Loss and Damage Fund Defers Its First Project Approvals to December After 176 Requests Worth $2.8 Billion

The Fund for responding to Loss and Damage, created at the COP27 climate conference in 2022, has deferred its first project funding approvals to December 2026, Climate Home News reported on 10 July. The fund's board, meeting for the ninth time in July, did not approve any proposals under its initial funding window, known as the Barbados Implementation Modalities, and instead set its tenth meeting in December as the target for a first package. The board received 176 requests totalling about $2.8 billion, far more than the resources available.

Loss and damage refers to the impacts of climate change that cannot be avoided through mitigation or adaptation, such as destruction from extreme storms and floods, or slow-onset changes such as sea level rise. The fund is hosted by the World Bank as a financial intermediary fund, with its own board and secretariat based in the Philippines. The gap between the $342 million available and the $2.8 billion requested illustrates a wider problem. Observers said the board needed more time to review proposals, agree criteria for ranking proposals and ensure fair distribution among regions and types of countries, given the large number of requests.

Loss and damage funding is intended mainly for immediate response and recovery rather than large infrastructure reconstruction. Climate finance discussions increasingly focus on financing that is arranged before disasters strike, such as catastrophe bonds, parametric insurance and contingent credit lines. Requests under the initial window cover a range of needs, including recovery after storms and floods, support for communities affected by drought and coastal erosion, and measures to restore livelihoods. The board has 26 members, with a majority from developing countries, including seats for small island states and least developed countries. The fund's first disbursements will be closely watched as a test of whether a new multilateral body can deliver money quickly to communities after disasters.