Pacific islands’ central banks sign inclusive green finance roadmap

June 21, 2024|Written by |Bank of Papua New Guinea, Reserve Bank of Fiji

The central banks of seven Pacific island nations have signed a roadmap that commits them to working together to boost inclusive green finance (IGF) in a region highly vulnerable to climate change.

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

The document identifies regional capacity building in green finance as a priority and encourages the pooling of funding and technical expertise between countries, as well as the leveraging of technological solutions by the financial sector.

It also emphasises the need for a just transition to net zero that recognises different states’ capacity to implement policy solutions, as well as the existence of diverse needs within populations and between countries.

“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 into 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 roadmap further highlights the Central Bank of Papua New Guinea’s “groundbreaking Inclusive Green Finance Policy, the first in the region, [which] includes a green taxonomy that resonates an inclusive approach to green financing wherein micro, small, and medium enterprises… are considered”.

The roadmap was signed under the auspices of the Pacific Islands Regional Initiative (PIRI) Plus, which is part of the Alliance for Financial Inclusion (AFI), at the end of a four-day conference in Natadola that also included representatives of the Reserve Bank of New Zealand and the central banks of the Maldives and Bahamas.

The document is intended as an attempt to build on the 2017 Sharm El Sheikh Accord on green finance, which promotes a financially inclusive response to climate change in developing countries.

PIRI chair Ariff Ali, the governor of the Reserve Bank of Fiji, “emphasised 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”, according to a statement released by the central bank.

“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 incentivise investments in renewable energy, sustainable infrastructure, and climate-resilient technologies.”

The AFI’s policy programmes director Eliki Boletawa meanwhile pointed to the devastating recent landslide in Papua New Guinea, which the prime minister has linked to changing weather patterns, as a sign of the urgency with which the region needs to “enhance our resilience against environmental shocks and emergencies”.

Low-lying Pacific island countries are considered extremely vulnerable to rising sea levels, with most of their populations living close to the shore.

The islands contribute less than 0.02% of global greenhouse gas emissions, but with cyclones and other extreme weather events rising in frequency and intensity, the cost of such disasters and local climate adaptation efforts has ballooned.

The Agence Française de Développement aid agency estimates that the annual cost of climate damage in the Pacific island nations stands at around 10% of their GDP, or US$1bn per year.

This page was last updated June 21, 2024

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