SIDS and Sustainable Finance: A Systems Based Risk Approach to Improve Access to Private Investment

Abstract

Commonwealth Small Island Developing States (SIDS) are broadly recognised as facing considerable challenges in accessing finance for development and climate change adaptation. Conventional approaches to overcome these challenges emphasise investing in capacity building to improve the quality of SIDS domestic governance as the key factor in facilitating more investment. We argue that this strategy has had limited success because it has failed to derisk SIDS specific systemic barriers faced by SIDS governments and investors. To address this, we introduce the Common Pool Asset Structuring Strategy (COMPASS) as a new type of financial governance framework and pathway for SIDS to access international finance and investment. Using the principle of collaboration, this model would shift SIDS from making individual applications for finance, to collectively developing investable projects, at larger scales, that can exploit common investment opportunities-thereby increasing scale, driving down project costs and diversifying project risk profiles.