Nepal’s Floods Put Climate Finance Shortfall in Focus Ahead of COP31

Last month, Nepal’s Prime Minister Balendra Shah used his address to the United Nations General Assembly (UNGA) to highlight concerns shared across South Asia and the wider Global South. The August 26 disaster along the Bhotekoshi–Trishuli river system has killed more than 1,400 people, with thousands still missing.

A month after the floods, Shah told the UNGA that recovery could cost as much as 10% of Nepal’s GDP, or roughly $5 billion.

The scale of the disaster has again exposed the vulnerability of countries with limited resources to climate-related losses. Ahead of the UN Climate Change Conference (COP31) in Türkiye, it has also sharpened attention on Loss and Damage, a key element of the Paris Agreement, adopted by more than 190 countries a decade ago.

On October 22, the Fund for Responding to Loss and Damage (FRLD) provisionally set aside $21.6 million for Nepal, including $20 million for recovery and $1.6 million for oversight. It was the Fund’s first provisional allocation for a specific disaster, but only a small fraction of Nepal’s estimated $4.77 billion in recovery and reconstruction needs.

The decision followed weeks of pressure after Nepal requested urgent assistance on August 31. Harjeet Singh, global convenor of the Fill the Fund campaign and founding director of the Satat Sampada Climate Foundation, welcomed the allocation but said the delay exposed the need for a permanent rapid-response mechanism.

“No country should have to endure a catastrophe and wait seven weeks, through historic letters and relentless pressure, just to unlock the Fund’s first-ever emergency meeting,” Singh said. He called for a system that could deliver support in days, not months.

Singh also pointed to the reluctance of some developed countries to let the decision set a precedent for future emergency funding. While they backed the release of funds for Nepal, he said, they were wary of prejudging the Fund’s longer-term model. 

That hesitation reflects a wider challenge. Vulnerable countries need far more than one-off emergency allocations, but developed countries have been reluctant to commit to the scale of funding required. “Nepal needs billions to rebuild, and this Fund is responding only in millions,” Singh said.

For Shah, the disaster was also a question of climate justice.

“We did not create this crisis. Yet we are paying a colossal price for it,” Shah said, summing up the climate injustice confronting vulnerable countries.

Nepal’s experience is not unique. From glacial lake outburst floods and landslides in the Himalayas to devastating floods, heatwaves and cyclones across India, climate-vulnerable countries in South Asia, and the larger Global South, face a common question: how can they respond to mounting losses when they lack the resources to prepare for climate risks in time, and who should bear the cost?

A growing crisis and climate losses

The climate crisis is growing in the Global South, with disasters affecting communities from the Himalayas to the plains and coasts. Over the past decade, South Asia has emerged as one of the world’s most climate-stressed subregions. According to a World Bank report, more than 750 million people in South Asia were affected by at least one climate-related disaster over the past two decades.

Nepal’s latest disaster adds to a series of severe Himalayan calamities, from Kedarnath in 2013 to Chamoli in 2021, Sikkim in 2023 and Dharali in 2025.

Cyclones and rising sea levels threaten coastal cities, while extreme rainfall is contributing to widespread flooding in poorly planned urban areas. Beyond the loss of life, such disasters can damage economies and undermine development across South Asia.

A 2014 Asian Development Bank study estimated that, under a fossil-fuel-intensive emissions scenario, six South Asian economies, including India, could lose an average of 1.8% of their collective annual GDP by 2050, with losses rising to 8.8% by 2100. Repeated disasters also strain public finances, diverting resources from long-term development towards emergency relief and reconstruction.

For India, the costs of climate change are already mounting. The country needs funds to recover from damage caused by disasters and help vulnerable communities rebuild their lives, while preparing for the risks ahead.

Loss and Damage Fund: Promise Versus Reality

After years of negotiations, FRLD was established at COP27 in Sharm el-Sheikh, Egypt, and operationalised the following year at the Dubai climate conference. It was set up as a dedicated international fund to help particularly vulnerable developing countries address the economic and non-economic consequences of climate change.

