The draft deal, time-stamped 03:30 Cairo local time, reaffirmed the Paris Agreement goal of limiting the temperature increase to 1.5 °C above pre-industrial levels.

However, the draft did not include a proposed solution to the contentious issue of financing loss and damage as demanded by a number of developing countries.

The text in the draft welcomed placing the issue of loss and damage for the first time on the COP agenda but left a placeholder for the funding arrangement.

Earlier on Friday morning, the EU put forward a new proposal to create a fund for responding to loss and damage as well as to strengthen efforts to limit temperature increase to 1.5 °C and speed up the process of phasing out of coal.

The Vice President of the European Union Commission Frans Timmermans said in a statement that this proposed fund would support the most vulnerable nations.

Timmermans added that the fund would need a broad financial donor base as part of a mosaic of solutions that includes, for example, reform of multilateral development banks.

Various parties in the negotiations to reach a final climate deal at the COP27 could not reach agreement on the issue of loss and damage on Thursday.

A preliminary draft deal that was issued by the COP27 presidency in the early hours of Thursday morning drew criticism from a number of representatives of developing countries for failing to specify a mechanism to fund loss and damage.

In a press conference on Thursday evening with UN Secretary General António Guterres, COP27 President Sameh Shoukry said extra efforts will be needed Friday to respond to the urgent and legitimate demand for adequate funding for loss and damage.

“Ambitious outcomes on finance have not yet materialised, and loss and damage parties are shying away from taking the difficult political decisions,” he said.

Meanwhile, Guterres appealed during the press conference to world leaders to find a solution and reach an agreement on financing loss and damage.

"We are at crunch time in the negotiations. COP27 is scheduled to close in 24 hours – and the parties remain divided on a number of significant issues."

"There is clearly a breakdown in trust between north and south, and between developed and emerging economies. This is no time for finger pointing. The blame game is a recipe for mutually assured destruction," he said.

"I am here to appeal to all parties to rise to this moment and to the greatest challenge facing humanity."