Fund for responding to Loss and Damage

Fund for responding to Loss and Damage

Summary

The Fund for responding to Loss and Damage (FRLD), operationalised by a decision of the 28th Conference of the Parties (COP28) of the United Nations Framework Convention on Climate Change (UNFCCC), is part of the UNFCCC’s financial mechanism and serves in the same function for the Paris Agreement. It is set-up, initially for four years, as a financial intermediary fund (FIF) with a World Bank-hosted secretariat. In 2028, COP33 will decide if this set-up is to be made permanent or whether the FRLD will become a fully independent fund similar to the Green Climate Fund (GCF).
The FRLD’s purpose is to assist developing countries that are particularly vulnerable to the adverse effects of climate change in responding to economic and non-economic loss and damage, including extreme weather events and slow onset events, especially in the context of ongoing and ex-post action that includes rehabilitation, recovery and reconstruction.
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Basic Description

Name of the Fund Fund for responding to Loss and Damage (FRLD)
Official Fund Website New website of the independent Secretariat (under development): https://www.frld.org/ Website of the interim Secretariat: https://unfccc.int/loss-and-damage-fund-joint-interim-secretariat
Date Created
Date fund proposed: The decision to establish the FRLD was made at COP27 in November 2022, which set up a one-year design process with a Transitional Committee in 2023.
Date fund made operational: A decision at COP28 in November 2023 adopted the FRLD’s Governing Instrument negotiated during a one-year Transitional Committee throughout 2023.
Proposed Life of Fund The FRLD is supposed to have periodic replenishments every four years. The termination of the Fund is not set but would be required to be approved by the COP based on a recommendation of the Board.
Objectives The FRLD is to serve as a new channel for multilateral finance to assist developing countries for addressing a variety of challenges associated with the adverse effects of climate change, such as climate-related emergencies, sea-level rise, displacement, relocation, migration, insufficient climate information and data, and the need for climate-resilient reconstruction and recovery.
It is to assist developing countries that are particularly vulnerable to the adverse effects of climate change in mobilising external finance to strengthen their efforts through the promotion of national response systems to respond to loss and damage while supporting both the achievements of international goals on sustainable development and the eradication of poverty.
With a focus on priority gaps within the current landscape of institutions that are funding activities related to responding to loss and damage, it is tasked to provide complementary and additional support and improve the speed and adequacy of access to finance for responding to loss and damage in a manner that promotes coherence and complementarity with new and existing funding arrangements across the international financial, climate, humanitarian, disaster risk reduction and development architectures.
Financial inputs and fund size The FRLD is able to receive contributions from a wide variety of sources of funding, including grants and concessional loans from public, private and innovative sources.
As of April 2025, the FRLD has received pledges of USD 786 million from 27 contributors (25 countries, the European Union, and the Belgian region of Wallonia). Detailed information about the pledges received is available at: https://unfccc.int/topics/climate-finance/funds-entities-bodies/fund-for-responding-to-loss-and-damage/pledges-to-the-fund-for-responding-to-loss-and-damage Up-to-date information about the conversion of pledged commitments into signed contribution agreements and funding received is provided at: https://fiftrustee.worldbank.org/en/about/unit/dfi/fiftrustee/fund-detail/frld#1 The contributions are eligible to be classified as official development assistance (ODA).
Activities Supported The Fund will provide finance for addressing a variety of challenges associated with the adverse effects of climate change, such as climate-related emergencies, sea level rise, displacement, relocation, migration, insufficient climate information and data, and the need for climate-resilient reconstruction and recovery.
The Fund will provide support for responding to economic and non-economic loss and damage associated with the adverse effects of climate change. This support may include funding that is complementary to humanitarian actions taken immediately after an extreme weather event; funding for intermediate or long-term recovery, reconstruction or rehabilitation; and funding for actions that address slow onset events.
The support provided by the Fund may include developing national response plans; addressing insufficient climate information and data; and promoting equitable, safe and dignified human mobility in the form of displacement, relocation and migration in cases of temporary and permanent loss and damage.

Administrating Organization

Secretariat or Administrative Unit The FRLD was initially served by an interim Secretariat during the beginning of its operations in 2024 with seconded staff from the UNFCCC, the Green Climate Fund (GCF) and the United Nations Development Programme (UNDP). After the selection of its inaugural Executive Director in October 2024, the Fund in 2025 is transitioning from the interim Secretariat to a new, dedicated and independent Secretariat accountable to the Board.
The independent Secretariat is housed at the World Bank in Washington, DC following the set-up of the FRLD as a FIF with a World Bank-hosted Secretariat as an interim measure for four years as approved by COP29, with COP33 in 2028 to decide if this arrangement will be permanent or if alternatively the FRLD will be set up as a fully independent organisation.
Trustee The World Bank is the interim trustee until a decision by COP33 in 2028.

