Small islands will be washed away unless they harness a greener off-shore finance
Climate change is already being felt across the world with extreme weather events causing food insecurity, conflict and forced migration in places as diverse as the Middle East, Latin America and the Arctic. As world leaders gather in Glasgow for Cop26 next week, there are some for whom the outcome could literally be a question of national survival.
Small islands live and breathe the impacts of climate change as hurricanes sweep across them, flattening livelihoods. They are on the front line facing particular risks which require complex practical, legal and policy solutions. Many low-lying small islands are just a few metres from total submersion. In the international corridors of power, however, the plight of these tiny nations is often overlooked.
Small islands only end up in the news when they are being shamed for their part in global illicit financial flows. The recent leaks in the Pandora Papers shine a disturbing light on offshore finance in island jurisdictions like Samoa, the Bahamas, the Seychelles, British Virgin Islands and Cyprus. The Offshore Leaks Database of the International Commission of Investigative Journalists lists many more small island states like Vanuatu and Antigua and Barbuda. But perhaps the prevalence of small island jurisdictions in these exposes reveals not only the problem with offshore finance, but also its potential for global change.
Over recent years, NGOs have been reporting extensively on financial businesses that support the fossil fuel industry including the production of scorecards like the Rainforest Action Network’s “Fossil Fuel Finance Report Card”. RAN’s report says: “Financial institutions that support business-as-usual for the fossil fuel industry are placing their bets on companies whose long-term success depends on runaway climate change.”
For many small islands, that means betting on their own annihilation. That is also, however, a level of influence on global finance that could spell their salvation.
After the Cayman Islands were ripped apart by Hurricane Ivan in 2004, their new constitution in 2009 introduced constitutional protections for the environment so that the government would be bound “in all its decisions, [to] have due regard to the need to foster and protect an environment that is not harmful to the health or well-being of present and future generations.
How this translates into practice for the financial services sector remains to be seen.
Financial services may put food on the tables of many Caymanians today, but, with a high point just 6 metres above sea level, global finance that fuels emissions could see those tables sink underwater by the end of the century. Arguably, if the Cayman Islands government is to fulfil its constitutional obligations, it must make sure that its policies in the finance sector shift the dial towards green finance. And if all those islands that serve as a conduit for global finance were to follow suit, they could set a path towards change.
Small island economies, like their ecosystems, are fragile. There is a reason why so many of them have turned to global finance as a source of income – you don’t need much land for financial transactions. Calls for offshore finance to be closed down tend to favour large financial hubs like the City of London or Delaware without addressing the underlying problems of transparency and tax justice.
But perhaps there is an opportunity for small island financial centres to clean up their act and take the lead in creating a sea change in global financial markets that could help them keep their heads above water for generations to come. They may be small, but they are many, and their future depends on it.