Go green or risk being gone from the investment map.
Shania Taylor, an economic analyst in First Citizens’ economic research unit, says this is the reality facing Caribbean countries if they want to remain viable players in the global economy.
She assessed the issue in a recent First Citizens commentary titled Green Or Gone: Climate Risk And Investment Flows In The Caribbean.
Taylor, who highlighted Barbados as “a leader in climate finance reform”, noted that “for the Caribbean, climate vulnerability is now a defining factor in investment flows”.
“Countries that fail to address these risks run the danger of being bypassed by capital markets that increasingly prioritise resilience and sustainability,” she warned.
“Those that embrace reform, strengthen disaster financing, and pioneer innovative financial tools are already showing that climate risk can be managed and even turned into an opportunity.
“The future of investment in the region depends on this shift: to remain viable players in the global economy, Caribbean countries must go green or risk being gone from the investment map.”
The economic analyst suggested a number of policy priorities needed for Caribbean countries to attract climate-smart capital.
“To remain competitive for global investment, Caribbean economies must continue to strengthen climate-related disclosures by adopting International Sustainability Standards Board (ISSB)-aligned standards and developing thematic bond markets that make climatesmart projects more accessible to environment sustainability and governance (ESG) investors,” she recommended.
“Publishing adaptation-readiness assessments, such as those from Notre Dame Global Adaptation Index (ND-GAIN) or The Stimson Center’s Climate and Ocean Risk Vulnerability Index (CORVI), will provide clearer information on vulnerabilities and opportunities, allowing investors to make more confident decisions.”
Taylor also said that “expanding disaster financing strategies to include layered instruments, insurance, catastrophe bonds, and debt clauses will reduce fiscal risks and send strong market signals”.
“Embedding climate resilience into public investment systems and public-private partnership frameworks will ensure that infrastructure remains viable over the long-term.
“Finally, scaling naturelinked finance such as debt-fornature swaps and blue bonds will appeal directly to investors seeking to combine financial returns with measurable sustainability outcomes,” she advised.
Climate risk ratings
In her commentary, Taylor observed that investors “are increasingly attentive to these risks, relying on climate risk ratings, ESG screening, and adaptation-readiness assessments before committing capital”.
Her analysis sought to examine how climate vulnerability is shaping investment patterns in tourism, infrastructure, and foreign direct investment, while also highlighting the ways Caribbean economies can strengthen their resilience
and position themselves as attractive destinations for sustainable finance.
She pointed out that “the scale of climate-related disasters in the Caribbean has made investors factor climate risk directly into their decisions”.
Taylor said the devastating economic impact major hurricanes had on Dominica and The Bahamas in recent years “highlights how climate shocks can overwhelm small economies, forcing investors to reconsider the risks of doing business in the region”.
Investors are now screening climate readiness, said Taylor, having “moved beyond traditional economic indicators and begun to place greater emphasis on climate readiness”.
“The Notre Dame Global Adaptation Initiative, in its 2024 Country Index, ranked Barbados 26th globally for readiness, signalling strong institutional and financial capacity to adapt to climate risks, while Jamaica was placed much lower at 90th out of 187 ranked countries, suggesting weaker resilience and greater execution risk,” she recalled.
“City-level diagnostics also play a role in shaping perceptions of investment risk. The Stimson Center’s Climate and Ocean Risk Vulnerability Index (CORVI), published in 2023, has been applied to cities such as Kingston in Jamaica and Roseau in Dominica.
“These reports provide detailed profiles of risks to ports, housing, and tourism infrastructure, helping investors determine where resilient investment pipelines may be most viable.
“At the sovereign level, rating agencies such as Moody’s have also begun integrating climate risks into their assessments, noting in 2024 that exposure to hurricanes and sea-level rise can directly affect debt sustainability and borrowing costs.”
She continued: “Disclosure practices further influence investor confidence. In 2023, the ISSB issued its first global climate disclosure standards, creating a unified framework that helps reduce information risk.
“Jamaica quickly followed suit by introducing guidelines for green, blue, and sustainability bonds through its Stock Exchange in 2024, a move that provides local platforms for ESG-focused investors to finance projects that address climate risks directly.”
Taylor said that Caribbean governments have recognised these risks and are investing in resilience.
They are also “innovating with financial instruments to address climate risks”, she said, mentioning Barbados, Belize, Jamaica and The Bahamas as examples of this effort.
The analyst also mentioning the Caribbean’s pioneering of debt-pause clauses, highlighting those implemented by Barbados, Grenada and St. Vincent and the Grenadines.
“Collectively, these measures signal to investors that the region is willing to innovate in order to manage climate-related fiscal risks,” Taylor said. (SC)
