Wealthy nations risk undermining the loss and damage fund’s plan to deliver $250 million in aid next year to climate-vulnerable countries hit by extreme weather, board members from developing nations said this week.
While rich nations have pledged $789 million, they have only transferred $348 million so far to the Fund for Responding to Loss and Damage (FRLD), which all governments agreed to set up two years ago and is now in its start-up phase.
Speaking on behalf of developing country board members, Honduras’s representative Elena Cristina Pereira Colindres expressed “concern” during a press briefing, adding that “transparency and predictability” on when the money would be paid is lacking.
Pereira did not name individual countries but Italy, the European Union and Luxembourg are the three donors that have promised money but not said when it will be given.
Other nations – like the United Arab Emirates, Australia and Sweden – are drip-feeding their promised pledges, only giving a part of them each year.
Pereira said that these “mutli-year disbursement schedules” severely limit the fund’s board’s ability to determine how much money they can spend and reduces “overall confidence in our partner’s commitments to long-term capitalisation of the fund”.
“Lemonade stand money”
While the fund’s board has agreed to spend $250 million next year, Pereira said that this “must not be used or considered as an indication of the future scale of the fund” because the needs are in the “hundreds of billions”.
A 2024 study in Nature found that climate change is causing $395 billion of loss and damage each year. Developing countries have called for developed nations to provide $100 billion of loss and damage finance per year by 2030.
Daniel Lund, Fiji’s representative to the fund, told an FRLD board meeting held in the Philippines on Wednesday that the amount the fund currently has is just “lemonade stand money”, adding that it was about a quarter of what it costs to build a coal-fired power plant.
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The fund’s board is drawing up a strategy to get more money – known as a resource mobilisation strategy – by the end of 2025. “It is of crucial importance to the constituency that this fund that was established for all developing countries serves their collective needs at the scale that is needed”, Pereira said.
In April, the fund approved a strategy for the initial $250 million start-up phase, in which it agreed to give out grants of between $5 million and $20 million to project proposals submitted by developing countries.
Priority for private finance?
With funds scarce, the secretariat which runs the FRLD has proposed that projects which bring in extra sources of funding like private-sector finance should be judged favourably by the fund’s board.
But some developing country board members and climate campaigners pushed back at the board meeting against adding this practice, known as leveraging, into the criteria.
Egypt’s representative Mohammed Nasr said he had “a very strong concern” about this. “This should not be part of any criteria when we deal with loss and damage funding”, he said.
The head of Climate Action Network (CAN) International Tasneem Essop said she was worried that the fund’s secretariat were pursuing “typical World Bank approaches”. The World Bank was chosen to host the fund – at least on an interim basis – despite opposition from some large NGOs like CAN.
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Essop said she opposed leveraging and derisking. It’s “as if what we are setting up here is an investment fund,” she said, “no it’s not – this is a solidarity fund. This fund needs to benefit the people that are suffering from the climate crisis”.
Speaking after her, Nasr said he agreed. “A fund is not a bank. Solidarity is different to investment. Loss and damage is different to development”, he said.
When will funds be given out?
Despite funding constraints, board co-chair Richard Sherman said he expects the first projects to be approved early next year.
Sherman said he expects the fund to put out a call for proposals at the next board meeting in October and the first projects to be approved at the following meeting in February 2026.
The board is still working out the fund’s financial architecture, meaning how the money is banked and disbursed to countries, Sherman said. If done correctly, he added, a unique fund can be set up to deliver a “rapid disbursement in time of disaster or extreme event”.
“We are working wholeheartedly to make sure that (rapid disbursement) happens,” Sherman said during a press briefing, adding that he strives for the fund to “almost be a hotline for communities” facing loss and damage events.
In a statement read out by a minister before the board meeting, the president of the Philipines Ferdinand Marcos called for urgency, saying that “every delay means more families without shelter, more livelihood disrupted and worse – more lives lost”.
