What is Loss and Damage (Climate)?

What is Loss and Damage?

Loss and damage is the harm from climate change that mitigation and adaptation do not prevent: homes and harvests destroyed by storms, land lost to rising seas, lives and livelihoods lost to heat and drought. It includes economic losses that can be priced and non-economic ones, such as cultural heritage, ancestral territory and biodiversity. In UN climate negotiations, the phrase also names a policy agenda about how the world responds to that harm and who pays for it.

Article 8 of the Paris Agreement recognizes the importance of averting, minimizing and addressing loss and damage from both extreme weather and slow onset events, such as sea level rise and desertification. The same decision that adopted the agreement states that Article 8 provides no basis for any liability or compensation, a line that still shapes the debate.

The dividing line with climate adaptation is timing and limits. Adaptation lowers risk before a hazard strikes; loss and damage is what is left when adaptation falls short or reaches its limits. The IPCC's 2022 assessment of impacts and adaptation found that soft limits to some human adaptation have been reached, that hard limits have been reached in some ecosystems, including some warm-water coral reefs, and that even effective adaptation does not prevent all losses and damages. A wider adaptation gap tends to mean more loss and damage later.

Why It Matters

The burden falls hardest where economies are smallest. WMO data published in 2023 show that weather, climate and water extremes caused 11,778 reported disasters between 1970 and 2021, killing just over 2 million people and causing $4.3 trillion in economic losses, with more than 90% of deaths in developing countries. In developed economies, no recorded disaster cost more than 3.5% of GDP; in small island developing states, one in five disasters with reported losses cost more than 5% of GDP, and some exceeded 100%.

Hurricane Melissa showed the arithmetic in 2025. The World Bank and IDB estimated its physical damage in Jamaica at $8.8 billion, more than 40% of the country's 2024 GDP. Jamaica, whose disaster risk financing the World Bank holds up as a model, received a full $150 million catastrophe bond payout, less than 2% of the damage.

The new UN fund cannot close that distance on its own. Its first call for funding requests drew 176 proposals from 119 countries seeking about $2.8 billion, against $342 million available in its start-up phase.

The question of who pays is also moving into courts. In July 2025 the International Court of Justice advised that states breaching their climate obligations incur legal responsibility and may have to make full reparation, depending on the circumstances. The opinion is not binding, but it keeps the question of reparation open outside the UN funding track.

How It Works / Key Components

The UN architecture

How the fund works

The COP28 decision set the fund up as a World Bank-hosted financial intermediary fund for an interim period of four years, with the Bank as trustee and host of an independent secretariat, on conditions meant to keep the fund autonomous, such as setting its own eligibility criteria. A 26-member Board, 14 of whose members come from developing countries, governs it. Support can complement humanitarian aid after extreme weather, pay for longer-term recovery and reconstruction, address slow onset events, and help with relocation and other forms of climate-related human mobility.

Where the money stands

The fund is still in its start-up phase, known as the Barbados Implementation Modalities. In July 2026 the Board raised the phase's budget from $250 million to $342 million, kept at least half for small island states and least developed countries, and deferred its first funding decisions to its December 2026 meeting to assess the volume of requests, so no request had been approved as of September 2026. Pledges exceed $820 million, and the Board has begun preparing the fund's first replenishment.

Council Fire's Approach

We approach loss and damage as a planning and evidence problem as much as a funding one. With public agencies, communities and the organizations that serve them, we document what is at stake, including non-economic losses such as cultural sites, local knowledge and community ties that standard damage assessments miss, and we involve affected residents in deciding what recovery should restore. We connect adaptation planning to recovery planning, so choices about where to rebuild, protect or relocate are made before the next disaster, and for companies we map where operations and suppliers sit near the limits of adaptation. Where a program needs it, we build tools through Council Fire Labs to track losses, funding and recovery over time.

Frequently Asked Questions

What are non-economic losses?

Non-economic losses are harms that markets do not price, such as loss of life, health, cultural heritage, Indigenous and local knowledge, biodiversity and ancestral territory. They are often the hardest losses for communities to recover from and the easiest for damage assessments to leave out. The fund's mandate explicitly covers both economic and non-economic loss and damage.

Who can receive money from the Fund for responding to Loss and Damage?

Developing countries that are particularly vulnerable to climate change are eligible. The fund's governing rules provide for access through national governments, national and subnational entities, and international agencies, plus small grants for communities and Indigenous Peoples. In the start-up phase, at least half of the resources are reserved for small island developing states and least developed countries.

How does loss and damage affect businesses?

Companies with operations, suppliers or customers in highly exposed regions face losses that adaptation alone will not prevent, from damaged facilities to broken supply chains. Insurance often covers only part of the bill, as Jamaica's experience with Hurricane Melissa showed. The debate over responsibility for climate harm is also moving into courts, which makes loss and damage a legal and reputational issue as well as a physical one.