(Alex David Rosaria is a member of the US-based think tank: Global Americans’ High-level Working Group on Climate Change in the Caribbean that just published Climate Finance and the Caribbean. What follows is a summary.)
The costs of dealing with climate change are massive and daunting. The United Nations has called it “the trillion-dollar challenge.” Climate change finance is relatively well-established with public finance organizations, but it is a new and expanding area for the global private investment community. As such, it is driven by increased concerns over climate change and the need to assume greater responsibility among stakeholders to do something about it.
Increased private-sector engagement is an important development for a region like the Caribbean that contends with tough climate change issues and is burdened by high debt levels and constrained fiscal resources. The following recommendations seek to provide a framework for Caribbean countries to approach climate change financing with greater success.
Caribbean governments need to level more pressure on multilateral lending institutions, particularly the World Bank and Inter-American Development Bank, to move away from basing concessional lending rates based on per capita income levels. The United States, Canada, and other non-regional stakeholders should lend their support to such an effort.
Encouragingly, U.S. Vice-President Harris’ U.S.-Caribbean Partnership to Address the Climate Crisis 2030 (PACC 2030) initiative pledges the U.S. Treasury’s advocacy to unlock additional financing from multilateral lending institutions for infrastructure projects in underserved Caribbean countries. The Caribbean should consider developing a plan to reach out to some of the key players in executive and legislative branches around the world (i.e., the Nordic countries and Germany would be especially receptive) for additional support.
As reflected by severe floods in Guyana and Suriname in 2022, droughts in a number of island-states, and rising sea levels throughout the region, climate change makes a natural area where U.S. and Caribbean interests converge and where action is needed, especially in the area of financing. The Caribbean needs a plan to foster robust institutional ties between regional civil society organizations dedicated to the environment and climate and international organizations. Caribbean countries need to upgrade human capital to better play the climate change finance game.
Caribbean governments facing the need for climate change financing must consider that human capital is needed to steer through what is often a complicated process. Without experts with the necessary skills, Caribbean countries will not be able to conduct reforms to improve the quality and coverage of current assets as well as manage future upgrades.
The ability to tap the newly emerging financial system that is more geared to green finance will slip out of reach in what is a competitive game. In this regard, Caribbean countries should reach out to the G7, G20, and other interested parties, including civil society organizations, for assistance.
Caribbean governments need to sharpen their knowledge of funding sources. There are many institutions dedicated to helping finance climate change projects. Once identified, governments in their application process face eligibility standards. At the same time, some governments may lack the capacity to prepare proposals or fully understand the investment process including investment banks, institutional investors, and rating agencies.
Caribbean governments need to develop a deeper understanding and awareness of ESG [environmental, social, and corporate governance – Ed.] and how it plays into investor perceptions of the region. Paying attention to the Caribbean’s natural resources is usually left to the tourist sector; a broad audience of investors from North America, Europe, Asia, and the Middle East are interested in helping preserve the Caribbean.
Caribbean countries need to find a way to gain better lending terms from multilateral institutions, to overcome the high-middle income and middle income “hurdle” in terms of public lending. Specifically, they must advocate for special consideration to account for the gap between GDP [gross domestic product] indicators and vulnerability to external shocks.
For those Caribbean countries that have not done so, the creation of an environmental security investment plan is well worth pursuing.
Alex Rosaria
