Last year, the South Pacific Stock Exchange and International Finance Corporation, with support from Australia and New Zealand, launched an initiative to help identify environmentally sustainable economic activities. The aim is to guide public and private investments toward projects aligned with Fiji’s climate goals. It was just one of several initiatives deployed by Small Island Developing States in the effort to confront a complex web of challenges, comprising rising sea levels and coastal erosion, with the resultant effect on volatile sectors such as tourism.
Small island nations are increasingly turning to environmental, social and governance (ESG) standards as a potential tool for sustainable development. ESG frameworks are designed to align investment flows with environmental stewardship, social equity and responsible governance. ESG principles are closely aligned with the United Nations Sustainable Development Goals (SDGs), not only as market signals, but governance tools to track and steer national progress toward global sustainability targets. However, their introduction to small island nations is itself proving a challenge.
Jamaica is an instructive case. The island has struggled to reconcile rapid tourism development with ecological preservation. The 2024 opening of the Princess Grand Jamaica Resort involved clearing mangrove forests that sparked public outrage and raised questions on environmental governance. The Jamaican government and civil society have pursued ESG aligned conservation strategies such as the Jamaica Mangroves Plus Project aiming to conserve 60 per cent of Jamaica's public forested wetlands.
ESG standards cannot be imposed as one-size-fits-all models.
But other countries have made progress. In Comoros, where environmental degradation and poor infrastructure continue to hinder development, efforts to integrate ESG principles are nascent, but notable. Limited institutional capacity has historically been a contributing factor constraining implementation of broad-based reforms. The Comoros government recently incorporated key ESG measures into a National Quality Policy to improve sustainable development outcomes. Comoros has also engaged in international frameworks such as the Nairobi Convention seeking regional cooperation in marine and coastal environmental governance.
Meanwhile, the Seychelles continues to garner global recognition for its innovative ESG financing models. In 2018, it issued the world’s first sovereign blue bond raising US$15 million to finance ocean conservation and sustainable fisheries. Bond proceeds have supported the expansion of marine protected areas, improved fisheries management and capacity-building for local communities.
The adoption of ESG standards in small island countries is not without obstacles. Limited financial and human resources hinder implementation in nations with public institutions that are already stretched. Many island nations face challenges building the technical capacity required to monitor ESG indicators and enforce compliance. The pressure to meet global ESG benchmarks can conflict with immediate economic needs including job creation or debt servicing. Foreign investors sometimes impose ESG requirements that do not align with local realities, marginalising traditional practices and small-scale enterprises.
ESG standards cannot be imposed as one-size-fits-all models. A localised approach that respects indigenous knowledge, builds institutional capacity and ensures inclusive participation in governance processes is essential. The international community can play a supportive role providing financing, knowledge transfer and capacity development to ensure that small island developing states implement ESG frameworks not only for compliance, but transformation.
