions made could undermine the Fund's ability to meet the needs and priorities of affected peoples and communities of the Global South, potentially reaching trillions of dollars a year by the end of the current decade.
- Developing countries contend that industrialized nations, responsible for about 80% of historical greenhouse gas emissions, should pay for the damage they caused, and question the voluntary payments provision in the agreement.
- Climate justice advocates believe the Fund fails to deliver on justice, equity, and human rights, as the continued denial by wealthy historic polluters of their responsibility to pay for climate harms is out of touch with reality.
- As the Loss and Damage Fund moves towards operationalization, questions regarding sufficient funding and equitable distribution of resources remain pressing concerns, and it is crucial that the Fund lives up to its promise in helping vulnerable countries deal with harm caused by global warming.
