Climate Loss and Damage Fund: A Global Governance Transformation from Post-Disaster Compensation to Pre-Disaster Resilience

From Emergency to Prevention: The Paradigm Gap in Loss and Damage Policies

Extreme events brought about by climate change have exceeded the infrastructure and fiscal response capabilities of many countries. In 2025, a study published in *npj Climate Action* systematically examined the structural imbalance in the current international loss and damage (L&D) policy framework: more than 80% of climate finance is used for post-disaster response, with only about 12% invested in ex-ante risk reduction. This "disaster-first, relief-second" model not only leads to inefficient resource use but also traps vulnerable countries in a vicious cycle of "rebuild and lose again."

Before and After: Two Disconnected Logics

The concept of loss and damage first emerged in the United Nations climate negotiations in the 1990s, aiming to provide compensation for climate impacts that cannot be avoided through mitigation and adaptation. However, from the establishment of the "Fund for Responding to Loss and Damage" (FRLD) at COP27 to the initial capitalization at COP28, there is an order-of-magnitude gap between pledged funding (approximately $700 million) and estimated annual needs (hundreds of billions of dollars). More critically, most of these funds go to emergency humanitarian assistance and infrastructure repair, rather than systematic investments to enhance long-term community adaptation capacity.

Based on discussions with 49 experts (from 12 countries, including five Global South countries), literature reviews, and case comparisons, the research team identified three major barriers to integration: fragmentation of knowledge systems, exclusionary governance mechanisms, and rigidity of financing instruments. For example, in the post-cyclone reconstruction of Cyclone Idai in Zimbabwe, the concept of "Build Back Better" was written into policy, but due to a lack of cross-sectoral coordination and long-term budget commitments, in practice it often degenerated into simple in-situ reconstruction of the same structures.

Three Enabling Conditions: Knowledge, Governance, and Finance

1. Sound Knowledge Systems: Many developing countries lack fine-grained assessments of the spatiotemporal distribution of climate risks, resulting in a lack of targeting in ex-ante interventions. A sound risk information system needs to integrate traditional knowledge with scientific models and establish cross-border early warning cooperation.

2. Inclusive Governance: Current L&D decisions are mostly led by central governments and international institutions, marginalizing the participation of local communities, women, and indigenous peoples. The study emphasizes that governance mechanisms should ensure the voices of affected groups in project design, implementation, and monitoring, thereby enhancing the social sustainability of resilience.

3. Flexible Financing: The disbursement processes of existing funds (such as FRLD) are lengthy and have strict conditions, making them unable to adapt to rapid response to sudden disasters or long-term resilience investment. The study calls for establishing a "blended finance" mechanism that combines grants, concessional loans, and risk insurance instruments, allowing funds to flow flexibly across prevention, response, and recovery phases.

Collective Action Challenges under Fragmented Global GovernanceAgainst the backdrop of frequent extreme weather events and deepening geopolitical rifts, loss and damage policies face more complex governance dilemmas. Disagreements between developed and developing countries over "historical responsibility" and "compensation obligations" persist. Research indicates that if the fund's operations focus only on ex-post compensation while neglecting ex-ante prevention, not only will the total amount of losses remain unreduced, but it may also reinforce the repair of fossil fuel infrastructure, locking in carbon emission pathways.

At the same time, the voice of the Global South remains insufficient in fund governance institutions. Although the FRLD board envisioned equal representation, technical barriers and asymmetrical negotiating power in actual implementation have constrained the voice of developing countries. This further undermines the effectiveness and fairness of fund allocation.

Long-term trend: Resilience investment becomes the core of development competitiveness

From an ESG perspective, climate resilience capacity will gradually become a core indicator of the development competitiveness of countries and regions. Research by the World Bank and the Global Commission on Adaptation shows that every $1 invested in ex-ante resilience can save $4 to $6 in post-disaster recovery costs. However, the international climate finance system remains biased toward "green" and "emission reduction" projects, with a severely imbalanced allocation to "adaptation" and "loss."

In the future, L&D policies need to move beyond the narrow framework of "humanitarian assistance" and embed into a broader sustainable development agenda: including ensuring food security for the most vulnerable populations, preventing education disruptions, and protecting ecosystem services. Only by establishing a dynamic balance between ex-ante prevention and ex-post recovery can global climate governance truly shift from "responding to crises" to "managing risks."

References: Totin, E., Mechler, R., Birkmann, J. et al. Balancing ex-ante and ex-post approaches for Loss and Damage policy in a fragmented world. *npj Climate Action* 5, 64 (2026).