Launching the "loss and damage" mechanism is a priority for the talks running from November 30 to December 12, a year after nations reached a landmark deal following fraught negotiations at the COP27 talks in Egypt.
Poorer nations have argued for years that such a fund is needed to help them recover from natural disasters fuelled by climate change.
Its launch will likely have a major influence on the rest of the COP28 negotiations, with nations set to tussle over demands for a phase-out of fossil fuels.
The EU's pledge for the loss and damage fund was announced in a joint statement by the bloc's climate commissioner, Wopke Hoekstra, and the incoming COP28 president, Sultan Al Jaber of the United Arab Emirates, following talks in Brussels.
"The COP28 Presidency and the Commissioner emphasised the importance of operationalising the Loss and Damage funding arrangements at COP28 including early pledges," the statement said.
"The Commissioner is ready to announce substantial financial contribution by the EU and its Member States to the loss (and) damage fund at COP28," it said.
The EU did not provide a figure.
In a separate statement, Jaber welcomed the EU pledge, adding that the fund would have an impact on "billions of people, lives and livelihoods who are vulnerable to the effects of climate change."
- Grants, or loans? -
The Climate Action Network welcomed the pledge as "much-needed momentum to help people recover from the severe impacts of climate change, such as recurrent crop failures due to erratic and extreme weather events, and rising sea levels".
But it said the funds "should be provided as grants, not loans, to avoid exacerbating the debt crisis in developing nations already struggling with multiple challenges," the NGO's head of political strategy, Harjeet Singh, said on social media.
Earlier this month, negotiators reached a compromise on having the World Bank host the fund on a temporary basis for four years.
Developing countries initially opposed housing the fund at the Washington-based institution, saying it is dominated by Western nations and not adapted to their needs.
The United States also has reservations as it wants contributions to be on a voluntary basis and wealthy emerging countries such as Saudi Arabia to pay, too.
In their statement, Hoekstra and Jaber "emphasised that COP28 is a critical opportunity to show unity and restore faith in multilateralism in a world that is polarised through a positive, action-oriented engagement and outcomes."
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