A new fund set up to help low-income countries as they recover from devastating climate events is now accepting proposals for its first projects, according to a report. Dialogue land.
What is climate finance?
Climate finance refers to the money that flows from richer countries to developing countries to help them deal with the repercussions of global warming. This includes funds needed to prevent future damage and recover from disasters that have already occurred.
One key piece of this puzzle is the Loss and Damage Fund, established at the UN Climate Summit in 2023. The Fund specifically targets countries facing the worst consequences from severe storms, droughts and floods, such as island nations threatened by rising ocean levels.
By mid-2025, pledges from 27 countries totaled approximately $768 million. Although this seems like a large number, developing countries lose more than $100 billion annually due to disasters, making the current amount a small portion of what is actually needed.
Why is climate finance important?
When hurricanes, droughts or floods strike, low-income countries are often left without the tools to recover. Many of them lack universal coverage programs, emergency savings at the government level, or the ability to rebuild quickly.
Without external support These disasters It can push entire economies into cycles of borrowing and slow growth that last for years.
TCD Picks » Upway Spotlight
💡Upway makes it easy to find discounts of up to 60% on premium e-bike brands
According to research conducted by Tsinghua University, between 2009 and 2019, climate disasters associated with rising temperatures caused economic losses of about $125 billion annually. About half of this amount came from the destruction of property and crops. The other half spread abroad through trade networks and production delays.
“It is worth bringing these findings to bear on the concept of ‘vulnerability’ that lies at the heart of climate negotiations,” Wang Bowen, a doctoral student at the Institute of Energy, Environment and Economics at Tsinghua University, noted in an article he wrote for Dialogue Earth.
“It generally means the extent to which a system can suffer negative impacts from exposure to climate risks.”
How climate finance stabilizes the global economy
Weather disasters do not remain confined to one corner of the world.
TCD Picks » Quince Lights
💡These best-selling products from Quince provide affordable, sustainable luxury for everyone
When a flood shuts down a factory in Southeast Asia, or when a drought devastates African farms, the effects of these disruptions ripple along trade routes and affect prices, production, and jobs everywhere.
Agriculture, shipping, construction and manufacturing absorb the biggest hits from these events. But businesses in retail, finance and hospitality also face difficulties when the flow of goods and materials is interrupted.
At the 2024 UN Climate Summit, countries agreed to target $1.3 trillion in annual financing 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 the hardest part.
If you would like to support these efforts, get in touch Your elected officials and vocal support for international climate agreements.
Get free TCD newsletters for easy tips to save more, reduce waste, and make smarter choices — and earn up to $5,000 toward clean upgrades in TCD exclusives Rewards Club.