By Jamie Hailstone,
Contributor. Jamie Hailstone is a U.K-based reporter, who covers sustainability.
Small Island Developing States (SIDS) are being systematically locked out of climate finance, because the global financing system deems them too small and too fragmented to fund, according to a new analysis.
A new report by the ocean research initiative Back to Blue, from Economist Impact and the Nippon Foundation, claims SIDS are receiving just a fraction of the climate finance they need, which is estimated to be approximately $12 billion annually.
The study adds despite contributing less than 1% of global greenhouse gas emissions, SIDS across the Caribbean, Pacific, Indian Oceans face the most severe and immediate impacts of climate change.
It also claims for many philanthropies, NGOs and development finance institutions, funding SIDS is considered a high-risk undertaking.
The report also argues current funding systems are failing SIDS, preventing them from building lasting resilience.
The study argues the cycle can be broken if funders coordinate investment, share data and build on existing progress and if SIDS governments provide enabling policies.
It adds climate shocks are becoming increasingly frequent and unpredictable, making it critical not only to scale up funding but also to ensure it is deployed effectively.
And as global attention turns to Pacific Islands ahead of the pre-COP31 events in Fiji and Tuvalu later this year, the report highlights an urgent opportunity to fix climate finance systems that are failing them.
Safiya Sawney, special envoy and ambassador for climate of Grenada said there has been too much emphasis on short-term support and planning, and not enough for the long term, in an interview.
Sawney added long-term planning needs to be put in place to ensure “we are able to bounce back in the way which allows us to continue to be valuable economically”.
“We know there needs to be some major transformation, not just within our own institutions, but within the global financial architecture to ensure not only that the money is raised, but also ensuring the money can be accessed by the most vulnerable, which are small island developing states,” she told me.
Sawney said states like Grenada have a high dependency on grants, with funding often focussed on a particular issue or pilot projects, which rarely make the next stage.
She added the Caribbean islands have traditionally not been able to leverage philanthropic financing at a large scale.
“Global warming is going to continue,” said Sawney. “A conventional loan is not going to solve the issues we are dealing with.
“I believe that as small islands, we are doing as much as we can, but there is a fundamental issue we are not addressing, which is the access to financing, the lack of capacity, and the lack of institutions who are serving us in the way we need,” she added.
Professor Enrico Biffis, from the Imperial Business School and academic director of its Centre for Climate Finance and Investment, said small deal sizes and fixed transaction costs further penalise SIDS, and adaptation projects often lack direct cashflows, in an email.
Professor Biffis added a more accurate framework should model physical risk probabilistically, link resilience investments to expected-loss reduction, and treat adaptation as a credit-positive stabilisation device.
“It should also switch from emphasizing income per capita to making climate vulnerability a primary driver of eligibility and terms,” he said.
“SIDS can look “middle-income” on paper but remain structurally fragile. Eligibility and cost of capital should reflect the likelihood and severity of climate shocks and the capacity to absorb them, not just average income.”
Professor Biffis said with COP31 approaching, a successful outcome for SIDS would mean more adaptation and resilience finance.
He added faster disbursement, including rapid cash after disasters would also benefit these smaller states.
Source: Forbes
The “Back to Blue” report referred to in this article can be found here.
Information on the “Back to Blue Initiative” can be found here.