What Is 'Loss and Damage' from Climate Change? 8 Key Questions, Answered

The planet has already warmed by about 1.3 degrees C (2.3 degrees F) and, in 2024, it temporarily surpassed the Paris Agreement’s 1.5 degrees C threshold for the first time — an alarming milestone driven by human-induced climate change. Millions of people today are facing the real-life consequences of higher temperatures, rising seas, fiercer storms and unpredictable rainfall. 

Rapidly reducing greenhouse gas emissions is essential to limit temperature rise and secure a safer future for us all. So is making major investments to protect communities from severe impacts that will continue to worsen. 

Yet collective efforts to curb emissions and adapt are currently not enough to tackle the speed and scale of climate impacts. Even if we rein in warming in the long term, we’re already seeing daily reminders of the risks a warmer world brings, from increased wildfires to extreme flooding — meaning some losses and damages from climate change are inevitable. How countries handle these losses and damages has been a key issue at the UN climate negotiations and beyond. 

Here we provide an explainer on the concept of “loss and damage” and what’s needed to address it. 

1) What Is Loss and Damage?

While there is no official definition of loss and damage under the UN, the term is used in international climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to — for example, the loss of coastal heritage sites due to rising sea levels or the loss of homes and lives during extreme floods. This also includes situations where adaptation options exist but a community doesn’t have the resources to access or utilize them. 

Loss and damage is harming and will continue to harm vulnerable communities the most, meaning addressing the issue is an urgent matter of climate justice. But the subject has historically been fraught with contention both inside and outside of UN climate negotiations. In particular, countries have struggled to reach agreement on how much money developed countries should supply to address loss and damage in developing nations, which have contributed the least to the climate crisis but are often hit hardest by its impacts. While an international loss and damage fund was established in 2022 to begin addressing this need, long-term financing commitments remain unsolved. 

2) What Counts as Loss and Damage?

Loss and damage can result from extreme weather events like cyclones, droughts and heat waves, as well as from slow-onset changes such as sea level rise, desertification, glacial retreat, land degradation, ocean acidification and salinization. In some cases, damages may permanently alter places — for example, rising seas encroaching on low-lying islands, drought shrinking water supplies and once-productive farmland turning into barren land. 

Damages from the effects of climate change can be further divided into two categories — economic and non-economic — though there is overlap between the two. 

Economic losses and damages are those affecting resources, goods and services that are commonly traded in markets, such as damage to critical infrastructure and property or supply chain disruptions. This can play out at an international or national scale as well as locally, such as impacts on individual farmers or communities. 

In coastal Bangladesh, for example, salt farming is a major source of employment. Yet in recent years, frequent cyclones, tidal surges and heavy rainfall have hampered salt production, eroding the country’s self-sufficiency and forcing it to import salt to manage the market shortfall. 

Non-economic losses and damages can be some of the most devastating, such as the incalculable toll of losing family members, the disappearance of cultures and ways of living or the trauma of being forced to migrate from ancestral homes. 

Take the communities in Kosrae, Micronesia, who have lost burial grounds due to coastal erosion caused by sea level rise. Likewise, the loss of sea ice in the Arctic has affected the cultural identity and hunting practices among Inuit communities. While harder to quantify and monetize, non-economic losses have severe and detrimental effects on communities’ well-being. 

3) What Is the Difference Between Mitigation, Adaptation and Addressing Loss and Damage?

Under the Paris Agreement, countries recognized the importance of “averting, minimizing and addressing” loss and damage. These approaches are closely linked to the three pillars of climate action: mitigation, adaptation and addressing loss and damage. 

Loss and damage can be averted by curbing greenhouse gas emissions (mitigation) and minimized by taking preemptive action to protect communities from the consequences of climate change (adaptation). Climate adaptation actions include protecting communities from sea level rise by helping them move to higher ground, preparing for extreme weather disasters by investing in early warning systems, protecting food supplies, switching to drought-resistant crops and much more. 

But not all impacts can be prevented or adapted to. This is where the third pillar — addressing loss and damage — comes in. It focuses on addressing issues such as displacement, destruction of livelihoods and cultural loss. 

