For the first time in the history of the United Nations, an affluent member state has committed to paying compensation for the effects of emissions in the developing world. Denmark will allocate around $13 million to vulnerable nations that have experienced "loss and damage" due to climate change.

The historic statement was made on Tuesday as world leaders and diplomats gathered in New York for the UN General Assembly. Earlier in the day, UN Secretary-General Antonio Guterres urged countries to tax fossil fuel firms and utilize the money raised to aid those suffering from the irreversible impacts of climate change.
 
Danish development minister Flemming Mller Mortensen said in a statement that a trip to Bangladesh's flood-ravaged districts this spring served as inspiration for the vow.
 
“It is grossly unfair that the world’s poorest should suffer the most from the consequences of climate change, to which they have contributed the least,” Mortensen said.

Read next: Rich states must compensate nations facing climate crisis: Pakistan

For many years, leaders from vulnerable nations and those who support climate justice have made funding for loss and harm their rallying cry. Wealthy nations, such as the United States, have rejected those requests out of concern that any financial commitment would entail legal culpability for the rising costs of climate change.

However, the subject has gained popularity in light of the growing destruction caused by climatic disasters, such as the recent devastating floods in Pakistan and the famine caused by drought in East Africa. In a statement published last month, 400 activist organizations demanded that the Sharm el-Sheikh climate conference in November include financing for loss and damage.
 
At last year’s talks in Glasgow, Scotland became the first government contributor to a loss and damage fund. Belgium’s Wallonia region pledged another million euros to the cause.

The largest loss and damage investment to date is from Denmark, but environmentalists claim that it is insignificant in light of the annual economic damage caused by climate change. It is anticipated that Pakistan's recovery from the floods will cost more than $10 billion.

Read next: Death toll nearing 1,000 in Pakistan floods

The offer includes 40 million Danish kroner, or about $5.4 million, to engage with civil society organizations on addressing loss and damage, particularly in Africa's Sahel region, according to a statement from the Danish foreign ministry. In advance of the impending talks in Egypt, it also allots millions for "strategic efforts" related to loss and damage negotiations.

Denmark's commitment was deemed "significant" by Harjeet Singh, head of the global political strategy at the NGO Climate Action Network. However, he emphasized that the InsuResilience Global Partnership, a UN-run initiative that allows private enterprises to offer disaster insurance to those most at risk from climate change, will receive approximately a third of the projected cash.

This setup “will create business for European corporations in the developing countries, eventually making vulnerable people pay for the premium toward losses and damages from climate disasters,” Singh said.

The Danish embassy was not immediately available for comment.