The need for Climate Finance in island economies

As a result, Caribbean islands and island economies, more generally, spend a disproportionate amount of their public finances on debt servicing rather than on climate mitigation or adaptation, further locking them into cycles of unsustainable debt levels while the impacts of climate change are intensifying.

This situation leaves island economies in precarious situations unless they leverage new sources of climate finance – which have largely been overlooked until now.

Climate finance has evolved rapidly, and an increased reliance on international partnerships, multilateral development banks, and other mechanisms could help address the unique challenges islands face against climate change. New innovative financing instruments are emerging, such as impact finance or blended finance tools, green, social, or sustainability-linked loans or debt instruments, or carbon offsetting mechanisms, all aiming to mobilize the vast amounts of private sector capital currently in search of “sustainable investments”. These could play an important role in supporting islands in their sustainable development agendas. 

After introducing recent climate finance commitments in islands, this publication focuses on some specific opportunities blue bonds represent for islands in leveraging the full potential of the blue economy.