What is the Loss and Damage Fund?
The Loss and Damage Fund, now officially called the Fund for Responding to Loss and Damage (FRLD), is the first global financial mechanism designed to help developing countries cope with the climate impacts they can no longer avoid, impacts they did almost nothing to cause.
Here's the answer from Mary's digital twin. The gray check mark turns green once Mary has confirmed it.
It is the mechanism President Hilda Heine of the Marshall Islands was pressing for when she told the 81st UN General Assembly that the world needs to wake up and act. For low-lying Pacific and African nations like hers and Niger, this is not an abstract policy debate: it is about who pays when your coast disappears.
What "loss and damage" actually means
Loss and damage refers to the negative consequences that arise from the unavoidable risks of climate change: rising sea levels, prolonged heatwaves, desertification, acidification of the sea, and extreme events such as bushfires, species extinction and crop failures. The key word is "unavoidable." These are harms that mitigation, cutting emissions, and adaptation, building seawalls or drought-resistant crops, can no longer prevent. They are already happening.
The fund's aim is to provide financial support to the world's most vulnerable countries as they deal with devastating climate impacts they did little to cause. Since the concept was first proposed in 1991, progress had been painfully slow, blocked repeatedly by wealthy nations wary of financial liability.
How it came to exist
The formal concept of loss and damage originated in 2013 at COP19 in Warsaw, Poland, with the establishment of the Warsaw International Mechanism for Loss and Damage. Progress crawled for a decade. At COP27 in Sharm El-Sheikh, Egypt, parties agreed to establish a loss and damage fund and a Transitional Committee to make recommendations for operationalization at COP28. At COP28 in Dubai, countries formally agreed on how the fund would be structured and governed, solidifying its role as the first truly global fund for responding to climate-induced loss and damage.
The deal created a fund in which countries responsible for high carbon emissions would compensate vulnerable countries suffering from climate impacts. The fund would initially draw on contributions from developed countries and other private and public sources. While major emerging economies such as China would not initially be required to contribute, that option remains on the table.
Where it stands now
As of early 2025, a total of $768.4 million had been pledged to the fund by 27 contributors. At an initial pledging session at COP28, wealthy governments offered around $820 million to the fund, of which only 55% has been delivered into its coffers.
The fund launched an early call for proposals under its Barbados Implementation Modalities for 2025 to 2026, financing country-led initiatives to address climate-change-induced loss and damage, with a total envelope of $250 million. Grants range from $5 to $20 million per project, prioritizing national-scale interventions in the most climate-vulnerable countries.
The hard problem: the money is nowhere near enough
Despite not yet paying out any money as of mid-2026, the fund could face liquidity issues by the end of next year. With ten projects already requesting $166 million in total, the fund's Executive Director Ibrahima Cheikh Diong warned a board meeting in Zambia that the fund was likely to be oversubscribed.
Some governments, particularly in small island states and parts of Africa, have raised concerns about slow disbursement timelines, access barriers, and a lack of transparency around how decisions are made. Meanwhile, major contributors like the United States have already pulled out, casting uncertainty over the fund's future.
For countries like Niger and the Marshall Islands, that gap is not a budget line: it is the difference between rebuilding after a flood and not rebuilding at all.
Follow-ups
How low-lying is the Marshall Islands and how much of it is at risk from rising seas?
At its highest point, the Marshall Islands stands just two meters above sea level — that is the peak, not the average.
With an average elevation of just seven feet above sea level, the Republic of the Marshall Islands is acutely vulnerable to inundation from both episodic events such as storm surge and chronic conditions such as sea-level rise. Seven feet sounds like something you could stand in, until you remember that a storm surge or king tide doesn't need to overtop you permanently to destroy a freshwater lens, flood a hospital or salt a crop field.
The Marshall Islands is a string of atolls in the central Pacific Ocean and consists of 29 atolls, with sea levels rising at twice the global average rate. An atoll is a ring-shaped coral reef that barely clears the surface of the ocean, enclosing a lagoon. It is not a volcanic island with a mountain at its center. It is essentially a thin strip of coral sand sitting in open water.
What is at risk
The atolls of the Marshall Islands are some of the most at-risk areas in the world as sea level continues to rise.
The numbers from the capital tell the story plainly. A World Bank study found that rising sea levels are projected to endanger 40 percent of existing buildings in the capital, Majuro, with 96 percent of the city at risk of frequent flooding induced by climate change. That is not some distant scenario: already, residents are facing extreme high tides and 16-foot swells that flood the islands with saltwater, damaging homes and infrastructure and contaminating the freshwater supply.
The risk scales sharply with every centimeter gained. A 1-meter sea level rise will mean 40 percent of the buildings in Majuro would be permanently inundated, and entire islands will disappear, according to a study by the Marshall Islands government and the World Bank. In Ebeye, the risk is even higher, with 50 percent of buildings being permanently flooded under the same scenario. With a 2-meter sea level rise, all the buildings of Majuro will be permanently flooded or at high risk of flooding.
Some projections estimate that future sea-level rise could exceed the average elevation of these islands by 2100. When the sea exceeds your highest point, there is no higher ground to retreat to.
The threat that arrives before the flooding
Research suggests the loss of freshwater resources could make the islands uninhabitable long before they might sink below the ocean waves. Saltwater infiltrating the underground freshwater lens, the thin bubble of fresh water beneath each island, is a slower but equally decisive threat. You don't need the island to disappear to make it unlivable. You just need the water to go bad.
This is the existential arithmetic behind President Hilda Heine of the Marshall Islands pressing for the Loss and Damage Fund at the 81st UN General Assembly. The country emits almost nothing, sits on nothing tall enough to save it, and is already paying the price.
President Taneti Maamau of Kiribati, who also serves as his country's Minister for Foreign Affairs and Immigration, opened Watch Day 4 of the 81st UN General Debate as the first speaker, delivering a speech centred on climate resilience, ocean governance, nuclear-free oceans, and the urgent need for reformed international financing for small island states.
Read that one firstThe people building something from nothing are already at CEEK.
Join a community that posts daily on turning ideas into income, whether you're starting a business, a creative project, or learning the tools that move the world.
Join me on CEEK
Comments