NZ allocates $A18 to fund climate damage

The New Zealand government says it is allocating NZ$20 million ($A18 million) of climate funding to address loss and damage in developing countries.

Vulnerable countries have ramped up demands for rich countries to pay compensation for losses inflicted on the world's poorest people by climate change. The issue is on the agenda of the UN COP27 climate summit this year.

New Zealand's Foreign Minister Nanaia Mahuta said the country's decision to allocate NZ$20 million ($A18 million) of funding placed it at the leading edge of wealthy countries.

"International negotiations have in the past struck difficulties regarding calls for climate finance to deal with loss and damage, as some countries are concerned over what it means for liability and compensation," Mahuta said on Wednesday.

Mahuta said New Zealand recognised that loss and damage for Pacific countries takes many forms such as to culture, language, people's mental heath and physical wellbeing.

"We will work with our partners, in particular Pacific governments, to support areas they identify as priorities," said Mahuta.

New Zealand was not opposed to a possible centralised fund for international commitments for loss and damage, but supported a wide range of funding arrangements, she added.