Loss and Damage Fund

NOV 21

Preliminary   > Environment and Ecology   >   Global warming   >   Climate change

Why in news?

  • The countries at the COP27 of UNFCCC in Sharm el-Sheikh, Egypt have decided to establish a ‘Loss and Damages’ fund.

About Loss and Damage:

  • There is no official definition of ‘Loss and damage‘. It is a general term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to; OR when adaptation is possible but a community doesn’t have the resources to access or utilise them.
  • The developing countries are more vulnerable to climate change events, both due to frequency of events as well as lack of resources to adapt.
  • According to a study, 6 of the world’s 10 most affected countries (between 1996-2015) by extreme weather events were in Asia.
  • Under the Loss and Damage framework, developing countries demand compensation from developed countries for losses/damages suffered due to climate change events.

About Loss and Damage Fund:

  • Loss and damage fund (LDF) was first floated in 1991.
  • Vanuatu, a low-lying island nation in the Pacific, suggested the creation of an insurance scheme, under the auspices of the UN, to help pay for the consequences of rising sea levels.
    • For thirty years such demands were left ignored by the UN. But recently Scotland promised £2m ($2.4m) to the cause.
  • At the COP 27, countries decided to establish the Loss and Damage Fund.
  • The fund will be aimed at helping developing countries that are “particularly vulnerable” to the effects of climate change.
  • The fund would initially draw on contributions from developed countries and other private and public sources such as international financial institutions.


With reference to ‘Loss and Damage Fund’ under UNFCCC, consider the following statements:

1. It aims to compensate economically vulnerable countries for the damages caused by climate-linked disasters.

2. The fund includes contributions from both public and private sources.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2