L&D finance must not be replaced with humanitarian aid

The glacial collapse and resulting massive flash floods in Nepal constitute one of the worst manifestations of loss and damage (L&D) in recent history.

It is another painful reminder of the costs unjustly paid by climate-vulnerable nations instead of those who produce the most climate pollution. It is also another preview of the kinds of catastrophes that await a world that would unfortunately surpass for the next few years the 1.5°C global warming limit under the Paris Agreement.

This has also placed the Fund for Responding to Loss and Damage (FRLD) back in the spotlight - a few months after spending more hours behind closed-doors than being transparent during its 9th Board meeting (B9). The Nepalese government has already submitted a request for emergency assistance from said fund, but as of this writing, there is no approval of the request.

Is help on the way?

Consideration for a rapid disbursement policy was actually included in the B9 agenda, as shown in the FRLD's proposed workplan from its 8th meeting. In previous meetings, Board members from the Least Developed Countries and Small Island Developing States actually pushed for this to be urgently enacted.

However, no known discussions were made at B9, as said meeting [most of which were held as "executive" sessions] was dominated by discussions about operationalising the USD250-million pilot funding program Barbados Implementation Modalities (BIM), which was substantively designed for cases like this.

While ironing out the details of the BIM operationalisation is obviously necessary, this left multiple agenda items undiscussed, including the policy for Active Observers and multistakeholder engagement – and rapid disbursement.

No more delays: the Board and Secretariat has to deliberate on this modality. There are several elements to consider for a rapid disbursement modality.

One of these elements is what triggers this mechanism. How the eligibility aspect has been handled emerged as an issue for the FRLD; a factor for why no BIM proposal was approved at B9 is the broad scope of eligible activities allowed for proposals. Many of the projects ended up being more on adaptation and disaster risk reduction than L&D.

This must be avoided for the criteria that triggers a rapid disbursement modality under the FRLD. It must coordinate with the Warsaw International Mechanism – including the Santiago Network – to properly set a policy for triggers and other indicators applicable to responding to emergency situations that would apply for all developing countries.

Another element is on direct access – and not the modality currently set under the BIM. This is to ensure that in cases like this, the money directly flows to affected communities, especially with the bottlenecks seen under national governance processes across developing countries. Through considerations for a small grants policy, this was also initially slated for the B9 agenda.

Elements such as devolved subnational financing, simplified small grants aimed for specific groups like Indigenous Peoples and children and youth, and accompanying safeguards must be accounted for in the Board's decision-making on this issue – hopefully sooner than later.

As key as addressing the issues of rapid disbursement and direct community access are, these gaps in the structure and readiness of the FRLD itself are not the only ones being exposed by the recent event.

Not a dichotomy

The catastrophe in Nepal also highlights an interesting dynamic between humanitarian response and L&D finance.

While the FRLD struggles to figure out how to respond to Nepal's request or get more actual funds under its belt for cases like this, developed countries are quick to pledge millions in humanitarian funding to answer the call for emergency support.

Let's make this clear: humanitarian aid is always critical, especially for emergency situations. There is a need to optimise complementarity and coherence to strengthen the global landscape of addressing L&D, which covers rapid and slow onset events, economic and non-economic losses and damages. In some cases, there will be overlaps between these two forms of support.

Yet it also creates a possible pattern of humanitarian aid not being viewed as complementary, but being used as an alternative to providing new and additional L&D finance.

As of this writing, three years into the FRLD's existence, it has yet to reach even USD1 billion in disbursable funds or even pledges. Through this potential trend, it could appear that climate finance is increasing, even though the money is simply being repurposed from existing funding pools under humanitarian and development landscapes.

In addition, it could reduce political pressure from higher-income governments to provide new and additional L&D finance. Developed countries could continue to claim to provide climate-related support through humanitarian assistance while avoiding their accountability that comes with coursing it through the FRLD and downplaying the justice aspect that is integral to the L&D concept.

The FRLD was designed to be a hub for innovative financing. Responding to loss and damage does not mean it has to be merely reactive to or slowly deal with the climate calamities happening around us.

It is unfortunate that, yet again, a developing country had to experience a catastrophe of this magnitude before momentum for something that was obvious from the start would be given sufficient urgency and attention. This has been the story of the L&D workstream for three decades, and it has costed us way too much for this story to continue in this direction.

Both COP31 and the fund's next Board meeting are not that far off. Whatever the decisions the FRLD Board will make for the rest of 2026 must abide by this principle: the vulnerable must not be the ones paying the costs of climate pollution. It is polluters who must pay.

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