Beating climate change: Why finance needs to flow to small entrepreneurs in the Pacific and Caribbean
Islands in the Caribbean and Pacific face the devastation of their communities from climate change. Social and green entrepreneurs have potential solutions, but lack the right finance to realise their dreams.
Entrepreneurs in the Caribbean and Pacific could help battle the ever more dramatic effects of climate change, but at the moment there is little of the right kind of finance available to help their businesses to take off.
These were the findings of recent research presented at a webinar run by the Investment Climate Reform Facility, a project co-funded by the European Union, the Organisation of African Caribbean and Pacific States (OACPS), the German Federal Ministry for Economic Cooperation and Development and the British Council at the end of February. The event examined what finance is available to support the growth of social and green enterprises in the Caribbean and the Pacific.
“There’s an urgent imperative for financing climate change solutions in Caribbean and Pacific regions,” said Bonnie Chiu, managing director of The Social Investment Consultancy, which collated research from a number of sources.
There is a lot of room for impact investors to be focusing on climate change
She added that this was particularly relevant for small island states which were especially vulnerable to the effects of sea level rises and storms. What’s more, she pointed out, natural disasters associated with extreme weather events caused US$93bn of damage to the Caribbean region between 2015 and 2019.
“Climate change is not just an environmental issue, but an issue that has environmental and social impact,” she said. The other participants in the event agreed that these were pressing concerns.
Escipión Joaquín Oliveira Gómez, assistant secretary-general of the Department of Structural Economic Transformation and Trade at OACPS, and a Dominican Republic citizen, said: “Social finance and green investments are important themes – especially for island people like us.”
A gap for impact investors to fill
Drawing upon research from the Stockholm Environment Institute, Chiu said that while billions of dollars of climate focused finance was flowing to the Pacific and the Caribbean, it wasn’t meeting the needs of social and green enterprises. For example, in Pacific countries, smaller investments were missing from the finance mix. In both areas, most of the funding was via grants rather than other types of impact investment.
“There is a lot of room for impact investors to be focusing on climate change,” said Chiu.
The panellists in the webinar backed up these findings. Buriata Eti-Tofinga, a lecturer at the social of business at Monash University in Malaysia who has studied the development of social enterprises in the small islands of the Pacific, said start-up entrepreneurs had limited finance options; often their only choice was their local bank. “They don’t have anything specifically tailored for social enterprise,” she said.
“They have plenty of ideas,” she added. “In the Pacific we are training entrepreneurs, but matching them with the financial options out there in the Pacific is a problem because it’s so limited.”
Ruth Houliston, private finance lead specialist at the Inter-American Development Bank, said in the Caribbean “we have finance if you are a blue chip company”. “Access to finance is the most pressing issue that constrains entrepreneurs’ growth,” she added.
Targeting the ‘blue economy’
The speakers, however, did pick out some examples of good practice. These included the Global Fund for Coral Reefs, which is seeking to raise and invest US$500m in coral reef conservation over the next ten years.
The fund is still new – it launched in September 2020 – but “it is likely that a lot of the beneficiaries will be a number of the least developed island countries”, said Chiu.
She pointed out that the fund intends to offer innovative finance to enterprises operating in the “blue economy” – the sustainable use of ocean resources for economic growth, improved livelihoods and jobs, and ocean ecosystem health – such as ecotourism, sustainable fisheries and waste management.
Chiu also highlighted PacificRISE, which operates across 14 island countries with the goal of attracting US$10m of new private investment into the Pacific by July 2021 and which supports investors to consider gender equality.
“We are now seeing more innovative financing structures to ensure that climate finance can be channelled to enterprises, including start-ups and SMEs,” said Chiu.
The webinar chair, the British Council’s Owen Dowsett, said: “The discussion highlights the potential role that there is at a structural level to ensure that capital is flowing in the right direction to the right communities. Increasingly, globally, there is a recognition that responsibilities lie with policy makers, investment professionals and others to up their game in terms of the innovations that they use.”
• Communicating with Pioneers Post after the event, Miguel Campo Llopis, policy officer in the private sector and trade unit of the European Commission, emphasised that the new EU Global Recovery Initiative aims to be the backbone for a recovery from the Covid-19 pandemic that is “green, digital and just”. The initiative should, he said, “support the transition towards climate neutrality and resource-efficient economies”.
He added that EU and the OACPS are also jointly promoting a new programme for the Caribbean aiming to consolidate a Caribbean investment ecosystem for inclusive private sector innovation. The focus, he explained, would enable early stage and growth-oriented SMEs to “innovate and thrive”, benefiting from a strengthened network of innovation ecosystem actors and investors.
A recording of the webinar is available online here.
A message from the ICR Facility for Pioneers Post readers
The live event mentioned in this article was held as part of the Investment Climate Reform (ICR) Facility, which aims to support countries in Africa, Caribbean and the Pacific to create a more conducive, sustainable and inclusive business environment and investment climate. ICR leverages a repertoire of skills, existing instruments, and experiences from four European implementing partners: GIZ, the British Council, Expertise France, and SNV to provide local and international expertise on demand base.
If you are a regional/sub-regional body, national government, sectoral institution, public-private dialogue mechanism, development finance institution (DFI), private sector association or other non-state actor engaged in improving the business environment, you are welcome to hand in your support requests. The ICR Facility responds to multinational, national and subnational applications.
For more information, see the website here.
The contents of the publication are the sole responsibility of British Council and Pioneers Post and do not necessarily reflect the views of the EU, the OACPS, BMZ or the other implementing partners.