The Caribbean: a region of pristine beaches, crystal-clear waters, and vibrant culture. But behind the beauty lies a complex web of challenges, from climate change to social inequality. In recent years, the concept of Environmental, Social, and Governance (ESG) has gained traction as a way to address these issues and ensure sustainable development across the region. Economic growth is something that benefits both companies and local communities, and with this growth tied to a global transition to sustainability and climate action, ESG policies have provided a platform for private entities to collaborate with public sector projects. While issues remain in terms of accountability and efficiency of ESG projects, new opportunities are opening up a pathway to public-private partnerships capable of creating lasting positive change.
The 2023 Island Finance Forum (IFF) hosted by Island Innovation alongside PwC Caribbean provided an opportunity to take stock of what opportunities stakeholders from island nations and territories had identified in their quest to develop their sustainable solutions. The three-day online event brought together dignitaries, academics, and industry leaders from around the world to compare notes and share their knowledge, so how is the Caribbean faring when it comes to ESG, and what challenges and opportunities exist within the region?
Nature-Based Solutions
The Caribbean is in an enviable position when it comes to developing nature-based solutions (NbS). A biodiversity hotspot with ample natural resources, local communities with strong ties to their environment, and an economic model heavily dependent on tourism, the Caribbean has a strong foundation to build on. From the Caribbean Challenge Initiative (CCI) which saw the region protect 20% of its natural areas by 2020, to the development of blue economy projects and innovations within the energy sector maximizing natural renewable resources – the region has shown an appetite for developing sustainability projects.
Combined with a strong presence on the global stage pushing for concerted climate action, the Caribbean public sector as a whole is actively seeking to build resilience. This can and should be something that the private sector taps into. “Any sustainable model requires ESG,” explains Sandals Resorts’ Chief Experience Officer Jessica Shannon, “This has been key for the organization and we have the benefit of tremendous support from our leaders. We know that any risk to the framework is a major issue for our (business) and any business overall.”
As Shannon points out, risk is an inherent threat to any company, and in a world increasingly impacted by climate change, the need to embrace ESG and sustainability projects is critical. This is especially true for islands, as Ronaele Dathorne-Bayle, Partner, Regional Tax and Legal Services Leader at PwC East Caribbean notes in the same session, “The expectation is that by 2050 sea levels in our region are going to rise by as high as 40 centimeters, and could exceed a meter by 2100. In terms of capital GDP loss due to sea level rise it could be as high as $187 billion by 2080.”
For countries that have contributed a negligible amount to historic and current emissions, the cost of adaptation and mitigation to climate change is prohibitive – but less than the cost of global inaction. “The impact on us continues to be at such a high rate, despite minimal impact that we are actually having as a result of that our leaders have had to step up to the plate,” Dathorne-Bayle continues. As the IFF demonstrated, island nations globally are finding innovative ways to build resilience, with the public sector supporting local entrepreneurs and innovators as well as seeking to shake up long-held international policies. In the Caribbean, the Blue Economy has been touted as a key development capable of transforming the region and benefiting from public-private partnerships.
A Focus on the Blue Economy
The Blue Economy, which encompasses a range of economic activities based on ocean resources, has the potential to drive sustainable economic growth in the Caribbean. However, it is essential that this growth is achieved through the incorporation of ESG principles. “It’s a means of ensuring corporate responsibility not only to shareholders for profit, but to employees to host communities and the world. It is an opportunity for us to demand more of the companies we do business with,” expresses the Honourable Quincia Gumbs-Marie, Minister of Sustainability, Innovation and the Environment from the Government of Anguilla.
By definition, ESG is meant to have a positive impact on the communities that are affected by companies’ activities, and in a region where nature is underpinning the economy, this means investing in conservation efforts. Incorporating ESG principles in the development of the Blue Economy can yield a range of benefits. For businesses, it can help mitigate risks related to environmental and social issues, enhance reputation, and attract investors who are increasingly interested in ESG performance; and for governments, it can promote sustainable development, increase resilience to climate change, and enhance food and energy security. In the end, this benefits local communities, through increased employment opportunities, improved health outcomes, and enhanced quality of life.
Despite the Blue Economy set to be a core development project across the region, ESG-related policies face some challenges. One of the main issues is a lack of awareness and understanding of ESG principles among businesses and policymakers in the Caribbean. This can make it difficult to develop effective policies and initiatives that incorporate these principles. Another challenge is the lack of available data and information on the environmental and social impacts of Blue Economy activities. Without this information, it is difficult to assess the risks and benefits of these activities and develop effective ESG strategies.
To overcome these challenges, it is important to raise awareness of ESG principles among businesses and policymakers in the Caribbean. This can be achieved through education and training programs, as well as through the promotion of ESG reporting and disclosure. It is also important to invest in research and data collection to better understand the environmental and social impacts of Blue Economy activities. By doing so, businesses and policymakers can make more informed decisions and develop effective ESG strategies that ensure the sustainable development of the Blue Economy in the Caribbean.
Importance of Public-Private Partnerships
A common thread that was unraveled throughout discussions and panels was the insular nature of islands, even among regional groupings in the Pacific and Caribbean, there is a lack of collaboration and goal-setting between governments with very similar objectives. “If the islands were to come together and agree on, for example, urgency funding, even if the islands took disparate approaches based on their own national interest, needs, and agendas, there is still a need for collaboration on this idea of how can we help each other, the crisis of all our making and we’re all going to be impacted by it,” highlights Dentons’ Head of the ESG and Sustainable Finance Rachel Welch-Phillips.
The need for collaboration between regional island groups is key. Outside of public-private partnerships, there needs to be better frameworks and communication between nations with regional ties to create a platform on which to build. “How can we work together and standardize the approach? Because that is a cost-efficient thing to do, but it’s also a way, for the reason to develop together, Welch-Phillips continues, “We are very small islands, and volumes are always going to be a problem when it comes to [financing].” Having the frameworks in place for multi-country collaboration on projects will bolster the attractiveness of a project.
Once the public sector is aligned it makes it easier for private companies and funders to become involved. “We recognize the importance of partnerships and we are looking forward to more collaboration,” corroborates Sandals’ Jessica Shannon, as well as St Kitts and Nevis’ Minister of Sustainable Development, Environment and Climate Action and Constituency Empowerment, the Honourable Senator Dr. Joyelle Clarke, “We’re not going to find $5 to $7 trillion dollars globally in the public sector. We’re not going to find it in Government coffers. We’re not going to fight it anywhere else but in the investment structures in the private sector – and that’s why public private partnerships are critical.”
A Strong Caribbean ESG Future
Business has a responsibility to be a force for good in society and can have a major impact through the implementation of strong ESG policies aimed at improving local communities and future-proofing economic development. The discussions over the course of the IFF cemented two facts: regions like the Caribbean have a strong ESG future; and more work needs to be carried out in both the private and public sectors to reach peak efficiency, but things are on the right track. As PwC’s Dathorne-Bayle put it, “There must be some level of transformation, especially depending on the industry within which one is operating.”
Island nations are uniquely vulnerable to the impacts of climate change, including rising sea levels, natural disasters, and ecosystem degradation. Sustainable finance plays a critical role in building resilience and promoting sustainable development in these regions. As such, ESG policies incorporating the NbS available to islands stands to have a net positive impact for all stakeholders. In the Caribbean, the Blue Economy is the sustainable solution capable of kicking the region’s development into higher gear, all that is left is finding the pathway to enabling it.
