Experts raise red flags on major problem with multimillion-dollar international fund: 'Adverse impacts'

A new fund built to assist lower-income countries as they recover from destructive weather events is now accepting its first project proposals, reported Dialogue Earth.

What is climate finance?

Climate finance refers to money that flows from wealthier nations to developing countries to help them deal with the fallout of a warming planet. This includes funds for preventing future damage and for recovering from disasters that have already occurred.

One major piece of this puzzle is the Loss and Damage Fund, which was created at the 2023 UN climate summit. The fund specifically targets countries that face the worst consequences from severe storms, droughts, and floods, like island nations threatened by rising oceans.

By the middle of 2025, pledges from 27 countries totaled around $768 million. While that sounds like a lot, developing nations lose more than $100 billion every year to weather disasters, making the current pool a tiny fraction of what's actually needed.

Why is climate finance important?

When hurricanes, droughts, or floods strike, lower-income countries are often left without the tools to recover. Many lack comprehensive coverage programs, emergency savings at the government level, or the capacity to rebuild quickly.

Without outside support, these disasters can push entire economies into cycles of borrowing and slow growth that last for years.

According to research from Tsinghua University, between 2009 and 2019, weather disasters associated with rising temperatures caused about $125 billion in economic damage every year. About half that amount came from the destruction of property and crops. The other half rippled outward through trade networks and production delays.

"It is worth bringing these findings to bear on the concept of 'vulnerability' which is at the heart of climate negotiations," noted Wang Bowen, a PhD student at Tsinghua University's Institute of Energy, Environment and Economy, in a piece written for Dialogue Earth.

"It generally means how far a system is liable to suffer adverse impacts as a result of exposure to climate hazards."

How climate finance stabilizes the global economy

Weather disasters don't stay relegated to one corner of the world.

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When a flood shuts down a factory in Southeast Asia or a drought devastates African farms, the effects of those disruptions ripple along trade routes and influence prices, production, and jobs everywhere.

Agriculture, shipping, building, and manufacturing absorb the biggest hits from these events. But businesses in retail, finance, and hospitality also struggle when the flow of goods and materials gets interrupted.

At the 2024 UN climate summit, nations agreed to aim for $1.3 trillion in yearly funding by the middle of the next decade. Getting those dollars into the hands of the people who actually need them, and doing so without red tape slowing things down, is proving to be the hardest part.

If you want to support these efforts, contact your elected officials and voice support for international climate agreements.

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