Fund Finance and Access Modalities

Conditions and Eligibility Requirements Eligibility is not restricted to ODA eligible countries. All developing countries that are particularly vulnerable to the adverse effects of climate change and are parties to the UNFCCC and the Paris Agreement are eligible to receive resources from the Fund.
Accessing the Fund
Access Modalities – The Fund will allow access to its resources through various modalities to be developed which may include:

  1. Direct access via direct budget support through national Governments, or in partnership with entities whose safeguards and standards have been judged functionally equivalent to those of multilateral development banks
  2. Direct access via subnational, national and regional entities or in partnership with entities accredited to other funds, such as the Adaptation Fund, the Global Environment Facility and the Green Climate Fund
  3. International access via multilateral or bilateral entities
  4. Access to small grants that support communities, Indigenous Peoples and vulnerable groups and their livelihoods, including with respect to recovery after climate-related events
  5. Rapid disbursement modalities.

At its 5th Board meeting in April 2025, the FRLD approved start-up financing of USD 250 million in grants, to be disbursed by the end of 2026. This funding will be delivered under the ‘Barbados Implementation Modalities’ as part of a test phase. The phase includes the development of funding criteria, a call for proposals from developing countries to select implementation partners, and support for initial projects ranging from USD 5 to 25 million. An initial results measurement framework for the start-up phase is expected by October 2025. The first funding commitments could be made in early 2026.
Financial Instruments – The Fund will provide financing in the form of grants and highly concessional loans. It may also deploy a range of additional financial instruments that take into consideration debt sustainability such as guarantees, direct budget support and policy-based finance, equity, insurance mechanisms, risk-sharing mechanisms, pre-arranged finance, performance-based programmes and other financial products.
Accreditation process – The Governing Instrument of the FRLD does not foresee accreditation procedures for implementing partners. However, it indicates the development of simplified procedures, still to be developed, for fast-tracked screening to determine the ‘functional equivalency’ of potential implementing partners with internationally recognised fiduciary standards and environmental and social safeguards. It is likely that the existing standards of the World Bank or multilateral development banks (MDBs) will serve as the basis for such ‘functional equivalency’ determination.
Overview of implementing entities – As of April 2025, the list of implementing partners has not yet been determined. However, the Governing Instrument of the FRLD sees entities already accredited to other funds, including the Adaptation Fund, the GCF and the Global Environment Facility among likely implementation partners, as well as other multilateral, bilateral, subnational, national and regional entities that are already implementing activities for responding to loss and damage from among existing funding arrangements.
Nature of recipient country involvement – Country ownership is at the heart of the FRLD operations. According to its Governing Instrument, the Fund will seek to promote and strengthen national responses for addressing loss and damage through pursuing country-led approaches, including through effective involvement of relevant institutions and stakeholders, in particular women, vulnerable communities and Indigenous Peoples and be responsive to country priorities and circumstances.
It commits to utilise, where appropriate and available, existing national and regional systems and financial mechanism, and to promote, in all its operations, direct engagement at the national and, where appropriate, subnational and local level to facilitate efficiency and the achievement of concrete results. It may provide support for activities relevant to preparing and strengthening national processes and support systems. This may include support for developing proposed activities, projects and programmes, such as planning activities for addressing loss and damage; estimating financial requirements for implementing loss and damage activities; and establishing national loss and damage finance systems.
Developing countries will be invited to designate a national authority or national focal point to be responsible for overall management and implementation of activities, projects and programmes supported by the Fund. The authority or focal point will be consulted on any requests for funding through any access modalities.
Allocation criteria – The Fund will have to develop a dynamic resource allocation system, to be periodically reviewed, which is supposed to take into account various considerations:

  1. The priorities and needs of developing countries that are particularly vulnerable to the adverse effects of climate change, while taking into consideration the needs of climate-vulnerable communities
  2. Considerations of the scale of impacts of particular climate events relative to national circumstances, including but not limited to response capacities of the impacted countries
  3. The need to safeguard against the overconcentration of support provided by the Fund in any given country, group of countries or region
  4. The best available data and information from entities such as the Inter-governmental Panel on Climate Change and/or pertinent knowledge from Indigenous Peoples and vulnerable communities on exposure and sensitivity to the adverse effects of climate change and on loss and damage
  5. Estimates of recovery and reconstruction costs based on data and information from relevant entities, in particular national and/or regional entities
  6. A minimum percentage allocation floor for the least developed countries and small island developing States.
Safeguards, Gender and Indigenous Peoples
Safeguards – The Governing Instrument for the FRLD does not foresee the development of own environmental and social safeguard (ESS) standards. While committing to ensuring that best practice environmental and social safeguard policies are applied to all its activities, the FRLD will instead rely on the ESS and related management systems of its implementing partners. The ESS of implementing partners will be checked for ‘functional equivalency’ with those of the World Bank on the basis of modalities to be developed.
Gender – The Governing Instrument of the FRLD commits the Fund to take “a culturally sensitive and gender-responsive approach” to all of its funding activities. It is not clear if in order to achieve this the Fund will develop its own gender policy (as comparator funds such as the GEF, GCF or Adaptation Fund have) or instruct its implementing partners as part of its ‘functional equivalency’ determination to ESS to apply their own gender and social inclusion policies for implementing FRLD supported activities.
The Governing Instrument makes reference to consider the gender balance of its Board and the staff of its independent Secretariat. It also acknowledges the role of women as important stakeholders, including their representation through an active observer in Board proceedings and in stakeholder participation consultative forums.
Indigenous Peoples – The Governing Instrument of the FRLD recognises the role of Indigenous Peoples and indigenous knowledge for effective activities to respond to loss and damage. It is unlikely that the Fund will develop a separate Indigenous Peoples Policy (such as for example the GCF has). Rather, it will likely instruct its implementing partners as part of its ‘functional equivalency’ determination to ESS to apply safeguards and protections for Indigenous Peoples and their rights under their own environmental and social safeguard policies and management systems for implementing FRLD supported activities.

