As part of a 10-year plan to help preserve some of them from extinction, the world’s tiny island governments intend to band together to lobby for debt relief and more climate investment ahead of this year’s COP29 climate meeting, a draft document obtained by Reuters revealed.

The United Nations has recognised that the 39 states and 18 associate members that make up the Small Island Developing States (SIDS) are particularly vulnerable to increasing sea levels and more extreme weather as the world gets hotter. However, many of these states are severely indebted, which makes it difficult for them to respond.

Following years of conflict over climate funding with wealthier nations, the islands will now outline cooperative efforts to strengthen their resilience during their fourth, once-a-decade summit, which takes place in Antigua and Barbuda next week.

The islands’ new proposal would create a common framework to handle everything from negotiating debt relief with creditors to luring investment and providing legal advice, in response to the piecemeal support provided thus far.

It was co-designed by the independent, policy-focused International Institute for Environment and Development (IIED) and representatives from SIDS members, namely Samoa, Antigua & Barbuda, Trinidad & Tobago, Tonga, and Tuvalu. The service is called the Global SIDS Debt Sustainability Support Service.

The Commonwealth Secretariat, a voluntary association of 56 former British Empire nations, the World Bank, Wall Street bank JPMorgan, insurance advisor and broker Willis Towers Watson, and others were on a strategic advisory committee.

A report scheduled for release by the United Nations Development Programme on Monday claimed that the collective cost for Small Island Developing States (SIDS) was less than $10 billion annually, despite the fact that for some islands that would amount to a fifth of their economic output. This is in contrast to a recent report by the Grantham Institute that estimated the annual cost of adapting all developing countries to the impacts of climate change at up to $2.4 trillion.

The UNDP stated that the SIDS “pose a test case” for the global financial institutions to address climate risk “at speed and scale” because of the comparatively little amount of money required.

The new four-step strategy from the SIDS entails a “strategic layering” of debt relief measures, such contingent debt terms, to free up governments to spend money on more climate-resilient infrastructure and other initiatives.

Countries would get assistance in obtaining insurance and other tools to guard against future harm. They would also go to the capital markets for more diversified types of financing, such bonds linked to environmental preservation.

In order to help tiny islands overcome their restrictions, the Support Service would also offer legal and commercial negotiating aid. Many small islands rely on just one or two persons to handle the whole debt process.

As a result of our tiny stature, it is difficult for us to draw in investments on the scale that we actually require,” Maldivian Environment and Energy Minister Thoriq Ibrahim told Reuters.

According to IIED data, 70% of SIDS have debt that exceeds what is considered sustainable, and more than 40% are in or near debt distress, where the majority of their income is used to pay off their debts.

They are especially vulnerable as a result in the event of a tragedy. For instance, Hurricane Maria devastated the Caribbean island of Dominica, resulting in losses more than two years’ worth of economic output. 

This might indicate that a nation is not only unable to pay back its debts, but also needs to take out new loans in order to rebuild, frequently at market rates or with terms that force part of the money to flow back to wealthier nations, locking the nation in a vicious cycle that can be difficult to break.

The Commonwealth Secretary General Patricia Scotland declared, “Borrowing is no longer cheap,” noting high interest rates and volatility throughout the world associated with heavy debt loads, “frequent climate shocks,” and the recovery of the economy after the COVID-19 epidemic.

Amidst a revamp of the global financial infrastructure, the November COP29 discussions in Azerbaijan will centre on deciding how much wealthier nations would yearly spend to aid developing nations, including the island states.

The Support Service is a significant shift in how the islands respond to climate risk and will likely influence their bargaining stance at the summit, even though other organisations are providing SIDS with greater assistance.

“There has never been a coordinated approach to debt alleviation, debt sustainability, and it has never been put within the context of a long-term plan for financial resilience in those countries,” said Tom Mitchell, executive director of the IIED.

He described it as essentially requesting that small island governments be helped to exist at a cost that was “a rounding error in terms of big international finance.”

As part of the debt relief process, governments may undertake cooperative restructuring or swap issuance in addition to dividing the expense of legal help.

Numerous island nations, like Vanuatu and Nauru, are impoverished; but, even the comparatively wealthier ones, like Singapore and the U.S. Virgin Islands, have climate sensitivity comparable to that of the world’s Least Developed Countries, according to IIED data.

The Maldives, whose economy depends heavily on tourism, is especially affected because of the need to adjust its more than 1.000 low-lying islands to erosion caused by climate change and the extensive coral bleaching that occurs as ocean temperatures rise.

The Maldivian ambassador to the UN, Ali Naseer Mohamed, stated, “Development is about climate adaptation… we are forced to make a choice between whether to construct hospitals and schools in the islands or make revetments to protect the islands.”

(Adapted from StraitsTimes.com)