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Buddhist monks offer ritual prayers for the souls of those who lost their lives in the Bhotekoshi disaster at a flood-affected area in Trishuli, Nuwakot, Nepal (Ambir Tolang/NurPhoto via Getty Images)
The fund created to compensate climate disasters has $350 million on hand and $2.8 billion in requests – and that was before.
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Nepal’s floods will test whether loss and damage funds can actually workNepal’s floods will test whether loss and damage funds can actually work
As Nepal reels from the Bhotekoshi flood, its government has filed a formal request (Opens in new window) with the UN’s Fund for Responding to Loss and Damage, warning that the scale of destruction, put at $4–7 billion (Opens in new window) for broader economic loss, including $2.5 billion in infrastructure damage (Opens in new window), is far beyond what the country’s own resources can absorb.
Nepal’s government has called this a matter of legal and moral liability, not charity, arguing the country is bearing the cost of a climate crisis it did not create.
The FRLD was established (Opens in new window) in 2022 at COP27, with its Governing Instrument agreed the following year at COP28 to cover exactly this kind of loss, the kind mitigation and adaptation finance cannot address. Pledges to date stand at $822 million (Opens in new window), but only $350 million is actually earmarked for disbursement (Opens in new window). Against that, the fund’s first call for proposals drew 180 requests worth $2.8 billion, nearly eight times what’s available. The board deferred its first funding decision to December, a year after the call opened. None have been approved, and no money has yet reached any country for any disaster.
The machinery built to deliver that mandate still operates like a conventional development fund rather than an emergency response mechanism.
Nepal’s flood is exactly the kind of disaster the fund exists for, but its request breaks from the usual process. It arrives after the funding window has closed and asks for an emergency decision outside the normal calendar, something the board has never granted. Eight members representing Africa, Asia and the least developed countries have called for an extraordinary meeting (Opens in new window) on the appeal, treating it as a test of whether the fund can act fast when it matters. Even if the board agrees, the numbers make the outcome predictable: some support may follow in December, nowhere near the quantum of cash needed to cover the damage Nepal has cited.
The scale of destruction in Nepal is the worst the region has seen in years, and it forces a reckoning with how climate finance, and loss and damage funds in particular, are built to respond to vulnerable countries hit by disasters of this magnitude.
The FRLD’s own mandate allows it to provide funding immediately following extreme weather events, according to its governing instrument (Opens in new window), not only for long-term reconstruction. The problem is that the machinery built to deliver that mandate still operates like a conventional development fund rather than an emergency response mechanism. Its only funding cycle (Opens in new window) runs eleven steps, from origination through technical review, board approval, implementation, and three years on, it remains the fund’s sole track.
This is not to say technical review and due diligence are unnecessary. Multilateral climate funds and bilateral donors need that kind of scrutiny to run multi-year, multi-billion-dollar projects on emissions cuts and resilience-building. But loss and damage finance is different, and it demands a different lens of urgency. Countries facing catastrophic loss of life and destruction of their economies cannot afford to wait years for procedural and technical review. At the same time, the developed world, and the high-emitting countries in particular, cannot evade responsibility. They must put more money into climate finance, and especially into loss and damage. The $350 million currently available against $2.8 billion in requests, let alone Nepal’s own four-to-seven-billion-dollar claim, is an insult to injury.
And if adequate, just compensation isn’t available in the form of grants, what choice do vulnerable countries have but to take on more loans for recovery, adding to the burden on economies already struggling to service existing debt?
Relief supplies from Australia loaded in support of the floods at Nepal (Dana Millington/Defence Imagery)
Pakistan is a stark example. The 2022 floods caused $30 billion in combined damages and losses (Opens in new window), and killed more than 1,700 people. With grants far short of what was needed, Islamabad took on billions more in fresh loans including $400 million (Opens in new window) just to rebuild homes and infrastructure. A country hit by a disaster it did not cause ended up borrowing its way through recovery.
The question is whether the vulnerable developing nations of the Global South can depend on the promise of climate finance and genuine compensation, or whether the developed world will keep delaying the money these countries justly and urgently deserve.
For South Asia, this is a matter of civilisational survival, as Nepal’s Foreign Minister Shisir Khanal has said, (Opens in new window) given the region’s dependence on Himalayan rivers. Khanal has warned that if Himalayan glaciers disappear, the water security of more than two billion people across South Asia who depend on rivers fed by these mountains would be permanently compromised.
The letter from developing-country board members demanding emergency action on Nepal is a small preview of what that solidarity can look like in practice. It needs to scale up, in COP negotiating rooms and in bilateral diplomacy, not stay confined to a single letter over a single disaster.
This is a matter of survival for the region, and it calls for solidarity and unity. Yesterday it was Pakistan. Today it is Nepal. Tomorrow it may be someone else.
About the author
Jawad Khalid
Jawad Khalid is a climate finance specialist based in Islamabad.
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