UN Loss and Damage Fund Launches Initial Support Phase with $250 Million Budget, But Gaps Remain

Under the auspices of the United Nations, the Loss and Damage Fund (LDF) has initiated its first support phase, aiming to assist developing countries impacted by climate disasters. With a budget of $250 million set to be disbursed by the end of 2026, the fund seeks to offer critical aid—but its current resources fall far short of what is needed to address the destruction caused by the climate crisis. Despite $768 million in pledges, only $321 million has been effectively transferred to the fund to date.

Following meetings held in Barbados, the fund’s board of directors established the initial strategic framework known as the Barbados Implementation Modalities (BIM). This first phase prioritizes strengthening national capacities for responding to climate disasters, rather than community-level interventions. The decision has sparked criticism from activists who favor more localized, grassroots efforts. Under the current plan, developing countries can apply for grants ranging between $5 million and $20 million. Direct budget support for emergency interventions such as temporary shelter in disaster scenarios will also be available.

Priority for the Most Vulnerable

One of the most debated issues during the meeting was how the fund would allocate its resources. It was ultimately decided that small island developing states and least developed countries would receive at least 50% of the initial funding. While developed countries pushed for this figure to be set as a minimum threshold, many developing nations opposed making it a binding requirement. The final decision was reached through consensus, not unanimous vote. Richard Sherman, co-chair of the fund’s board, stated after the meeting: “The negotiations were difficult and highly multilateral, but the outcome shows that multilateral cooperation is still possible.”

Coordination with Other Funds and a Grant-Based Model

Another key point of contention was how the LDF would coordinate with other multilateral funds, such as the Green Climate Fund (GCF). The board agreed to collaborate with other institutions during the fund’s initial phase and tasked the Secretariat with developing a proposal for such partnerships. On financial mechanisms, the board established a clear rule: the fund will only provide grants. However, recipient countries are free to combine these grants with private sector financing if they choose.

A Persistent Funding Gap

Despite its launch, the fund remains under-resourced. Of the $768 million pledged, only $321 million has been received so far. According to the NGO network Loss and Damage Collaboration, developing countries face an annual loss and damage financing need of approximately $400 billion. The fund’s Executive Director, Senegalese banker Ibrahima Cheikh Diong, announced that a resource mobilization strategy would be presented by the end of 2025.

A Meaningful but Insufficient Step

Civil society groups view the fund’s launch as a positive yet inadequate development. Harjeet Singh, founding director of the India-based Satat Sampada Climate Foundation, described it as a “delayed but necessary step.” He emphasized, however, that “support must not only be delivered—it must also empower affected communities with decision-making rights.”

Speaking at the meeting, Barbados Prime Minister Mia Mottley emphasized the need to “think outside the box” for climate action. She called for global taxes on flights, shipping and fossil fuel production to provide climate finance. Barbados co-chairs, with France and Kenya, the Global Solidarity Taxes Task Force, which is considering such taxes. Mottley also made a direct appeal to the CEOs of oil and gas companies to contribute financially to the climate solution: “Unless they have a plan for a habitable Mars or Pluto – and there is no such thing in sight at the moment – they will be hit by this crisis.” But the proposed shipping tax for climate finance took a significant blow last week. Governments have ruled that fines on polluting ship owners cannot be used for non-industry purposes.