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Advancing Climate Finance Access at the 4th SIDS International Conference

by | Oct 30, 2023 | Small Islands Developing States (SIDS)

Summary

This article highlights this crucial matter that should take center stage during the 4th SIDS international conference.

Advancing Climate Finance Access at the 4th SIDS International Conference

 

The upcoming Fourth International Conference on Small Island Developing States (commonly called “SIDS4”), scheduled to take place in Antigua and Barbuda in the coming year, marks a crucial milestone. Several conferences have been held since the Earth Summit in 1992 to talk about SIDS issues. However, SIDS4 will be the most important one yet because it will focus on the difficulties of navigating a global environment that sometimes directly threatens the survival of small island developing states.

The resulting 10-year plan from this conference must devise solutions for a spectrum of issues that may soon become extremely difficult to resolve. One of the most significant problems that SIDS faces at the national and sub-national levels is its reliance on international climate finance to address the effects of climate change. This article highlights this crucial matter that should take center stage during the 4th SIDS international conference. It also outlines potential approaches to tackle this concern, providing stakeholders with insights to aid in formulating the SIDS4 agreement.

 

The climate finance mechanism comprises an intricate web of systems that function through bilateral, multilateral, and regional initiatives, providing various types of concessional support, including grants, loans, guarantees, and private equity (Kalaidjian and Robinson, 2022).

 

Due to the distinctive governance structures, operational methods, and objectives of each mechanism, the network becomes highly diverse. Because of this, the network is very complicated and cannot work well, fairly, or quickly enough to meet the needs of SIDS.

 

The finance and development structure, coupled with the small state systems of island nations, intensifies the issue, making it even more challenging to access available funds due to burdensome bureaucratic processes.

 

Due to limited manpower and the competitive nature of dealing with larger development states, SIDS could consider similar financing procedures as larger economies like India and China. While SIDS has 12 staffers devoted to a project, larger economies might have fifty people to work towards meeting donors’ proposal standards and reporting requirements. Both the public and private sectors of small island countries struggle to find qualified workers. The several responsibilities that government employees carry out do not allow for proper time and specialization, thereby affecting the institutional capacity of governments.

 

Additionally, SIDS faces many challenges in this one-size-fits-all system of climate finance:

(1) Certain countries within the Small Island Developing States (SIDS) group have ascended the economic hierarchy, disqualifying them from receiving concessional financing. For instance, about 50% of the climate finance given to SIDS during the 2017–2018 period was non-concessional. It also indicates that only 3% of the public funding they got was in the form of bilateral climate finance and that roughly half of it came in the form of loans or other non-concessional methods (Oxfam, 2020)

 

(2) Projects proposed by SIDS are assessed on the same basis as larger developing countries. Many International Access Entities tended to give their smaller-scale adaptation projects (typically between US$5 million and US$10 million) lower priority because they believed these projects had relatively high operational costs and required a lot of bureaucratic work for a relatively small disbursement (GCF IEU, 2020).

 

Large-scale mitigation projects, which SIDS typically do not need, have traditionally received most funding. However, some of the adaptation projects that were successful in receiving the funding of green climate finance in the year 2021 were large in scale and worth 20 million dollars or more. Even when these countries do get funds, high transaction costs rank as the top difficulty in the disbursement and implementation stage of projects.

 

Another significant hurdle in securing climate finance lies in the restricted availability of data and the scarcity of data resources. Performing feasibility assessments and persuading financiers to support adaptation projects necessitates access to historical climate and environmental data, which SIDS are lacking due to the absence of data repositories, hence, unable to develop evidence-based justification and project “climate rationale.”

 

Where should SIDS concentrate its efforts?

SIDS must develop a compelling advocacy strategy and clear communication for engaging with the Green Climate Fund (GCF), other climate financing entities, and the international community. Their goal should be to ensure that their voice is not only heard during the Fourth International Conference but also actively heeded by the international community, with their priorities having a significant impact on the resulting outcomes.

Moreover, this platform should be strongly used to advocate for loss and damage funding mechanisms. The challenges mentioned above are not novel; however, the key distinction lies in how effectively they are expressed to multilateral donors and developed economies. SIDS should openly convey the specific support they require, formulate advocacy strategies, and use alternative channels to pursue loss and damage funding.

In order to address data and capacity restrictions, it is essential to assist in establishing foundational data facilities and developing systems for generating both scientific data and local and regional impact data. It should collaborate with important stakeholders to improve data consolidation and analysis that highlight the needs, challenges, and obstacles encountered by SIDS (Climate Finance Access Network, 2022).

Finally, huge capacity gaps cannot be simply filled with external consultants. A new technical assistance model should be put forth by SIDS4 that seeks to build long-term domestic capacity so that climate adaptation projects stand the test of time.

Sources:

  • Kalaidjian, E., & Robinson, S. A. (2022). Reviewing the nature and pitfalls of multilateral adaptation finance for small island developing states. Climate Risk Management, 36, 100432. https://doi.org/10.1016/j.crm.2022.100432
  • OXFAM (2020), Climate Finance Shadow Report 2020. Oxford, United Kingdom: Oxfam International
  • GCFIEU (2020), Independent Evaluation of the Relevance and Effectiveness of the Green Climate Fund’s Investments in Small Island Developing States, Evaluation Report No. 8. Songdo, South Korea:Green Climate Fund Independent Evaluation Unit
  • Climate Finance Access Network (CFAN). (2022). AccessingClimate Finance: Challenges and opportunities for Small Island Developing States. UN-OHRLLS. Retrieved from https://www.un.org/ohrlls/sids%20climate%20financing%20report%202022

 

Atoofa Zainab

(Atoofa is a doctoral candidate in Energy and Environmental Policy at the University of Delaware.)