New loss and damage fund could run out of money next year

The UN-backed Fund for Responding to Loss and Damage (FRLD), established to support developing countries affected by climate-related disasters, faces a risk of running out of money by the end of 2027 unless additional donations are secured. Despite not having disbursed any funds yet, the fund is already oversubscribed, with ten projects requesting a total of $166 million. Executive Director Ibrahima Cheikh Diong warned at a recent board meeting in Zambia that cashflow problems are likely, raising concerns about the fund’s operational sustainability and reputation. Since its creation at the 2022 UN climate talks in Egypt, wealthy nations have pledged $822 million to the fund but have only delivered $449 million so far. The fund is expected to approve its first projects in July, with early proposals focusing on flood response in Bangladesh and Lagos, Nigeria, and water infrastructure improvements in Jamaica following Hurricane Melissa. However, climate justice advocates emphasize that the current level of funding falls far short of the billions, or even trillions, needed to adequately address loss and damage in the Global South, which could cost developing countries up to $400 billion annually. At the Zambia meeting, ActionAid Zambia’s climate justice coordinator Michael Mwansa criticized the failure of developed countries to meet their climate finance commitments, warning that this shortfall severely limits the fund’s ability to scale up. The fund’s board is now considering strategies to raise more money, including appointing a high-level champion to lead fundraising efforts ahead of the first replenishment round planned for 2027. Climate campaigners have called for developed countries to contribute $50 billion annually starting next year, increasing to $400 billion by 2035, and to introduce new taxes on fossil fuels, financial transactions, luxury air travel, and wealth to generate revenue. The fundraising strategy will be further discussed at the next board meeting in the Philippines in June, as stakeholders seek to secure sustainable financing to ensure the fund can meet its mandate of supporting vulnerable countries facing climate-induced loss and damage.