The ‘loss and damage’ (L&D) fund

The ‘loss and damage’ (L&D) fund


Addressing a three-decade-old demand for climate justice, the ‘loss and damage’ (L&D) fund during the COP28 climate talks was initiated.

  • This fund, consisting of financial resources and technologies, aims to assist developing countries in dealing with the unavoidable impacts of climate change.
  • Despite the optimism surrounding its operationalization, challenges persist. The World Bank will host the fund for an interim period of four years, raising concerns about significant overhead fees.
  • Additionally, committed amounts from certain countries, totaling $450 million, fall short of the actual demand, especially given the backdrop of developed countries failing to meet their 2020 climate finance promises.


GS – 03 (Environmental Pollution, International Treaties & Agreements, Government Policies & Interventions)


Loss and Damage’ (L&D) fund, Conference of the Parties 28, Climate Change

Mains Question:

Examine the operationalization of the ‘loss and damage’ fund during COP28, highlighting the challenges and assessing its effectiveness in promoting climate justice. (100 words)

Dimensions of the Article:

  • The Article Analysis
  • ‘Loss and Damage’ (L&D) fund
  • Historical Roots
  • Challenges and Concerns

The Article Analysis:

  • The decision to operationalize the L&D fund at COP28 marks a diplomatic victory, especially for the G-77 bloc of countries plus China. However, critical issues emerge during the TC-4 and ad hoc TC-5 meetings.
  • The temporary hosting by the World Bank raises concerns, with an expected significant overhead fee impacting its effectiveness. The committed amounts from developed countries, such as Japan, Germany, and the UAE, are deemed insufficient, amounting to $450 million against the actual demand of several billion dollars.
  • The voluntary nature of contributions and the lack of clarity on periodic replenishment pose further challenges. Developed countries’ failure to meet the 2020 climate finance deadline and delivering only $89.6 billion in 2021 adds skepticism to the fund’s robustness.
  • Conditions imposed on the World Bank for fund management, including enhanced transparency and accountability, indicate potential bureaucratic hurdles. The fund’s accessibility, timeliness, and adequacy remain uncertain.

‘Loss and Damage’ (L&D) fund:

  • The ‘Loss and Damage’ (L&D) fund serves as a financial mechanism to address the irreversible impacts of climate change that cannot be alleviated through adaptation measures.
  • It aims to compensate for real losses incurred by communities, countries, and ecosystems due to climate change, going beyond monetary values to encompass human rights, well-being, and environmental sustainability.

Historical Roots:

  • COP Milestones:
    • COP 19 (2013): In Warsaw, Poland, a formal agreement was reached during the 19th Conference of the Parties (COP 19) in 2013, establishing the foundation for the Loss and Damage (L&D) fund. This marked a crucial step in providing aid to economically developing nations grappling with Loss and Damage due to climate change.
    • COP 25: The establishment of the Santiago Network for L&D occurred during COP 25. However, at this stage, no committed funds were secured.
    • COP 26 (2021): Discussions continued in Glasgow with a focus on the operationalization of the fund.
    • COP 27 (November 2022): A landmark agreement was reached during COP 27, leading to the setup of the Loss and Damage fund. Additionally, a Transitional Committee (TC) was formed to guide the implementation of funding mechanisms.

Challenges and Concerns:

  • Developing nations feel neglected, complicating climate action and jeopardizing global cooperation. The weakened L&D fund threatens climate justice and exacerbates the plight of vulnerable communities.
  • The absence of a specified fund size, coupled with the reluctance of wealthy nations to commit, raises concerns about the fund’s effectiveness and operational framework.
  • Climate-change-induced instability can lead to conflicts in vulnerable nations, posing security challenges and potential spillover effects. The lack of support for vulnerable communities heightens humanitarian crises.
  • Lack of commitment from wealthy nations, especially the US, raises doubts about fulfilling the fund’s objectives, impacting global cooperation on climate change.

Way Forward:

  • While the L&D fund’s online initiation at COP28 is a positive step, there is a pressing need for comprehensive actions to address the identified challenges. Attention must be given to the World Bank’s role, ensuring transparency and efficiency in fund management.
  • Advocacy for increased and periodic contributions from developed nations is crucial, aligning with the actual demand. The voluntary aspect of contributions should be reconsidered to enhance the fund’s reliability.
  • Overall, the road ahead involves sustained efforts to fortify the L&D fund, making it a robust mechanism for addressing the impacts of climate change in a just and effective manner.