Business resilience funding boost

Business in Barbados are among those eligible to benefit from millions of dollars in blended finance and technical assistance to help them better withstand future climate shocks.

This is being facilitated through a partnership between the Inter-American Development Bank’s (IDB) private sector arm, IDB Invest, and the Green Climate Fund (GCF).

IDB Invest will deploy US$118.9 million of GCF funding “to increase the resilience of the Caribbean businesses while promoting environmental sustainability”.

This is part of Facing the Storm: How IDB Invest Supports Caribbean Private Sector Resilience Caribbean Net-Zero and Resilient Private Sector Programme, which “aims to drive greenhouse gas emission reductions and climate-resilient private sector investment towards the Caribbean region”.

With businesses from Barbados, The Bahamas, Belize, Dominican Republic, Guyana, Jamaica, Suriname and Trinidad and Tobago able to participate, the programme in the Caribbean seeks to mobilize up to US$400 million overall.

The blended finance resources and technical assistance is being offered across the infrastructure, renewable energy, transport, agriculture, and blue economy sectors.

Details of the initiative were shared in a recent blog by IDB experts Nikolai Orgland, a blended finance investment officer in the financial products and services division and Malini Samtani, a climate change specialist in the advisory division.

They noted that “Caribbean small island developing states face persistent vulnerability to extreme weather shocks – a reality underscored . . . when Hurricane Melissa struck” Jamaica.

“Roofs were torn off, ground floors flooded, and power lines snapped. Damage to Jamaica alone is estimated at US$8.8 billion, equivalent to approximately 41 per cent of its 2024 gross GDP. Much of this reconstruction cost will be borne by businesses and individuals paying to rebuild their homes and businesses,” Orgland and Samtani said.

“With a new GCF-financed IDB Invest facility, IDB Invest will support post-hurricane recovery and proactively help private-sector entities build stronger resilience to future climate shocks.”

They explained that “in addition to providing loans, equity, and guarantees, IDB Invest will provide businesses with technical assistance to strengthen investment readiness for resilience and develop innovative financial mechanisms to drive resilience and adaptation”.

The financial institution will also “work at the market level in these countries, with a variety of associations to train sectors such as tourism, agroprocessing, and the financial sector to incorporate resilience measures”.

Tackle sectoral challenges

Orgland and Samtani said that this approach “goes beyond individual projects to tackle sectoral challenges that can contribute to sustainable development in the Caribbean”.

The experts highlighted three structural vulnerabilities challenging the region – public finance pressure, climate risk exposure, and private sector constraints. They said that more frequent and severe weather events bring headwinds to already constrained Caribbean economies, reinforcing these three interconnected constraints.

“The local private sector struggles to fill the financing gap for resilience. Small, fragmented markets limit scale, and banking systems maintain tight risk limits. Banks prefer short-term loans, while resilience projects require long-term financing. Most financial institutions and companies have limited experience with long-term resilience projects,” the pair observed.

Their view as that while Caribbean companies cannot influence the frequency and intensity of future hurricanes, “they can improve the resilience of their companies’ assets before the next storm hits, thereby reducing losses”. “Governments face fiscal constraints that limit large-scale investment in resilient infrastructure, and the private sector has not yet bridged this financial gap. The IDB Invest GCF programme aims to address all three interconnected constraints, ultimately reducing the long-term vulnerability of businesses in these countries,” the IDB Invest team members said.

“The Caribbean manufacturer that restarts production within hours of the next hurricane, keeping workers employed and orders filled, will show what development finance can achieve when it targets systemic constraints.”

This specific Caribbean programme “serves as an initial milestone for the IDB Invest Small and Island (S&I) Roadmap, which commits to deploying approximately US$5 billion over five years to build resilient infrastructure, expand financial access, and strengthen business environments across S&I countries”.

“The GCF capital provides technical assistance and blended finance solutions to help companies transition to sustainable, environmentally responsible, and resilient operations,” Orgland and Samtani shared.

“Through this GCF facility, IDB Invest will help fill financing gaps for eligible investments by being flexible, patient, and risk-bearing.”

They said that IDB Invest-involved initiatives in Jamaica, Suriname, and Guyana showed what was possible for the programme.

“Building on these recent achievements and resources from the GCF facility, we will continue scaling up the provision of blended finance with technical assistance to help banks develop green lending products and support infrastructure project developers and firms, including medium-sized and women-led enterprises,” the duo stated.

“This strategy shifts from project-by-project interventions to a sustained effort to overcome structural barriers that constrain Caribbean development. The goal is to ensure that Caribbean businesses can rebound quickly when the next hurricane hits.” (SC)