How Island Nations Are Rewriting Climate Finance

Caribbean states are pioneering bold financial reforms to survive climate change.

This article was first published on https://rjaura.substack.com

BERLIN | 18 October 2025 (IDN) — When hurricanes strike the Caribbean, they leave behind more than just destruction. They also leave debt. Small island developing states (SIDS) often have to borrow large sums at high interest rates to rebuild. Even though these countries produce less than 1% of global emissions, they end up paying twice: first for the damage and then for the recovery.

Few leaders articulate the inequities of climate finance as effectively as Mia Amor Mottley, the prime minister of Barbados. In recent years, Mottley has emerged as a principal advocate for states acutely vulnerable to climate change, advancing the concept of ‘decent financing.’

She explicitly defines this model as the provision of financial resources that are disbursed rapidly, structured on equitable terms, and of sufficient magnitude to enable small island developing states to implement robust adaptation and recovery measures.

In Mottley’s formulation, ‘decent financing’ is distinguished from conventional funding mechanisms by its prioritisation of timely, fair, and context-appropriate financial support for at-risk nations confronting the disproportionate impacts of a warming climate.

“We are fighting for our lives, not for a line on a spreadsheet,” Mottley told the UN General Assembly last year. “Small nations are paying the highest price for a crisis we did not create.”

Her words reach far beyond the Caribbean. Mottley’s campaign, centred on the Bridgetown Initiative, has shifted the global debate on climate finance and compelled institutions such as the World Bank and the IMF to admit that their rules disadvantage the vulnerable.

A system built for another century

Across the Caribbean, the impacts of climate change are clear—hotter seas bleach reefs. Rising tides threaten aquifers. Storms intensify.

According to the UN Development Program’s Climate Promise, seven CARICOM members—Antigua and Barbuda, Barbados, Belize, Dominica, Saint Lucia, Suriname, and Trinidad and Tobago—are pressing ahead with climate plans despite limited budgets and technical staff. Each country has pledged emissions cuts and adaptation measures, from renewable energy projects to coastal defences.

Dominica is building a 10-megawatt geothermal power plant, due to start operations this Christmas, to replace costly diesel generation. Belize aims to cut 6.2 million tonnes of emissions by 2035 through forest protection and renewables. Suriname, one of the world’s few carbon-negative countries, is expanding rural solar power, while Trinidad and Tobago is testing green hydrogen and carbon capture to decarbonise its energy-intensive economy.

Although each initiative might appear modest when considered in isolation, collectively they exemplify a coherent regional commitment to climate resilience and sustainable development. This aggregation of targeted projects reflects not only the strategic prioritisation by Caribbean governments but also demonstrates the capacity of small island developing states to translate ambitious climate goals into tangible, measurable progress at both national and regional levels.

Turning policy into practice

Barbados’s plan is one of the most ambitious. In its second Nationally Determined Contribution, submitted in September 2025, the island pledged to cut overall emissions by 45% from 2008 levels by 2035 and to reduce electricity-related emissions by 95%. But for Mottley, setting targets is not enough. The global system that funds resilience also needs to change.

Her Bridgetown Initiative, now in its third iteration, lays out practical reforms:

a universal contingent finance facility at the World Bank to release funds quickly after disasters;
climate-resilient debt clauses (CRDCs) that pause repayments when disaster strikes;
and a new IMF framework that recognises investment in resilience as essential, not a fiscal burden.

“These are not abstract reforms,” Mottley said at COP29. “They are about survival.”

Proof that reform works

Barbados has already tested its ideas. In 2022, it completed a US$150 million “blue bond”—an innovative debt-for-nature swap supported by The Nature Conservancy and the Inter-American Development Bank. The deal refinanced expensive debt at lower rates, dedicating the savings to protecting 30% of the country’s marine area by 2030.

Two years later, the world’s first debt-for-climate resilience swap was launched, backed by the European Investment Bank, the IDB, and the Green Climate Fund. It freed about US$125 million for water and sewage upgrades, including a new reclamation plant to secure supplies during droughts. Reuters called it a “template for survival finance.”

Barbados now adds CRDCs to new bonds, so if a hurricane or flood occurs, repayments automatically pause for up to two years, when budgets are most strained.

The fight for decent finance

The biggest challenge, Mottley says, is not just raising money, but getting it to move faster and more fairly. The Loss and Damage Fund, created at COP28 to help countries recover from climate impacts, is one example. As of October 2025, pledges stood at about US$768 million, with only US$400 million paid in—tiny compared with the US$395 billion needed this year, according to the Loss and Damage Collaboration.

“The money exists,” she said recently. “What’s missing is the will to reimagine the system.”

The Resilience and Sustainability Trust (RST) shows promise. It uses the idle currency reserves of rich countries to fund low-cost loans for climate adaptation. But early users such as Barbados and Jamaica argue that the trust needs to grow and cut bureaucracy before it can make a real dent.

A regional movement takes shape

In March 2025, Barbados co-hosted the Sustainable Energy for All (SEforALL) Global Forum in Bridgetown, where governments and investors pledged more than US$500 million for island-scale renewables and electric transport.

Other Caribbean countries are following Barbados’s example. The Bahamas is working on a US$300 million debt-for-nature refinancing that could provide US$120 million for conservation. Belize’s earlier swap freed up money to protect coastal ecosystems. The message from the region is clear: the Caribbean is done waiting for permission. It is now creating its own rules for survival.

What fairness looks like in practice

Finance reform has daily impacts. In Saint Lucia, upgraded drainage lets shops reopen within hours after storms. In Dominica, reinforced hillsides prevent seasonal landslides. In Barbados, a modernised water plant keeps farms running during drought, stabilising prices and livelihoods.

UNDP Regional work has helped governments embed these priorities in updated climate plans, linking adaptation to gender equality, youth employment, and community wellbeing.

A test for the global system

The Caribbean cannot solve this problem alone. The Loss and Damage Fund needs billions more in support. Multilateral banks should make disaster clauses standard. Major economies should avoid sending mixed signals, such as the United States leaving the fund’s board while still claiming to support climate justice.

“The system was built for another century,” Mottley said at a recent forum. “We need one that understands the century we’re living in.”

A bridge to the future

Barbados has become a guiding example in climate finance. The island shows that small states can survive by refusing to accept high borrowing costs as unavoidable. Instead, they turn their vulnerabilities into strengths and build systems that can handle shocks and support investment.

Barbados’s progress does not excuse big polluters from cutting emissions or paying for the harm they cause. But it does show a credible path forward. For the Caribbean, climate finance is the difference between a sustainable future and prolonged disaster.

“Our test,” Mottley told delegates in Bridgetown, “is whether the world can be decent enough to give small nations a fair chance to live.”

Reporting and sources

This article draws on official documents and verified news sources from the UN Development Programme, UNFCCC, the Bridgetown Initiative, IMF, World Bank, Reuters, Associated Press, and others, accessed in October 2025.

About the author: Ramesh Jaura is a journalist with 60 years of experience as a freelancer, head of Inter Press Service, and founder-editor of IDN-InDepthNews. His work draws on field reporting and coverage of international conferences and events. [IDN-InDepthNews]

Original link: https://rjaura.substack.com/p/how-island-nations-are-rewriting

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Image. Small Island Developing States are on the frontlines of climate change. Source: UNDP