COP29: What’s at Stake for Businesses in Pacific Small Island Developing States?

By Corey Huber from the Vanuatu Business Resilience Council , a CBi Member Network

The outcomes of COP29 will shape the ability of businesses and private sector actors in Pacific Small Island Developing States (PSIDS) to operate sustainably in an increasingly unpredictable environment. Small businesses in particular ?- think tourism, fisheries, and agriculture ?- are essential drivers of local economies, yet highly sensitive to climate impacts. This makes accessible finance vital for their resilience.

Here is a bit more context on why that is, and how COP29 is critical not just as a high-level forum but a platform whose outcomes this year will affect businesses big and small.

Why the focus on Pacific Small Islands Developing States?

PSIDS consistently rank amongst the most vulnerable countries to climate induced disasters, with associated estimated losses on an annualized basis far exceeding those in nearly all other regions worldwide. Accordingly, climate change is recognized by PSIDS leaders as the single greatest threat to the livelihoods, security, and well-being of the peoples of the Pacific.

Within the region, the private sector is often framed as inclusive of actors in both the financial sector and real economy, ranging from large international and domestic corporations to micro, small, and medium-sized enterprises (MSMEs) and smallholder farmers. Local businesses and private sector actors are a fundamental component of building resilience for local communities affected by climate change and face increasing physical risks from acute and slow onset impacts such as tropical cyclones and sea level rise.

Negotiations at the upcoming 2024 United Nations (UN) Climate Change Conference (COP29) under the UN Framework Convention on Climate Change (UNFCCC) will have significant implications for the survival of these enterprises. Delegations from around the world will shape global decisions that will directly impact how effectively PSIDS and businesses within the region adapt to and succeed in a changing climate.

This 29th session of the COP (COP29), to be held in Baku, Azerbaijan in November, will focus heavily on climate finance. A key goal will be the setting of a new post-2025 climate finance target, known as the New Collective Quantified Goal on Climate Finance (NCQG). This new global financial goal aims to ensure that climate vulnerable nations like PSIDS can access the resources needed to effectively address the climate crisis. This is not just a matter of international diplomacy – what happens at COP29 will have direct implications for nation-states as well as businesses and people around the world.

For PSIDS, the NCQG represents a crucial opportunity to shape discussions not only on how much climate finance is needed, but equally important on the quality of finance. This includes how will climate finance be raised, distributed, and accessed, and which types of finance and sources will count.

Regional leaders will be advocating that for the NCQG to most effectively support PSIDS, it must contain several key provisions, such as:

• the special circumstances of SIDS recognized in the Paris Agreement?
• grants-based climate finance
• finance coming from developed country parties
• the establishment of thematic sub-goals to balance flows between mitigation, adaptation, and loss and damage, amongst other goals

What will negotiations mean for businesses in PSIDS?

Outcomes of COP29 will shape the ability of businesses and private sector actors in PSIDS to operate sustainably in an increasingly unpredictable environment. MSMEs in PSIDS are essential drivers of local economies, particularly in industries such as tourism, fisheries, and agriculture that are highly sensitive to climate impacts. This makes accessible finance vital for their resilience.

Increased flows of climate finance to PSIDS will be critical for enabling businesses to invest in green technologies, disaster preparedness, and infrastructure resilience. Renewable energy projects could help lower energy costs for businesses while reducing their carbon footprint, and sustainable tourism practices could protect vital ecosystems and attract eco-conscious travelers.

Access to climate finance could also help the private sector build adaptive capacity. For agribusinesses, it could support the development of climate-smart techniques that reduce water use, improve soil health, and increase food security. For tourism operators, it could help businesses recover from climate related disruptions, maintain infrastructure, and ensure the long-term sustainability of their operations.

Another important aspect of success would be increased private sector involvement in financing adaptation and resilience projects. Mobilizing private capital alongside public funding could spur new opportunities for local businesses, allowing them to scale climate-smart solutions and create jobs while enhancing local economies.

What happens if negotiations fail?

If negotiations at COP29 fail to deliver a successful outcome on the NCQG, the consequences for PSIDS and businesses within the region could be dire. Many of these businesses, especially MSMEs, lack the financial resilience to weather prolonged climate disruptions, which could lead to significant job losses and contract local economies. Vulnerable communities that rely on these businesses for their livelihoods would likely be the hardest hit.

Businesses may be forced to absorb higher operational costs due to climate-related damages and increased uncertainty. For example, these enterprises may face higher insurance premiums, reduced access to credit, and a lack of investment in resilience-building technologies. For many local businesses, particularly those operating on thin margins, these challenges could lead to closures, loss of livelihoods, and diminished economic activity.

On a larger scale, the failure to secure sufficient climate finance would exacerbate economic instability across PSIDS ?- but also other regions such as the Caribbean. Many of these nations already face significant debt burdens, and without access to grants and concessional financing, governments may be forced to take on additional debt to support recovery and adaptation efforts, further constraining private sector growth.

This article was originally published on the OCHA/UNDP Connecting Business initiative (CBi) website. CBi engages the private sector before, during, and after emergencies with the objective of fostering resilience to disasters. It works with Member Networks that are national or regional chambers of commerce or business associations, including the Vanuatu Business Resilience Council (VBRC). To find out more about CBi or the VBRC, connect with us directly - be it here on LinkedIn or by signing up for the CBi mailing list.