Jamaica needs US$5 billion for green investments

The Jamaica Stock Exchange (JSE) will by mid-year start offering ‘blue-green’ bond products as part of the island’s push to invest US$5 billion by 2050 to retard the effects of a hotter climate.

The sustainability bonds are ‘blue’, which represents water and the ocean, and ‘green’ for the land.

“Later this year, the JSE will become the first stock exchange in the region to facilitate the issuance of green, blue, and other sustainable bonds,” said Dr Nigel Clarke, minister of finance and planning, earlier this week at the Jamaica Stock Exchange’s (JSE) Investments and Capital Markets Conference at the Jamaica Pegasus hotel in New Kingston.

“By the end of June, the JSE will be in the position,” he noted.

These bonds will make developing large-scale sustainability projects less risky for the private sector. That’s because these bonds usually contain concessions or government equity involvement.

“To ensure that there is a return on these projects that cover the cost of capital, we need to have what is termed a ‘blended finance arrangement’ with other streams of capital that have other motives, and, therefore, might have other expectations of returns. And that is where these blue and green facilities come from,” Clarke said. “So, the Government would come in at the first loss layer to inspire others to come in.”

Governments around the world, under an agreement called the Paris Accord, are keen to reduce carbon emissions, which is the main driver for heating the globe over time. Scientists say that without adapting now, the globe will warm by 1.5 degrees Celsius by 2050.

The amount seems small, but it is twice the elevated temperatures of a typical fever. Already, the world experienced its hottest year on record in 2023.

Clarke explained that international partners are increasingly making more funds available for sustainability funding than for other forms of funding for emerging economies.

“It will become more important, and a bigger part of the toolkit,” he added. “And that is a good thing.”

Jamaica is working with a group of multilateral and bilateral partners, including the International Monetary Fund, Inter-American Development Bank (IDB), the United Kingdom and “possibly beyond”, to set up a suite of instruments.

“For mitigation measures, it was estimated that we will need US$5 billion, and for adaptation, we would need US$1 billion,” said Development Bank of Jamaica Manager Roxanne Valentine-Donegan, who specialises in environmental and social management, at the JSE Conference. “For the Caribbean, just for disaster risk-reduction intervention, the region would require US$100 billion.”

She said that the 2050 figure emerged last year from the state planning arm, the Planning Institute of Jamaica (PIOJ), which developed an international climate finance strategic framework.

“The numbers are great,” she said.

The investment push targets energy efficiency; clean transportation; pollution prevention; sustainable agriculture, fisheries and forestry; protection of aquatic and terrestrial ecosystems; clean water; and sustainable water management, according to the PIOJ in its Voluntary National Review 2022.

The investments over the two decades is also aimed at increasing the island’s resilience against storms and floods.

For instance, a 1-in-100-year storm would cost the island between US$4.8 billion and US$5.9 billion by 2050, according to the World Bank and International Bank for Reconstruction and Development, as quoted in the PIOJ report. In other words, one disaster could cost more than the funding target over the period.

In 2020, the Green Bond Project was initiated with support from the Green Climate Fund, aiming to assess the debt market and establish a conducive environment for a green bond market. It was delayed and reformulated under COVID-19.

Since December 2023, the JSE has partnered with IDB Invest to guide its transformation into a sustainable stock exchange. The partnership aims to create guidelines for green, social, and sustainability+ bonds in Jamaica, conduct stakeholder sessions, establish a green bond trading platform, and formulate a sustainability strategy and action plan, according to the JSE in response to queries in December.

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