Also Read: Beyond Compensation: What Coastal Communities Lose to a Rising Sea

While adaptation seeks to reduce future risks, Loss and Damage finance supports responses to harm that has already occurred or cannot be adequately avoided. This includes rebuilding homes, infrastructure, indigenous cultural practices and restoring livelihoods.

At COP29 in Baku, developed countries agreed to take the lead in mobilising at least $300 billion annually by 2035 to support climate action in developing countries. But this broader climate-finance commitment stands in sharp contrast to the limited resources available specifically for Loss and Damage.

As of March 2026, the FRLD had received pledges of just $822 million. The gap becomes clearer when set against demand. The Fund’s first funding round initially had $250 million available, later increased to $342 million, while eligible developing countries submitted requests totalling $2.8 billion — almost 8 times more.

Nepal’s experience illustrates the scale of the shortfall. The $20 million provisionally set aside for Nepal’s recovery by the Fund amounts to less than 0.5% of its estimated recovery needs — which is almost $5 billion. 

Countries across the Global South, including African nations, also highlighted the limited means available with the Fund.

“The Loss and Damage Fund has received pledges of only around $800 million, compared with approximately $80 billion in adaptation finance flows,” said Labanya Prakash Jena, a climate-finance expert and Visiting Senior Fellow at the London School of Economics, highlighting the limited financial support available to address losses and damages. Developing countries are particularly vulnerable because they often lack the financial capacity to absorb the impacts of devastating climate disasters, he added.

Mary Kyanyi, Climate Adaptation and Resilience Fellow at Power Shift Africa, argued that developed countries must take greater responsibility for financing the losses caused by climate change.

“Countries like Nepal, which contribute very little to global greenhouse gas emissions, are bearing a disproportionate burden of the climate crisis. Developed countries, with their greater historical responsibility for global emissions, must step up their contributions to the Loss and Damage Fund. Their commitments must translate into actual funding that reaches vulnerable countries, rather than remaining promises on paper,” she said.

Also Read: As Nepal rebuilds, a climate-vulnerable nation tests the world’s response

Shah’s appeal at the UNGA echoed this demand for climate justice, which was acknowledged by outgoing UN Secretary-General Antonio Guterres, who urged the biggest polluters to take greater responsibility for the damage caused by climate change.

“Those who polluted the most – and profited the most – must do far more to repair the damage they caused. Polluters must pay,” he said.

India: Who Pays for Climate Losses?

While India is highly vulnerable to climate impacts, including risks in the Hindu Kush Himalaya (HKH) region that it shares with Nepal and six other countries, its access to climate finance, particularly for loss and damage, remains complicated.

India is one of the world's fastest-growing major economies, and its energy demand is rising rapidly. According to the International Energy Agency's World Energy Outlook, India will account for the largest share of global energy consumption growth by 2035 as its cities expand, industry develops and living standards rise.

But economic growth comes with mounting climate risks, from the Himalayas to the coast. A World Bank report estimated last year that India will need $2.4 trillion by 2050 to build climate-resilient urban infrastructure. An OECD estimate says India will need $7 billion annually to cover flood damage alone.

India's position in climate negotiations is complicated by its emissions profile. It is among the world's largest annual carbon dioxide (CO₂) emitters, but its per-capita emissions remain relatively low. India emitted 3.19 billion tonnes of CO₂ in 2024, accounting for 8.27% of the global share, while its annual per-capita emissions stood at 2.2 tonnes. Its share of cumulative global CO₂ emissions since 1750 was 3.57%, despite accounting for about 18% of the world's population.

The question is how India can press for financial support for climate-related losses while navigating its own emissions profile and its role as a voice for the Global South. Experts say that the case rests not only on historical responsibility, but also on the scale of the risks the country faces and the resources needed to address them.

The HKH region offers one example. Global warming has accelerated glacier melting across the Hindu Kush, Karakoram and Himalayan regions, according to Saurabh Vijay, an assistant professor at IIT Roorkee, whose team mapped nearly 32,000 glacial lakes across the region using satellite remote sensing. 