Loss and damage is linked to adaptation and mitigation because it happens when efforts to reduce emissions are not ambitious enough and when adaptation efforts are unsuccessful or impossible to implement. Research from the Intergovernmental Panel on Climate Change (IPCC) acknowledges that as the magnitude of climate change increases, so does the likelihood of exceeding adaptation limits. It differentiates between “soft” limits — when adaptation options exist but communities don’t have the resources needed to pursue them — and “hard” limits, where “there are no reasonable prospects for avoiding intolerable risks.” These limits are particularly acute in vulnerable communities that lack the resources needed to implement effective adaptation options. 

Coral reefs offer a good example of where adaptation is likely to reach its limits. The IPCC found that 70% to 90% of tropical coral reefs will die by mid-century even if temperature rise is limited to 1.5 degrees C (2.7 degrees F), with nearly total loss with 2 degrees C (3.6 degrees F) of warming. This will lead to irreversible losses of biodiversity and have major social and financial impacts on coastal communities that eat and sell reef-dwelling fish. 

While further research is needed to fully understand the limits of climate adaptation, it’s clear that losses and damage are already happening and many communities lack the resources to deal with them. Climate plans and policies should account for loss and damage alongside mitigation and adaptation, and ensure adequate funding and support are made available. 

4) What’s the History of Loss and Damage in UN Climate Negotiations?

The issue of loss and damage has been a lively one in UN climate negotiations for over three decades. 

It began in 1991, when Vanuatu and other small island states proposed a scheme to provide financial resources to countries impacted by sea level rise. Under its proposal, each country would contribute funds based on its relative contribution to global emissions and share of the global gross national product. The idea was rejected and left out of the UN Framework Convention on Climate Change (UNFCCC), adopted in 1992. 

The issue of loss and damage didn’t formally enter climate negotiations until 2007 (as part of the Bali Action Plan) and only gained real traction in 2013, when the Warsaw International Mechanism on Loss and Damage (WIM) was established. But neither the WIM nor any other established mechanism delivered funding to help countries manage loss and damage. 

In 2015, developing countries successfully secured an article on loss and damage (Article 8) in the Paris Agreement. However, finance related to loss and damage was ignored. Not only that, but developed countries ensured that the decision text of the accompanying UN climate summit (COP21) included language ruling out lability or compensation claims associated with loss and damage. At the UN climate summit in 2021 (COP26), climate-vulnerable nations again pushed for a loss and damage fund but were rejected once more. Instead, negotiators launched a two-year Glasgow Dialogue to explore possible loss and damage arrangements. They also agreed to fund the Santiago Network on Loss and Damage (SNLD), established in 2019 to provide technical assistance to those impacted by loss and damage. 

In 2022, countries finally agreed to create a new loss and damage fund. The following year, it was operationalized as the Fund for Responding to Loss and Damage (FRLD), with almost $700 million in initial pledges to fill the fund. The SNLD was also formally operationalized that year. 

It was a landmark moment for loss and damage negotiations — but the work was far from done. 

Since 2023, efforts have continued to operationalize the FRLD — the Philippines was confirmed as the host country, an executive director was appointed and the World Bank successfully met the conditions required to host the FRLD. Meanwhile, the SNLD is mobilizing its first round of technical assistance, following Vanuatu’s request to develop a long-term program to address loss and damage impacts. Since the 2024 UN climate summit (COP29), additional pledges to the FRLD came from Australia, Austria, Luxembourg, New Zealand, South Korea, Sweden and others. As of April 2025, pledges to the FRLD total $768.4 million. 

It is also worth noting that, at COP29, the new climate finance goal was adopted but did not include a subgoal for loss and damage. While it acknowledged the widening gap in addressing the growing scale and frequency of loss and damage impacts, it did not include details on how much developed countries would be expected to contribute. Countries also failed to finalize the third five-year review of the WIM — now deferred to the UN climate summit in November 2025. 

While the $768.4 million pledged to date is a start, it falls far short of the up to $580 billion that vulnerable countries may require for climate-related damages by 2030. 

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5) Is Loss and Damage an Issue of Liability and Compensation?

One reason loss and damage has been so contentious historically is due to developed countries’ concerns that compensating for losses and damages caused by adverse climate impacts may be construed as an admission of legal liability, triggering litigation and compensation claims on a major scale. As such, developed countries fought to include language in the Paris Agreement to prevent them from being legally on the hook to provide compensation. 

