Historic deal has been agreed upon at the conclusion of the Conference of Parties (COP27) of the United Nations Framework Convention on Climate Change (UNFCCC) at the Sharm el-Sheik, Egypt. The member countries have agreed to establish a fund for assisting developing countries that are particularly vulnerable to the adverse effects of climate change.



  • From 6th Nov to 18th Nov, 27th Conference of Parties was held in Sharm el-Sheik, Egypt.
  • On the final day of the event, a decision was taken to establish a fund for what negotiators call ‘loss and damage’.
  • This fund will be used for compensating poor nations that are victims of extreme weather worsened by rich countries’ carbon pollution.
  • The expected monetary compensation from the L&D fund is estimated to be nearly $500 billion and rising by $200 billion annually.
  • It is a big win for poorer nations which have long called for funds sometimes viewed as reparations because they are often the victims of climate worsened floods, droughts, heat waves, famines and storms despite having contributed little to the pollution that heats up the globe.


About the Fund

  • The fund would be largely aimed at the most vulnerable nations, though there would be room for middle-income countries that are severely battered by climate disasters to get aid.
  • According to the agreement, the fund would initially draw on contributions from developed countries and other private and public sources such as international financial institutions.
  • While major emerging economies such as China would not initially be required to contribute, that option remains on the table and will be negotiated over the coming years.
    • This is a key demand by the European Union and the United States, who argue that China and other large polluters currently classified as developing countries have the financial clout and responsibility to pay their way.


Will India be a donor or a beneficiary of the fund?

  • The rich nations had been asking to expand the donor base of the loss and damage fund by including big economies like India and China as contributors to the fund.
  • However, India during the discussions made its stand clear that though the country has voluntarily been doing its bit to help vulnerable countries through different mechanism, it will not be mandatorily contributing to the proposed fund.
  • On the question whether India would be one of the beneficiaries of the fund as it is primarily meant for most vulnerable countries, India argued that the country too has many vulnerable areas.



The decision on donor base and beneficiaries will be clarified by 2023. At the COP27, the parties have also agreed to retain the COP26 points on mitigation – “phase down” of unabated coal power and “phase out” of inefficient fossil fuel subsidies. The COP27 also set up a four-year work programme on climate action in agriculture and food security, and on a just transition for energy use.