Fund for responding to Loss and Damage

    Logo: Fund for responding to Loss and Damage

    The Fund for responding to Loss and Damage (FRLD) is the most recent multilateral climate fund under the United Nations Framework Convention on Climate Change and the Paris Agreement. The decision to set up this fund was taken at the climate conference in Sharm el-Sheikh, COP27, in 2022. At COP28 in Dubai in 2023, the Fund was established as an operating entity of the Financial Mechanism. Germany is one of the founding donors.

    The mission of the Fund is to assist particularly vulnerable developing nations in responding to loss and damage associated with the adverse effects of climate change. This includes economic loss and damage such as the destruction of infrastructure and crop failure, and also non-economic loss and damage such as the loss of one's home territory, cultural heritage, or health. The Fund's mandate relates both to extreme weather events and to slow-onset events that are related to climate change.

    Design and start-up phase

    The Fund has been established at a remarkable pace. It only took three years from the decision to set up the Fund taken at COP27 in November 2022 to the first call for funding requests at COP30 in November 2025. So far, no other multilateral climate fund has been established so quickly.

    For a pilot phase of four years, the World Bank is hosting the Fund as a financial intermediary fund. In 2024, an independent secretariat was set up for the Fund. A Board of 26 members has been constituted, which comprises twelve industrialised country members and 14 developing country members. The Board is hosted by the Philippines. Germany has a seat on the Board and is represented by the BMZ.

    For the start-up phase of the Fund, the Board has adopted the Barbados Implementation Modalities (BIM). This phase focuses on financing a first set of interventions, and on testing and learning for the development of the long-term modalities of the Fund. Within this framework, a minimum floor of 50 per cent has been established for least developed countries (LDCs) and small island developing states (SIDS). The first funding decisions are to be taken in December 2026.

    The Fund is part of a broader support architecture in the field of loss and damage. Under the Paris Agreement and the UN Framework Convention on Climate Change (UNFCCC), the Executive Committee of the Warsaw International Mechanism (WIM ExCom) functions as the policy arm of the loss and damage response, and the Santiago Network (SN) functions as the technical arm. As the Fund evolves, cooperation within this UNFCCC and Paris Agreement support architecture is to be reinforced, so as to optimise the support for vulnerable countries. This support also includes the Global Shield against Climate Risks, which was co-founded by the BMZ and serves to foster pre-arranged finance solutions to protect particularly vulnerable countries and people.

    FRLD – a fund with a new approach

    The long-term modalities of the Fund are still being developed. The Fund is intended to pursue a new approach based on country leadership and ownership. Partner countries will identify their risks and needs, with support from the Santiago Network where appropriate, and will then receive support from the Fund as they develop their national resilience and response systems. Access to funding will be provided through direct budget support or based on cooperation with organisations that are already accredited with the Adaptation Fund, the Global Environment Facility (GEF) or the Green Climate Fund (GCF). In the current pilot phase, the Fund is providing most of its funding in the form of grants. In the future, the range of funding instruments is to be broadened.

    Germany's contribution

    Germany played a major part in bringing about the pathbreaking decisions at COP27 to launch the Fund. On the Board, Germany seeks to build understanding between industrialised and developing nations. At COP28, Germany made an announcement jointly with the United Arab Emirates that they would pledge 100 million US dollars each. This was the first time that funding from a Gulf country was mobilised for a multilateral climate fund, highlighting the fact that this new Fund is intended to rely on a broad, diverse base of contributors. Germany's contribution comes from the BMZ budget and has already been disbursed in full. So far, 27 donors have pledged a total of 822 million US dollars in support of the Fund.