The scale of destruction following the August 26 Bhotekoshi flood has exposed Nepal’s vulnerability to climate-induced disasters. According to the Rapid Damage and Needs Assessment (RDNA) jointly released by the National Planning Commission (NPC) and the National Disaster Risk Reduction and Management Authority (NDRRMA), total loss and damage stand at a staggering Rs 723.31 billion (approximately $4.74 billion)—representing roughly 35% of Nepal’s national budget. The hydropower sector alone sustained $2.56 billion in damage, accounting for more than 18% of the national budget.
Beyond the monetary destruction, the human and infrastructural toll is severe. The flood claimed more than 1,400 lives, left more than 6,000 missing, and displaced more than 84,000 people. Infrastructure losses include 281 megawatts of active power plant capacity, 388 megawatts of under-construction projects, more than 7,500 completely destroyed homes, and critical damage across roads, schools and health facilities.
Realities of Global Loss and Damage Financing
As Nepal confronts this multibillion-dollar crisis, it is natural that the government has turned to global climate financing mechanisms. However, the process will be fraught with structural constraints and challenges.
The adoption of Article 8 during the 2015 Paris Agreement (COP21) was widely hailed as a historic victory for climate-vulnerable nations. It formally established “loss and damage” as a standalone pillar equal to climate mitigation and adaptation. However, to secure consensus among high-income nations—led by the United States—strict qualifying language was inserted. Article 8 explicitly states that it “does not involve or provide a basis for any liability or compensation.”
Seven years later at COP27, when the Fund for Responding to Loss and Damage (FRLD) was established, the words “compensation” and “reparations” were again deliberately excluded. The FRLD is structured purely as a solidarity-based mechanism rather than a legal payout for historical emissions.
As of mid-2026, total global pledges to the FRLD stand at roughly $822 million across 27 contributing entities. Of this, just over $250 million has been earmarked for initial deployment while institutional setups are finalized under the World Bank as interim trustee. Crucially, initial FRLD emergency fast-track grants are capped between $5 million and $20 million per project.
These figures highlight an inescapable reality: The FRLD alone cannot fund Nepal’s recovery. Pursuing legal liability or demanding mandatory compensation from historical polluters is legally unviable under international treaties and risks.
Instead of confining its efforts to demands for financial compensation at global platforms like the UN General Assembly, Nepal must elevate this disaster as a regional crisis for the entire Hindu Kush Himalaya—a critical water tower supporting the lives and livelihoods of 2 billion people downstream.
Three-Tiered Financial and Technical Strategy
To successfully navigate the global climate finance architecture and secure multiyear reconstruction capital, Nepal should pursue a coordinated three-tiered strategy:
Fast-track direct access: Nepal must use its existing national designated authorities to access FRLD Phase 1 emergency grants ($5 million to $20 million) via direct budget support to national disaster funds immediately. Because the FRLD recognizes entities accredited by the Green Climate Fund (GCF), the Global Environment Facility (GEF), and multilateral development banks, Nepal can fast-track these initial funds to address immediate rehabilitation needs.
Programmatic co-financing and donor mobilization: Since initial emergency grants are limited, Nepal must combine FRLD Phase 2 multiyear recovery grants (intended for public asset reconstruction and new settlement construction) with larger project pipelines from the GCF and GEF. While the FRLD covers direct post-disaster losses, the GCF and GEF can fund long-term “build back better” resilient infrastructure. Concurrently, a conventional Post-Disaster Needs Assessment (PDNA) led by the World Bank should serve as the foundation for an international donors’ conference to rally direct support from friendly partner nations and immediate neighbors.
Technical support via the Santiago Network: Unlocking larger long-term grant allocations requires empirical, attribution-backed loss data. Nepal should immediately tap into the Santiago Network for Loss and Damage (SNLD) for technical assistance. While the SNLD does not disburse heavy infrastructure capital directly, it provides vital support to execute scientific risk mapping for glacial lake outburst floods, satellite-based damage assessments, and technical studies for early warning systems tailored to river basins and downstream settlements.
By building an empirical, attribution-backed loss database through the SNLD, Nepal will possess the technical justification required to unlock multimillion-dollar resilience packages across global climate funds.
Reconstruction after the Rasuwa-Bhotekoshi disaster demands that Nepal move beyond sole reliance on global compensation mechanisms and embrace a proactive, strategic approach. By acting swiftly to capture early FRLD emergency fast-track grants, leveraging programmatic co-financing alongside international donor conferences, and utilizing the Santiago Network for rigorous technical attribution work and risk mapping, Nepal can convert immediate crisis relief into durable resilience. Positioning this disaster not merely as a domestic emergency, but as a critical regional early warning for the entire Hindu Kush Himalaya, provides the leverage needed to secure long-term capital, protect vulnerable downstream populations, and establish a framework for climate adaptation across the region.
The author is a former Head of the Agency for UN-Habitat in Myanmar.