This concern was addressed in loss and damage funding discussions at the 2022 UN climate summit (COP27) and in the final decision the following year at COP28, which states that “funding arrangements, including a fund, for responding to loss and damage are based on cooperation and facilitation and do not involve liability or compensation.” This provided the assurance that developed countries were looking for to continue negotiations and set the loss and damage fund in motion. 

6) What Are Some Possible Sources of Funding for Addressing Loss and Damage?

A range of funding sources, including public and private, will be needed to address the scale and scope of loss and damage from climate change. But these sources cannot function separately. They all need to work together as part of a broader “mosaic of solutions”. 

Beyond the Fund for Responding to Loss and Damage (FRLD), some developed countries point to humanitarian aid, disaster-risk management and insurance as sources of finance for loss and damage. Other more innovative sources have also been proposed, such as levies on air travel and shipping, financial transactions taxes, taxes on windfall profits of fossil fuel companies and other non-public sources.

Examples from across the world show why this funding mix is necessary. In the wake of the devastating floods in 2022, Pakistan needed short-term humanitarian assistance as well as long-term support for rebuilding. Meanwhile, Palau is concerned that tuna are migrating out of its fishing areas as the ocean warms. Without the ability to fish for tuna, some Pacific Island nations could lose income averaging 37% of government revenue. While humanitarian aid would not be poised nor mandated to address this problem, other forms of finance could. 

This underscores the need for broader funding arrangements, including the dedicated loss and damage fund, which can coordinate and align various types of funding from both within and outside of the UNFCCC to adequately address loss and damage. The fund could facilitate coordination with a wide variety of funding arrangements through multilateral development banks, relevant UN agencies, multilateral climate funds, the Santiago Network and others. 

Outside of the UNFCCC, there have been additional important developments for financing loss and damage. These include the Climate Vulnerable Forum and Vulnerable Twenty (V20) Group’s crowd-sourced loss and damage fund and the G7 and V20’s Global Shield Against Climate Risks initiative, which aims to enhance existing financial structures on climate risk and loss and damage finance. 

7) What Activities Could Finance for Loss and Damage Support?

Action to address loss and damage could span a range of activities and should be shaped by the needs and priorities of the communities most affected by climate change impacts. For example, this could include weather-indexed crop insurance for farmers or proactively setting aside funds to rebuild critical infrastructure when disaster strikes. 

It could also entail providing immediate humanitarian assistance after an extreme weather event, offering relief and rehabilitation to victims through provision of basic amenities, enabling social protection systems to provide emergency cash transfers to the poor and enhancing microcredit institutions to provide financing for livelihood restoration. 

Loss and damage funding could also help people rebuild when their homes are destroyed. For example, while early warning systems in Bangladesh have helped radically reduce fatalities from extreme weather events, people leave the storm shelters to find their homes and livelihoods destroyed and have therefore unquestionably experienced loss and damage. 

Finally, when necessary, funding for loss and damage can assist with migration and relocation of people who are permanently displaced and help diversify skills if their original livelihoods are no longer available. 

8) What Needs to Happen Next to Address Loss and Damage?

Climate impacts are already causing widespread disruptions and are only poised to worsen, even with ambitious action on emissions reductions and adaptation. The need for loss and damage solutions — and finance to enable them — is more urgent than ever before. 

With the loss and damage fund now in motion, the international community will have to work diligently to finalize the details of new funding arrangements and to mobilize finance at scale. Attention will also turn to the board of the FRLD to ensure institutional structures are in place to deliver resources with the necessary speed and scale. 

As countries prepare for the 2025 UN climate summit (COP30), the world will be looking for clear signals on loss and damage from countries’ nationally determined contributions (NDCs). This could include information outlining loss and damage response plans, developing countries’ needs and commitments from developed countries to contribute to loss and damage finance. Moreover, additional commitments to the FRLD — as well as financial support for the broader global international arrangements for addressing loss and damage, including the Warsaw International Mechanism (WIM) and the Santiago Network (SNLD) — will be critical to building momentum as the world enters the second half of this critical decade.  

Developing countries and communities on the front lines of climate impacts are counting on the world to deliver. 

This article was originally published in April 2022. It was last updated in May 2025, to reflect the latest state of play for loss and damage in UN climate negotiations.