Greening the Caribbean Financial Systems (GCFS)

Caribbean countries are exposed to the consequences of climate change which affect populations and economic activities such as agriculture and tourism, which are key activities for food security and economic growth. Caribbean countries are keen to change their energy production structures, largely powered by imported fossil fuels, resulting in high electricity costs. As Small Island Developing States (SIDS), these countries also face economic fragilities due to small domestic markets, low levels of diversification, fragile social contexts and a high public debt.

In this context, there is an urgent need for strengthening capacity to address climate change, reducing vulnerability issues to be better prepared for these natural hazards, preserving biodiversity to maintain an attractive and adapted tourism sector, encouraging transitions to low carbon energy production and economic activities that support local productions of goods. These transitions shall be financed at a reasonable cost by these highly indebtedness countries.

In addition, persistent challenges to gender equality are another common feature of Caribbean countries, where gender stereotypes and habits continue to limit equal access to services and resources. 

The objectives of the project are:

• To support to three of the main central banks of the Caribbean Region to integrate the climate-related risks in their regulation and supervision activities, with the participation of their licensed financial institutions.
• To support to the Caribbean Development Bank (CDB) to promote the financing of adaptation and mitigation investments, with a gender-lens. The project will aim at supporting CDB in bringing concessional and affordable solutions to its Borrowing Member Countries (BMCs), while mainstreaming gender to ensure an empowerment of women workers.

To reach these objectives, the project includes a USD 50 million loan to the Caribbean Development Bank to finance 100% climate-friendly investments (of which a minimum of 50% adaptation), with a gender focus for all projects financed; and a EUR 5.85 million grant from the European Union’s Latin America and Caribbean Investment Facility (LACIF).

This project will contribute to strengthen green private investment portfolios, through loans from financial institutions supervised by the beneficiary central banks, and green public investment portfolios, through loans by the Caribbean Development Bank.

With this project, central banks and regulators will define guidelines for sustainable supervision and the Caribbean Development Bank and member states will improve their practices in financing sustainable infrastructure, with a particular focus on gender issues.