People walk past the headquarters of the World Bank in Washington, D.C., U.S.

The World Bank (pictured) is a controversial choice to host a ‘loss and damage’ climate fund.Credit: T.J. Kirkpatrick/Bloomberg/Getty

“It’s in the bag,” said Saleemul Huq, who could not hide his excitement during the final hours of the COP27 climate summit last November in Egypt. Talks to create a fund to finance ‘loss and damage’ caused by climate change were on a knife-edge. But Huq, the founding director of the International Centre for Climate Change and Development in Dhaka, had had advance notice from climate negotiators at the meeting that the idea would get over the line. It did – with an agreement that countries would flesh out how the fund should work and who should contribute to it ahead of the COP28 summit, which kicks off next week in Dubai.

Questions relating to climate finance have been central to decades of painstaking climate negotiations, as Huq wrote a decade ago (S. Huq et al. Nature Clim. Change. 33, 947–949; 2013). Finance has been a major sticking point between lower-income countries, which disproportionately bear the burden of climate impacts, and higher-income countries, which are responsible for a disproportionate amount of the emissions behind those impacts. Last week, it was announced that higher-income countries had finally come good, more than two years late, on a commitment originally made in 2009 to provide lower-income countries with US$100 billion of climate financing each year from 2020. This money was intended to cover some of the costs of climate mitigation (limiting the severity of global warming by reducing emissions) and adaptation (building infrastructure more resilient to its effects).

But loss-and-damage funding takes climate finance into a new arena. It is intended to support recovery from the losses — of jobs, for example — and damage, such as that caused to infrastructure, that occur when climate-vulnerable countries are hit by more frequent and more ferocious extreme-weather events as a result of climate change.

As COP28 approaches, talks on putting the loss-and-damage fund to work have moved forward — but only just. After five meetings, the countries tasked with making progress have agreed on a few things. The main achievement is the decision that the fund will be hosted by the World Bank in Washington DC for an interim period. It is sensible to make the bank only a stopgap solution. The bank, whose president is conventionally appointed by the United States, has come late to taking climate change seriously under its current president, Ajay Banga. There’s no guarantee that progress could not be reversed under a future leader. For this reason, climate-vulnerable countries are calling for the loss-and-damage fund to be associated with the United Nations on a permanent basis, reducing the risk of one country’s politics having an excessive influence on how the fund operates.

Questions of who will pay and how much, and who will be eligible to receive funding and on what grounds, are yet to be answered. The higher-income countries do not want to be legally bound to contribute, with many seeing that as a slippery slope to reparations. Yet, that is precisely what many climate-vulnerable countries want. Higher-income countries would also prefer that only the lowest-income countries be eligible for funding — but that would rule out middle-income countries such as Libya and Pakistan, both of which have needed international help to deal with the effects of devastating climate-related flooding.

Teams of researchers all over the world are working night and day, searching for ideas to break the log-jam. In this week’s Nature, Huq is a co-author of two commentaries intended to do just that.

Both sets of authors, in their different ways, present solutions, or partial solutions, to one of the greatest challenges in running a loss-and-damage fund: speed. Loss-and-damage finance will need to be released at the pace of humanitarian assistance, within days or ideally hours of an extreme weather event. This is another reason why there is nervousness about the World Bank’s involvement — the bank’s main experience is in giving out loans, which can take years to negotiate.

Laura Kuhl, a public-policy researcher, and her co-authors analyse the workings of the Green Climate Fund (GCF), headquartered in Incheon, South Korea, to see what lessons it has to offer (see page 693). Established in 2010 and funded by higher-income countries, this is the world’s largest fund for climate mitigation and adaptation projects in low- and middle-income countries. The researchers found that its processes are anything but fast: the average length of time taken to approve a project is two years. One-fifth of projects take between three and five years. It has allocated $13.5 billion in grants and loans, but managed to get only $3.6 billion out of the door.

The GCF was set up partly as an antidote to the typical means of providing international development finance. Half of the 24 members of its governing board come from low- and middle-income countries. Adaptation and mitigation projects are funded equally, and it is meant to support cities and community groups, as well as national governments. But the researchers found that three-quarters of its projects are in fact led by big bodies — notably UN agencies and the World Bank. The researchers say that a loss-and-damage fund also needs to focus on smaller grants (say, between $50,000 and $100,000) for grassroots community organizations, with simpler rules of access — all to get funding to the people who need it as quickly as possible.

Richard Clarke, a climate-risk specialist, and his colleagues propose a complementary way for a fund to be more agile (see page 689). Their idea is to use weather and climate data and models to predict the vulnerability of individual countries, regions and cities to climate events, and pre-emptively apportion funding accordingly. This is the opposite of an insurance-type approach — in which eligible countries apply for funding after an event — and would cut out delays in accessing funding. This approach would help the most vulnerable to be better prepared for shocks.

The authors recognize that this idea would need good data, which, in turn, would require a much better network of weather monitoring stations in the right places: there are only 37 for all of Africa. These monitoring stations are also a priority for UN secretary-general António Guterres — and will need much more international support to get off the ground.

Countries meeting at COP28 would do well to study these and other ideas emerging from the research community, on the design of the fund and ways to speed up money transfer. There are many unsolved questions — notably, on who should shoulder the responsibility of paying into the fund — and some of the ideas being presented this week could also go some way to addressing them.

Huq died, unexpectedly, last month, at the age of 71. Throughout his life, he was committed to advocating for environmental policy decisions to be built on science. He helped to create institutions in Bangladesh and other climate-vulnerable countries where people who are not scientists work hand-in-hand with researchers in the search for answers to their problems.

If his work helps to bring to an end the 30-year quest for a loss-and-damage fund, it will be a fitting final achievement.