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Loss and Damage Fund makes first country allocation: $21.6 million to Nepal

By CAShorts DeskPublished Sources: FRLD press release (22 Oct 2026) and Fund pages; UNFCCC; The Hindu; Hindustan Times

Loss and Damage Fund makes first country allocation: $21.6 million to Nepal
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The Board of the Fund for responding to Loss and Damage on 22 October 2026 set aside $21.6 million for Nepal, provisionally. The money answers the August Bhote Koshi floods. It is the Fund's first allocation to any single country. It covers $20 million for recovery and $1.6 million in oversight fees.

Syllabus: Prelims · Environment & Ecology; GS3 · Environment & Conservation; GS3 · Disaster Management

Why this matters for UPSC

GS3 (climate change, disaster management) and GS2 (international institutions). Prelims can ask where the Fund for responding to Loss and Damage was set up, who hosts its Board and trustee, and what Article 8 of the Paris Agreement covers.

Why it matters

Communities along Nepal's flooded rivers were struck by a disaster that the Board treats as climate-induced, while Nepal adds almost nothing to global emissions. Until now a poor country hit this way could borrow, appeal for aid or wait. This decision shows the Fund can answer a single country's emergency with grant money that does not add to national debt. It also shows the gap: the sum is tiny next to the damage, the cash still waits on paperwork and on donors paying what they pledged, and dozens of other countries have requests pending. For Himalayan states facing ice avalanches and glacial floods, how fast and how much this Fund can pay will shape their recovery.

Prelims pointers

  • COP27 at Sharm el-Sheikh, Egypt (2022), decided to establish the Fund (decisions 2/CP.27 and 2/CMA.4); a Transitional Committee prepared its design.
  • COP28 at Dubai, UAE (2023) approved the Governing Instrument and operationalised the Fund under a new, dedicated and independent secretariat.
  • Board: 26 members, 12 from developed and 14 from developing countries (3 Asia-Pacific, 3 African, 3 Latin American and Caribbean, 2 SIDS, 2 LDCs, 1 other); each has an alternate.
  • The Philippines was chosen in 2024 as host of the Board; the World Bank hosts the secretariat and acts as trustee.
  • Warsaw International Mechanism for Loss and Damage: created at COP19 (2013) with an Executive Committee that reports annually to the COP.
  • Article 8 of the Paris Agreement recognises averting, minimising and addressing loss and damage, including extreme weather events and slow onset events.
  • Barbados Implementation Modalities: start-up phase for 2025 and 2026, with at least 50% reserved for small island developing States and least developed countries.
  • Access routes under the start-up phase: direct budget support, or through entities accredited to the Adaptation Fund, Global Environment Facility or Green Climate Fund.

Practise a UPSC-style question

With reference to the Fund for responding to Loss and Damage, consider the following statements:

1. The decision to establish the Fund was taken at COP26 held in Glasgow.

2. The Fund's Governing Instrument was approved at COP28 held in Dubai.

3. The Fund serves both the UNFCCC and the Paris Agreement as an operating entity of the Financial Mechanism.

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 2 and 3 only
  3. (c) 1 and 3 only
  4. (d) 1, 2 and 3
Show the answer

Answer: (b) 2 and 3 only

Answer: (b) 2 and 3 only. The Fund was decided at COP27, not COP26.

Statement 1: incorrect. COP27 at Sharm el-Sheikh, Egypt, in 2022 decided to establish the Fund, through decisions 2/CP.27 and 2/CMA.4.

Statement 2: correct. COP28 at Dubai in 2023 approved the Governing Instrument and made the Fund operational.

Statement 3: correct. COP28 and CMA 5 made it an operating entity of the Financial Mechanism, serving the Convention and the Paris Agreement.

Eliminate: Statement 1 is the surest: Glasgow (COP26, 2021) did not create the Fund. Out: (a), (c), (d).

Trap: Look-alike names. COP26, COP27 and COP28 sit close together; the Fund was decided at COP27 and operationalised at COP28.

Remember: Decided at COP27 Sharm el-Sheikh (2022); operational from COP28 Dubai (2023).

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