Back to Blue: Global funding leaves vulnerable Small Island Developing States stranded, says new report

• Despite being the most exposed to climate change, Small Island Developing States (SIDS) receive a vanishingly small share of global climate funding.
• A new report reveals that for many philanthropies, NGOs and development finance institutions, funding SIDS is considered a high-risk undertaking.
• Exploring new data and analysis, the report calls on funders to stop funding isolated short-term projects that do not establish long-term resilience.
• As global attention turns to Pacific Islands ahead of pre-COP31, and with SIDS pushing for recognition of their "special circumstances" under international law, the report highlights an urgent opportunity to fix climate finance systems that are failing them.

LONDON, March 2, 2026 /PRNewswire/ -- Small Island Developing States (SIDS) are being systematically locked out of climate finance – not because they don't need it, but because the global financing system deems them too small, too fragmented and too risky to fund.

A new report, Financing SIDS' blue development: An assessment of regional delivery frameworks, launched today by Back to Blue – a global ocean research initiative from Economist Impact and The Nippon Foundation – reveals that many financiers see SIDS as unattractive funding propositions and sets out practical pathways to change this.

Despite contributing less than 1% of global greenhouse gas emissions, SIDS across the Caribbean, Pacific and Indian Oceans face the most severe and immediate impacts of climate change, receiving just a fraction of the climate finance they need, estimated to be approximately $12 billion annually.

The report — drawing on interviews with SIDS representatives and global funders and examining two regionally led initiatives, the Organisation of Eastern Caribbean States (OECS) 30x30 Transformation Programme and Unlocking Blue Pacific Prosperity (UBPP) — finds that fragmented governance, small project sizes, and limited institutional capacity make returns appear low and risks high, leaving SIDS underfunded and vulnerable.

Safiya Sawney, Grenada's ambassador, said: "SIDS and funders can't keep operating in silos. Only through joint action from both can these nations build truly resilient blue economies. If we align better, and develop solutions tailored to small islands' needs, we can create a much more effective system for financing and implementation, breaking the cycle that keeps SIDS incredibly vulnerable to the onslaught of climate change."

Tourism contributes an average of 30% to the GDP of SIDS, making it the largest economic sector in many of the SIDS countries. When climate shocks hit, the damage goes far beyond roads, ports and ecosystems – it drives debt, inflation and prolonged periods of recovery. Between 2000 and 2022, the average economic losses attributable to climate-related disasters in SIDS totalled at $1.7 billion per year, or $41.3 billion in total.

Lemalu Karena Lyons, Director of Partnerships at Pacific Islands Development Program, said: "We need to fundamentally rethink how we finance SIDS. Each funding shortfall compounds the next climate shock, leaving SIDS ever more exposed, indebted and unable to break free from a cycle of escalating vulnerability. New, regional approaches that centre local priorities could provide a new solution"

The report analyses two regional initiatives to assess whether these approaches offer a solution. The OECS 30x30 is a data-driven marine conservation plan that could attract up to $300 million in funding for Caribbean islands. UBPP is a regenerative financing framework in the Pacific, enabling its islands to sustainably manage 100% of their blue economies, potentially raising SIDS $500 million. They both spotlight that current funding systems are failing SIDS, preventing them from building lasting resilience.

Experts from Back to Blue argue that the cycle can be broken if funders coordinate investment, share data and build on existing progress and if SIDS governments provide enabling policies. Climate shocks are becoming increasingly frequent and unpredictable, making it critical not only to scale up funding but also to ensure it is deployed effectively.

The findings echo growing political momentum among SIDS. In September 2025, the Alliance of Small Island States (AOSIS) issued a Leaders' Declaration calling for the recognition of SIDS' "special circumstances" to be established as a core principle of international law. This could unlock simplified, customised financing pathways for SIDS, allowing them to meaningfully participate in and consent to international legal decisions that affect them.

Peter Thompson, UN Special Ocean Envoy, said: "I believe that Small Island Developing States should be first in line for climate finance. They're on the frontlines of a global crisis they have not caused, but their size and vulnerability militate against them receiving adaptation finance at the speed and scale required for their security. Until the system radically improves, SIDS will remain dangerously exposed."

The report calls on funders and SIDS governments to work collaboratively, acting decisively – ahead of pre-COP31 which is due to be held in numerous Pacific Islands – to begin reforming financing systems, embracing regional approaches to secure SIDS the investment to build long-term, climate-resilient blue economies.

Notes To Editors

"If we replicate structures from the past, we won't be successful. We have to innovate." said Illana Seid, Palau ambassador to the United Nations and chair of the Pacific Small Island Developing States.

About the report

Funding SIDS' Blue Development: An Assessment of Regional Delivery Frameworks is a new analysis based on more than 50 interviews with SIDS leaders and financiers.

About Back to Blue

Back to Blue is an initiative by Economist Impact and The Nippon Foundation that tackles ocean challenges with evidence-based solutions. Addressing gaps in understanding plastic and chemical pollution and ocean acidification, it aims to drive progress in ocean health.

About Economist Impact

Economist Impact combines the rigour of a think-tank with the creativity of a media brand to engage a globally influential audience. We believe that evidence-based insights can open debate, broaden perspectives and catalyse progress. Our track record spans 75 years across 205 countries. Along with creative storytelling, events expertise, design-thinking solutions and market-leading media products, we produce framework design, benchmarking, economic and social impact analysis, forecasting and scenario modelling.

About Nippon Foundation

Established in 1962, The Nippon Foundation is Japan's largest philanthropic foundation. In ocean affairs, the Foundation aims to cultivate human resources who will chart a course for the ocean's future and to pass on the ocean's riches to future generations. Other primary areas of activity include support for children, persons with disabilities, disaster relief, and international cooperation.