Pacific Island Countries’ Central Banks Sign a Roadmap for Inclusive Green Finance

Seven Pacific island nations’ central banks have signed a roadmap pledging to collaborate to increase inclusive green finance (IGF) in an area that is extremely vulnerable to climate change.

The central banks of the host nation, Fiji, as well as those of Papua New Guinea, Samoa, the Seychelles, the Solomon Islands, Tonga, and Vanuatu, agreed upon the Natadola roadmap, named after the beach resort where it was signed.

In addition to encouraging international funding and technical expertise sharing and the financial sector’s use of technological solutions, the document designates regional capacity building in green finance as a top priority.

It also highlights the necessity of a fair transition to net zero that takes into account the ability of various states to enact legislative measures and the reality that populations and countries have different needs.

“These Pacific Island nations are leading the way in implementing groundbreaking IGF policies. Countries such as Fiji and Vanuatu have included disaster resilience into their regulatory frameworks,” the roadmap says.

“The Reserve Bank of Fiji has made significant strides by including green elements in surveys that assess the demand for financial services. This enabled them to comprehend the susceptibility of households and their strategies for dealing with natural catastrophes.”

The groundbreaking Inclusive Green Finance Policy of the Central Bank of Papua New Guinea, the first in the region, is further highlighted in the roadmap. It “includes a green taxonomy that resonates an inclusive approach to green financing wherein micro, small, and medium enterprises… are considered.”

After a four-day meeting in Natadola with representatives from the Reserve Bank of New Zealand, the central banks of the Maldives and the Bahamas, and the Pacific Islands Regional Initiative (PIRI) Plus, all of which are a part of the Alliance for Financial Inclusion (AFI), the roadmap was signed.

The goal of the document is to try to build on the 2017 Sharm El Sheikh Accord on green finance, which encourages developing nations to respond to climate change in a way that is financially inclusive.

In a statement issued by the central bank, PIRI chair Ariff Ali, the governor of the Reserve Bank of Fiji, “emphasized that central banks play a critical role in addressing climate risk challenges, an issue acknowledged as one of the most pressing at our Pacific doorstep.”

“He underscored that central banks’ traditional mandates of price stability and financial stability are intrinsically tied to the health of our planet and that by integrating environmental considerations into macroeconomic frameworks, central banks can incentivize investments in renewable energy, sustainable infrastructure, and climate-resilient technologies.”

The devastating recent landslide in Papua New Guinea, which the prime minister has connected to shifting weather patterns, was cited by Eliki Boletawa, director of policy programs at the AFI, as evidence of the urgency with which the area needs to “enhance our resilience against environmental shocks and emergencies.”

Given that the majority of their people live near the coast, low-lying Pacific island nations are thought to be particularly vulnerable to rising sea levels.

Although the islands produce less than 0.02% of the world’s greenhouse gas emissions, the cost of these disasters and local attempts to adapt to climate change has skyrocketed as cyclones and other extreme weather events become more frequent and intense.

The aid organization Agence Française de Développement calculates that the annual cost of climate damage to the island nations of the Pacific is approximately 10% of their GDP or $1 billion USD.