This policy brief examines the newly established Fund for Responding to Loss and Damage (FRLD) within the United Nations Framework Convention on Climate Change (UNFCCC), which seeks to address the disproportionate burden of climate loss and damage that is borne by developing countries. The brief suggests that, to avoid the pitfalls of previous climate funds, the FRLD must establish a robust framework for allocation, access, and mobilization of funds. 

Existing climate finance mechanisms primarily focus on mitigation and adaptation, leaving loss and damage significantly underfunded. This gap led to the creation of the FRLD at COP27 in 2022. 

Key findings

• Vulnerable developing countries bear the brunt of climate loss and damage despite minimal contribution to the problem.
• The FRLD is the only existing multilateral fund mandated to address non-economic losses resulting from climate change.
• Voluntary government contributions to the FRLD are likely to be insufficient, necessitating innovative financing mechanisms.

Recommendations

• The Fund needs to allocate financing on the basis of recipient countries’ climate vulnerability, greenhouse gas emissions, GDP, and policy actions to address climate change. 
• Recipients should receive financing directly, rather than through intermediary organisations. 
• To ensure the Fund is well resourced, its Board should adopt innovative financial mechanisms, including seeking contributions from philanthropies and encouraging the adoption of market mechanisms such as levies. 
• Address non-economic losses through a three-tier approach: preparation, post-impact assistance, and memorialization activities.