The situation
The Caribbean region, due to its geographical location and size, is particularly susceptible to climate-related risks, including droughts, hurricanes, floods, rising temperatures, and sea-level rise.
These conditions have the potential to devastate both residential and commercial sectors, demanding urgent climate-resilient infrastructure. However, despite the pressing need for climate adaptation, barriers such as high costs, lack of incentives, and slow policy reform persist. While adaptation measures—like stormwater retention systems, impact-resistant windows, and green roofs—are economically viable (with returns of 20 to 30 times their respective costs), the key challenge is integrating these resilience measures into the fabric of the region’s economy.
Small and medium enterprises (SMEs), which make up a 50 to 70% of the employment and GDP in the region, are vulnerable to climate risks, as many lack the resources to recover from disasters. Business continuity, particularly for SMEs, is often severely impacted after climate events, with long recovery times further hindering economic growth. Similarly, residential developments are built without climate change considerations and ample resilience measures, such as impact resistant windows and doors, hurricane shutters, rainwater harvesting, etc., leaving homeowners vulnerable to climate-related risks.
Opportunities and Financial Mechanisms
There are significant opportunities in the SME sector for retailing and installing resilience-related products to meet the unmet housing and office demands across the region. Popular products include photovoltaic (PV) systems, hurricane shutters, and rainwater harvesting systems. However, the region must overcome reluctance from developers to incorporate these resilience measures in new developments, and consumers need awareness on the long-term benefits of climate-resilient infrastructure.
To overcome these challenges, a combination of good regulations, policy reform and market incentives are required to overcome the challenges of the free-market model. For example, both hurricane shutters and solar panels are marked up over 200% in the region in comparison to other jurisdictions. This puts climate resilient measures out of the reach of most of the region’s population due to severe inequalities.
The free market model in the Caribbean face challenges such as limited competition, market size constraints, and economic inequalities. In countries like Barbados, Jamaica, and Trinidad and Tobago, small markets, high import dependence, and the dominance of certain sectors (e.g., oil in Trinidad) distort market dynamics. Limited government intervention and price distortions due to subsidies or external factors make it hard for sustainable practices to compete. These factors collectively discourage investment in climate-resilient measures, as short-term profit motivations and high costs of sustainable materials hinder their adoption. Governments in the region need to update building codes to mandate climate resilience and offer financial products that incentivize sustainable building practices. By investing in resilience today, the Caribbean can ensure a safer and more prosperous future.
The need for climate-resilient infrastructure in the Caribbean is clear, and the economic case is strong. However, it will take concerted efforts from governments, developers, and the financial sector to fully realize the potential of these investments.