Originally published in August 2023; updated by the ThinkLandscape team in March 2026.

The climate crisis is here, and its effects are already being felt. Global heating is rapidly approaching
1.5 degrees Celsius above pre-industrial levels, resulting in prolonged heatwaves, drought, rising sea levels and increasingly frequent and devastating storms, wildfires and floods.

Millions of people around the world are affected by these losses every day – particularly those in
the poorest countries that have historically contributed the least to the climate crisis.

In response, these countries are increasingly calling on their wealthiest counterparts to help pay for the costs they’re incurring.

At the COP27 climate summit in 2022, negotiators struck a historic agreement to establish a loss and damage fund to help close these financing gaps.

The Fund for Responding to Loss and Damage (FRLD), as it is formally known, entered operation the following year at COP28 and has ground through the policy process in the years since.

However, almost half a decade later, there is still debate over how effective this fund will be.

So, here’s all you need to know about climate ‘loss and damage’, including what it means, how it relates to climate justice and what policymakers are doing about it.

What is climate loss and damage?

The term ‘loss and damage’ generally refers to the unavoidable consequences of climate change – those that surpass human capacity to adapt. These consequences can be economic, such as the destruction of infrastructure, property and markets, or non-economic, including loss of life, biodiversity and cultural heritage sites.

For example, in 2025, cyclones, extreme monsoon rains and flooding in South and Southeast Asia caused an estimated USD 25 billion in economic losses, claimed more than 1,750 lives (non-economic) and destroyed hundreds of thousands of homes (both economic and non-economic).

The World Weather Attribution (WWA), an international association of scientists, found that these extreme rains are becoming “more intense” due to planetary heating.

In Sri Lanka, one of the countries most affected, these weather events are now about 28 to 160 percent more intense due to warming, according to the WWA.

In policy terms, ‘loss and damage’ refers to the UN’s collective efforts to “avert, minimize and address loss and damage associated with climate change impacts, especially in developing countries that are particularly vulnerable to the adverse effects of climate change.”

What does loss and damage have to do with climate justice?

The world’s richest 10 percent of people are responsible for two-thirds of observed global warming since 1990, according to a 2025 study.

This small group contributed seven times more to increases in monthly once-in-a-century heat extremes globally and six times more to Amazon droughts than the average person, the study found.

Meanwhile, the poorer half of the world’s population contributes just 10 percent of emissions, according to Oxfam.

And yet, the countries facing the greatest climate-related loss and damage are poorer countries and island nations that lack the financial and technical resources to respond.

According to the Grantham Research Institute at the London School of Economics, loss and damage could cost developing countries between USD 290 billion and 580 billion by 2030, reaching USD 1–1.8 trillion by 2050.

These astronomical figures raise crucial – but controversial – questions about fairness, equity and responsibility.

For over three decades, leaders across the Global South have called on the United Nations Framework Convention on Climate Change (UNFCCC) to provide financial resources to address loss and damage. As early as 1991, the island nation of Vanuatu proposed an insurance scheme to help countries affected by sea level rise.

However, the proposal was rejected, and loss and damage did not appear in the UNFCCC framework convention of 1992. It wasn’t until COP27 in 2022 that a financial mechanism to address loss and damage was first announced.

One reason why rich countries have been cautious about addressing loss and damage is to avoid legal and financial liability for causing the climate crisis. If the agreements are not worded carefully, they could face a wave of litigation with no clear resolution.

When an article on loss and damage was added to the Paris Agreement in 2015, it included a clause that ruled out any admission of liability or compensation related to loss and damage, explained Preety Bhandari, a senior advisor at the World Resources Institute (WRI), on GLF Live. “Negotiation is a delicate game of give and take,” she noted.

All future discussions on loss and damage stem from a growing consensus on climate justice and solidarity, rather than from any legally binding agreement. This consensus is largely thanks to the persistence of certain countries, especially island nations, that have the most to lose from the climate crisis.

How is loss and damage calculated?

A growing field of ‘attribution science’ attempts to calculate the role of human-caused climate change in individual extreme weather events, called ‘extreme event attribution’ (EEA).

Whenever you see a headline like “Climate change made US and Mexico heatwave ’35 times more likely’,” that is an example of EEA.

These calculations are being combined with socioeconomic data in what is called ‘extreme event impacts attribution’ (EEIA) — an attempt to quantify the loss and damage from those individual events, which can then help us understand which costs should be compensated.

But not all loss and damage can be measured in purely financial terms.

The loss of a culturally significant site, for example, means the loss of intangible heritage as well as the physical space it occupies.

And while the insurance industry has long found ways to calculate the value of a person, there are few outside of it who would agree that a human life can be measured in dollars and cents.

Where will the money come from?

As of November 2025, USD 817.01 million has been pledged to the Fund for Responding to Loss and Damage (FRLD).

The majority of this sum – USD 700 million – was pledged at COP28 and came from various countries, including the United Arab Emirates (USD 100 million), Germany (USD 100 million), Italy (USD 108.9 million) and the U.S. (USD 17.5 million).

However, these promises fall far short of the hundreds of billions in losses that climate-vulnerable countries are expected to rack up this decade alone.

The vast majority – 82 percent – of climate funding currently comes from governments. The rest comes from the private sector, according to the Organization for Economic Cooperation and Development (OECD).

One of the reasons rich countries were willing to approve the FRLD at COP27 was that it took some of the financial burden off governments. The agreement stresses that funding should come from a variety of donors and innovative finance tools.

Some more controversial funding sources have also been proposed, including windfall taxes on fossil fuel companies, or diverting money from less urgent humanitarian aid to loss and damage relief.

Ultimately, addressing loss and damage will likely require a ‘mosaic of solutions‘ that bring together humanitarian aid, disaster risk management and more accessible insurance schemes for low-income families, according to WRI. Some funds could also be set aside to rebuild critical infrastructure and provide emergency cash when disaster strikes.

What are world leaders doing to help climate-vulnerable countries?

The agreement of the FRLD on day one of COP28 in Dubai came after a year of work by the Transitional Committee. This was set up after countries agreed to establish a funding mechanism for loss and damage for the first time at COP27.

At COP26 in 2021, the Glasgow Dialogue had been established to discuss possible solutions for a loss and damage fund. These discussions are still ongoing, but they have been criticized for acting as a “talk shop” with no real power to enact change.

Some governments also agreed at COP26 to fund the Santiago Network on Loss and Damage (SNLD), which offers technical support to developing nations who are experiencing loss and damage.

The specifics of the Fund for Responding to Loss and Damage still remain unclear, with countries releasing scant details about how, when or to whom the funding will be released.

A board of 26 members was created in 2023, with the Philippines selected as host of the board the following year.

Despite some pushback, the World Bank was selected as fund trustee and to host the independent secretariat, which was established in November 2024.

At COP30 in November 2025, a guidance report on the Fund for responding to Loss and Damage was adopted, meaning it is now entering its ‘startup’ phase.