COMMENTARY — Attorney offers the region ideas for addressing climate change

This commentary is the first of a three-part series.

 

In the wake of Hurricane Beryl’s unprecedented fury, the Caribbean faces a grim reality: Hurricanes are arriving earlier, growing stronger and occurring more frequently.

For small island developing states, commonly known as “SIDS,” climate change is not just a scientific and political issue but an existential threat, forcing us to bear the brunt of a crisis to which we have contributed the least. This underscores a profound issue of climate injustice demanding urgent attention.

This three-part commentary explores three legal responses to climate change. Climate finance is the focus of this first part. The next two parts will address climate litigation and the “ESG” concept, which uses environmental, social and governance criteria to evaluate corporate sustainability.

 

Climate finance

The cruel irony of climate change is that the states that have contributed the least to this intractable problem stand to suffer “first and worst.” The financing required to mitigate and adapt to the effects of climate change is substantial and is arguably an issue of life or debt for several Caribbean islands which are already saddled with mounting developmental challenges.

Recently, there have been two notable advances for SIDS in the area of climate justice: the Bridgetown Initiative and the Loss and Damage Fund from COP27, the United Nations Climate Change Conference held in Egypt in 2022.

The Bridgetown Initiative is a proposal by Barbados Prime Minister Mia Mottley to reform the global financial system to make it more accessible to developing countries and to support climate-resilient development.

The Loss and Damage Fund is a new fund established at COP27 to provide financial assistance to developing countries that have suffered loss and damage from climate change. The fund is still in its early stages of development, but it is expected to play a significant role in helping developing countries to recover from and adapt to climate-related disasters.

 

Implementation

Effectively implementing these developments necessitates agile legal instruments to ensure that the Caribbean region receives its fair share of financial and technical support.

Outside of the UN Framework Convention on Climate Change (UNFCCC) regime, we have also seen the rise of novel but complex instruments to provide additional sources of financing for SIDS. Some examples include natural disaster clauses and debt liability management tools.

The first of these instruments, natural disaster clauses, are provisions in contracts that address the risks associated with hurricanes and other extreme weather events. They were conceptualised as a means of providing financial flexibility within the realm of sovereign debt, particularly when no centralised bankruptcy system is in place, with the primary objective of aiding nations in circumventing the necessity for an official debt restructuring during times of humanitarian crisis. These clauses can be used to allocate risk between parties, establish procedures for responding to claims, and limit liability.

The genesis of this type of clause dates back to its initial inclusion in the bonds issued by Grenada during its debt restructuring in 2015. Barbados subsequently adopted a modified version of the clause in both 2018 and 2019, incorporating it into a significant portion of its overall debt portfolio as part of its debt restructuring efforts.

 

Debt for nature

The second type of instrument — debt liability management tools — includes debt-for-nature swaps.

These swaps are agreements between debtor countries and creditor countries or organisations in which the debtor country commits to protecting biodiversity or conserving natural resources in exchange for the reduction or cancellation of its debt.

Debt-for-nature swaps can be a valuable tool for Caribbean nations, which are often burdened by high levels of debt. By freeing up resources that would otherwise be used to service debt, the swaps can allow Caribbean nations to invest in climate resilience and conservation efforts.

In September 2022, the Barbados government completed a $150 million debt conversion with The Nature Conservancy and the Inter-American Development Bank. This is the first debt-for-nature swap in the Caribbean, and it is seen as a ground-breaking model for financing marine conservation and climate resilience.

 

Part two of this three-part series will focus on climate litigation. Ms. John is a Grenada-based attorney with a master’s degree in environmental law and policy from University College London, which she pursued through a Chevening Scholarship.