Published on: November 23, 2022

Loss and Damage Fund

Loss and Damage Fund

Why in news?
UN climate summit in Egypt has created history by deciding to establish a fund to address loss and damage to compensate the most vulnerable countries for damages from climate-linked disasters


  • It was first initiated by the island nation of Vanuatu and the Alliance of Small Island States for combating climate change

What is Loss and Damage(L&D) ?

  • Loss and damage refers to the most severe impacts of extreme weather on the physical and social infrastructure of poor countries, and the financial assistance needed to rescue and rebuild them.
  • They also include not only economic damage to property but also loss of livelihoods, and the destruction of biodiversity and sites that have cultural importance.
  • This broadens the scope for affected nations to claim compensation.

How it is funded?

  • global stocktake refers to a five-year appraisal by countries of the impact of their actions to curb climate change.
  • While a notional funding arrangement for L&D has been agreed upon, its shape and scale are far from clear. It is unlikely that calls on other crucial issues will be taken before the conclusion of the global stocktake
  • Vulnerable countries in the past argued that rich countries (USA and Europe) that caused the bulk of climate change with their historical greenhouse gas emissions should pay.
  • The EU has argued that China the world’s second-largest economy, but classified by the UN as a developing country should also pay into it.

How this fund can be game changer ? 

  • The creation of this fund has sent a warning shot to polluters that they can no longer go scot-free with their climate destruction.
  • Polluters have to pay up for the damages they cause and are accountable to the people who are facing supercharged storms, devastating floods, and rising seas.
  • Countries must now work together to ensure that the new fund can become fully operational and respond to the most vulnerable people and communities.
 The fund helps in transforming international financial markets to mobilise greater investments in renewable energy and green projects, and to ensure that climate finance was easily accessible to all, particularly the small and vulnerable countries.