Fund Governance

Decision Making Structure The FRLD functions under the guidance of and is accountable to the UNFCCC Conference of the Parties (COP). The FRLD Board governs the Fund and ensures accountability by:

  1. receiving COP guidance on matters such as policies and priorities
  2. responding appropriately to that guidance
  3. submitting annual reports to the COP for consideration.

FRLD Board
The Board is composed of 26 members—12 from developed countries and 14 from developing countries—nominated by their regional constituencies. The composition includes members from Africa, Asia-Pacific, Latin America and the Caribbean, SIDS, LDCs, and other developing countries. Members serve three-year terms. The Board meets three times per year, makes decisions primarily by consensus (but allows for voting in cases where consensus is not possible), and is co-chaired by one member from a developed country and one from a developing country, elected annually.
Accountability Mechanisms The FRLD Governing Instrument does not foresee for the Fund to have its own independent accountability mechanisms regarding integrity and complaints procedures. Instead the Governing Instrument stipulates that activities financed by the Fund will be subject to the implementing entity’s independent integrity unit or functional equivalent, which will work with the Secretariat to investigate allegations of fraud and corruption in coordination with relevant counterpart authorities and report to the Board on any such investigations. Likewise, activities financed by the Fund will use the implementing entity’s independent grievance redress mechanism to address complaints related to activities financed by the Fund, which will take appropriate action based on any agreements, findings and/or recommendations and report to the Board on any such action.
The FRLD is committed to periodic independent evaluations of the performance of the Fund in order to provide an objective assessment of the results of the Fund, including of the activities financed by the Fund, and its effectiveness and efficiency. However, the Board will have to decide whether the independence of such evaluations will be assured through the set-up of an independent evaluation office, or just through third-party independent providers.
Participation of Observers and Stakeholders The FRLD Governing Instrument commits to the establishment of consultative forums to engage and communicate with stakeholders. They are defined as “representatives of civil society organisations, environmental and development non-governmental organisations, trade unions, Indigenous Peoples, youth, women, climate-induced migrants, industries and sectors impacted by climate change, community-based organisations, bilateral and multilateral development cooperation agencies, technical and research agencies, the private sector and governments“. The Fund is also supposed to develop further mechanisms to promote the input and participation of stakeholders, highlighting in particular the groups most vulnerable to the adverse effects of climate change, including women, youth and Indigenous Peoples, in the design, development and implementation of activities financed by the FRLD. This might also include the establishment of expert and technical panels.
The Fund has yet to approve procedures for an observer accreditation process mandated by the Governing Instrument that will allow international organisations, private sector organisations and civil society organisations, as well as representatives from community groups or climate migrants/refugees to observe each Board meeting upon prior registration.
Additionally, a set of active observers (at minimum representing environmental non-governmental organisations, women, youth and Indigenous Peoples, but potentially considering other groups) will be invited to participate in Board and speak on behalf of their constituencies, although they will not be able to vote. The exact number and composition is still to be determined, with an active observer policy in development.
Transparency and Information Disclosure Currently, it is not clear if the FRLD will have a separate information disclosure policy that governs the activities of the Secretariat.
The transparency of and information disclosure related to Board proceedings is set via the Additional Rules of Procedure, which the FRLD Board approved in 2024. They outline that FRLD Board meetings are streamed live. Video recordings for recent Board meetings as well as most Board meeting documents are currently made available at: https://unfccc.int/loss-and-damage-fund-joint-interim-secretariat#Meetings-and-events The combined pledges and contributions made to the Fund are reported and frequently updated on the pledges subpage of the interim Secretariat, with funding availability reported on the FRLD trust fund website of the World Bank.
Other Issues Raised The FRLD, its operational procedures, processes, policies, and decisions are described in further detail in a dedicated briefing (CFF13) as part of the Climate Finance Fundamentals Series.