Island Policy Lab Blog: Atoofa Zainab

Photo by: Silke von Brockhausen /UNDP /CC BY-NC-ND

September 26, 2023

The upcoming Fourth International Conference on small Island Developing States (commonly referred to as “SIDS4”), scheduled to take place in Antigua and Barbuda in the coming year, marks a crucial milestone. In the wake of the 1992 Earth Summit, various conferences addressing SIDS concerns have transpired, yet SIDS4 is poised to be particularly momentous as it aims to address the challenges of navigating a global landscape that, in certain instances, poses a direct threat to the very existence 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 are facing at the national and subnational levels is their reliance on international climate finance to address the effects of climate change. This article draws attention to 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 the formulation of 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).

 As a consequence of the distinctive governance structures, operational methods, and objectives of each mechanism, the network becomes highly diverse. This diversity, in turn, renders the network exceptionally complex and ill-suited to function efficiently, equitably, or with the necessary speed and scope required to address the needs of SIDS adequately.

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 are compelled to follow similar financing procedures as larger economies like India and China. While SIDS have 12 staffers devoted to a project, larger economies might have fifty people to work towards meeting donor’s proposal standards and reporting requirements. Both the public and private sectors of small island countries struggle to find qualified workers and due to 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, leading to their disqualification 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 the majority of funding. However, some of the adaptation projects that were successful in receiving the funding of green climate finance in year 2021 were large in scale that worth 20 million dollar 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 SIDS should concentrate their efforts on?

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 for the advocacy for loss and damage funding mechanism. 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 and 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 provide assistance for establishing foundational data facility 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).

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