“Glacier mass loss is accelerating, while glacial lakes are expanding in both size and number,” he told CarbonCopy. Their research found that the total area of glacial lakes across the Third Pole in Asia — a high altitude region containing the world's largest repository of ice outside the poles — changed by about 5.5% between 2016–17 and 2022–24, with some regions recording growth of more than 20%. 

Vijay said the expansion was increasing the risk of glacier-related disasters in mountain valleys, leaving countries including India, Nepal, Pakistan and Bhutan vulnerable. Such disasters can claim human and animal lives and cause extensive damage to roads, bridges, hydropower projects and other critical infrastructure.

India has begun taking steps to address some of these risks. As part of the national GLOF risk-mitigation programme, Uttarakhand has installed its first early-warning system for glacial lake outburst floods (GLOFs) at Vasundhara Tal in Chamoli district, which lies 4,800 metres above sea level. 

Monitoring and early-warning systems require sustained investment, from identifying dangerous lakes to tracking changing conditions and ensuring warnings reach people in time. Vijay said, “Adequate financial support can help reduce these risks and limit the losses and damage caused by global warming.”

According to Jena, India should make its case for support by explaining its emissions history and climate vulnerability. He advocated for highlighting “historical and per-capita terms, rather than focusing only on the absolute volume of its current emissions.”

He argued that India should seek rapid-response grants for extreme events such as heatwaves, cyclones and floods, alongside access to advanced early-warning technologies and robust methods for assessing climate-related losses. Such support would help India respond to disasters while building the evidence needed to establish the scale of the damage.

“This support is particularly important for countries including India who face growing climate risks but lacking adequate resources to address them,” Vijay said.

Why Can’t the Rich World Pay? 

The debate over Loss and Damage finance ultimately comes down to a harder question: who should pay, and at what scale? As climate disasters intensify across the Global South, vulnerable countries are pressing developed nations to help fund recovery from losses they did little to cause.

CarbonCopy earlier reported how India could mobilise domestic resources and alternative sources of capital to bridge its climate-finance gap as international funding falls short. But domestic resources alone cannot meet the mounting costs of climate disasters. How to finance climate action is inseparable from the question of who should bear the cost of climate-related losses and damage.

At COP30 in Belém, Brazil, the Council on Energy, Environment and Water (CEEW) proposed one possible way forward. Its study suggested that if the world’s most responsible economies contributed 0.08% of their GDP to the FRLD, the fund could mobilise around $60 billion annually, roughly 75 times its pledges at the time. CEEW said the proposed contribution floor would raise global commitments to 15% of the finance required, up from 0.2% currently mobilised. That would still fall short of the $400 billion a year sought by developing countries.

The proposal is not an agreed international commitment, but it illustrates the scale of the funding gap and how predictable contributions from countries with greater historical responsibility and financial capacity could help narrow it. COP31 will test whether proposals such as this can be translated into concrete commitments and whether money can reach vulnerable countries when they need it.

For Nepal, the stakes are immediate. The floods have left the country facing billions of dollars in recovery and reconstruction costs. Abhishek Shrestha, adviser to Nepal’s Minister of Agriculture, Forest and Environment, said the disaster should force COP31 to confront failures in the multilateral climate regime.

He described Nepal’s experience as “a defining testimony to the cost of collective inaction.” He said the regime had failed to phase out fossil fuels, provide timely and adequate adaptation finance, and adequately fund the Loss and Damage Fund when countries urgently need support.

Shrestha also called for a coordinated regional response to risks shared by Himalayan and downstream communities. He warned that hazards originating in one country’s high mountains can quickly affect downstream communities and economies across borders. 

He called on Nepal, India and China to jointly map transboundary hazards, establish unified early-warning systems and integrate disaster response and adaptation strategies, with support from the international community. 

“Adaptation cannot be pursued in isolation,” he said. 

[Edit: Bhasker Tripathi, Shaswata Kundu Chaudhuri; Production: Arkatapa Basu]