by Rosana John LLM
In the wake of Hurricane Beryl’s unprecedented fury, the Caribbean faces a grim reality: hurricanes are arriving earlier, growing stronger, and occurring more frequently.
For Small Island Developing States (SIDS), climate change is not just a scientific and political issue but an existential threat, forcing us to bear the brunt of a crisis we have contributed the least to. This underscores a profound issue of climate (in) justice, demanding urgent attention.
This article explores 3 legal responses to climate change: Climate Finance, Climate Litigation, and ESG and Corporate Sustainability.
- Climate Finance
The cruel irony of Climate Change is that the States that have contributed the least to this intractable problem stand to suffer “first and worst”. The financing required to mitigate and adapt to the effects of climate change is substantial and is arguably an issue of life or debt for several Caribbean Islands, which are already saddled with mounting developmental challenges.
Recently, there have been 2 notable advances for SIDS in the area of Climate Justice. Namely, the Bridgetown Initiative and the Loss and Damage Fund from COP27[1].
The Bridgetown Initiative[2] is a proposal by the Prime Minister of Barbados Mia Mottley to reform the global financial system to make it more accessible to developing countries and to support climate-resilient development.
The Loss and Damage Fund is a new fund established at COP27 to provide financial assistance to developing countries that have suffered loss and damage from climate change[3]. The Fund is still in its early stages of development, but it is expected to play a significant role in helping developing countries to recover from and adapt to climate-related disasters.
Effectively implementing these developments necessitates agile legal instruments to ensure that the Caribbean region receives its fair share of financial and technical support.
Outside of the United Nations Framework Convention on Climate Change (UNFCCC) regime we have also seen the rise of novel but complex instruments to provide additional sources of financing for SIDS. Some examples include:
- Natural Disaster Clauses:
Natural Disaster clauses are provisions in contracts that address the risks associated with hurricanes and other extreme weather events. They were conceptualised as a means of providing financial flexibility within the realm of sovereign debt, particularly when no centralised bankruptcy system is in place, with the primary objective of aiding nations in circumventing the necessity for an official debt restructuring during times of humanitarian crisis[4]. These clauses can be used to allocate risk between parties, establish procedures for responding to claims, and limit liability.
The genesis of this type of clause dates back to its initial inclusion in the bonds issued by Grenada during its debt restructuring in 2015[5]. Barbados subsequently adopted a modified version of the clause in both 2018 and 2019, incorporating it into a significant portion of its overall debt portfolio as part of its debt restructuring efforts[6].
- Debt Liability Management Tools: Debt for Nature Swaps:
Debt for nature swaps are agreements between debtor countries and creditor countries or organisations in which the debtor country commits to protecting biodiversity or conserving natural resources in exchange for the reduction or cancellation of its debt[7].
Debt for nature swaps can be a valuable tool for Caribbean nations, which are often burdened by high levels of debt. By freeing up resources that would otherwise be used to service debt, debt for nature swaps can allow Caribbean nations to invest in climate resilience and conservation efforts.
In September 2022, the Government of Barbados completed a USD 150 million debt conversion with The Nature Conservancy (TNC) and the Inter-American Development Bank (IDB)[8]. This is the first debt-for-nature swap in the Caribbean, and it is seen as a groundbreaking model for financing marine conservation and climate resilience.
- Climate Litigation
As disillusionment with the multilateral climate process grows, individuals and organisations in the Caribbean are increasingly seeking legal avenues to address climate-related grievances. Advances in attribution science and mounting discontent are expected to lead to claims founded on constitutional rights, such as the right to life and a clean environment.
The case of Thomas & De Freitas v. Guyana is a significant development in climate change litigation. In 2021, two Guyanese citizens filed the first constitutional climate case in the Caribbean, challenging fossil fuel production on the grounds that it exacerbates global warming and threatens human rights. Before Guyana’s Constitutional Court, the Claimants argue that the government’s approval of a massive ExxonMobil-led oil and gas buildout off the country’s coast violates its legal duty to protect the rights to a healthy environment, sustainable development, and the rights of future generations[9].
Caribbean lawyers should anticipate and prepare for more cases of this nature. The Thomas & De Freitas case could have a far-reaching impact on the Caribbean region, setting a precedent for future climate lawsuits and influencing government policy and corporate behaviour.
Furthermore, there has been a notable advancement in the understanding of locus standi. A recent ruling by the Privy Council in the case of John Mussington and another v. Development Control Authority[10] has provided clarity on standing in judicial review cases concerning environmental issues. The Privy Council emphasised that individuals who demonstrate genuine interest and possess some knowledge of environmental matters are entitled to challenge decisions.
Notably, the justices affirmed that this expansive approach is consistent with Antigua and Barbuda’s international commitments under the Escazú Agreement. The Escazú Agreement, a significant regional accord adopted on 4 March 2018, within the UN Economic Commission for Latin America and the Caribbean and aims to ensure access to environmental information, public participation in decision-making, and access to justice in environmental matters[11]. Antigua and Barbuda, Belize, Grenada, Guyana, St Vincent and the Grenadines, St Kitts and Nevis and St Lucia are the Commonwealth Caribbean jurisdictions which have ratified this agreement.
- ESG and Corporate Sustainability
ESG stands for Environmental, Social, and Governance. It is a set of criteria used to evaluate a company’s performance on a broad range of sustainability and ethical issues[12].
The global landscape is witnessing a significant upswing in ESG regulation. In the European Union, key directives such as the Corporate Sustainability Reporting Directive (CSRD) [13]and the Sustainable Finance Disclosure Regulation (SFDR)[14] have been enacted. Meanwhile, in the United States, the Securities and Exchange Commission (SEC) has recently promulgated new rules that mandate public companies to disclose information regarding climate-related risks and emissions[15].
While mandatory ESG disclosures are not yet widespread in the Caribbean, there has been a notable shift. Regulators such as the Eastern Caribbean Central Bank have recently introduced prudential standards focusing on Climate-Related and Environmental Risks for licenced banks, and it is expected that other regional regulators will soon be issuing more sustainability-related guidelines.
Facing escalating climate threats, the Caribbean and other vulnerable regions urgently need more robust legal frameworks. While areas like equitable climate finance, litigation, and corporate sustainability are crucial, further legal responses are essential. Building codes prioritising resilience, improved land-use regulations, and financial incentives for sustainable practices are necessary. But legal solutions alone are insufficient. A truly resilient future demands unwavering international cooperation: wealthier nations must significantly reduce emissions and provide substantial financial assistance. Additionally, a steadfast commitment to environmental justice is required, ensuring impacted communities have a voice and resources for adaptation. Lastly, complete accountability demands that all stakeholders — nations and corporations alike — are held responsible for their contributions to climate change.
[1] The Conference of Parties (COP) is the supreme decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC). All States that are Parties to the Convention are represented at the COP, at which they review the implementation of the Convention and any other legal instruments that the COP adopts and take decisions necessary to promote the effective implementation of the Convention, including institutional and administrative arrangements.
For more information visit: https://unfccc.int/process/bodies/supreme-bodies/conference-of-the-parties-cop
[2] https://pmo.gov.bb/wp-content/uploads/2022/10/The-2022-Bridgetown-Initiative.pdf
[3] https://unfccc.int/loss-and-damage-fund-joint-interim-secretariat
[4] Mallucci, Enrico (2020). “Natural Disasters, Climate Change, and Sovereign Risk,” International Finance Discussion Papers 1291r1. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/IFDP.2020.1291r1.
[5] Ibid.
[6] https://www.elibrary.imf.org/view/journals/002/2022/377/article-A001-en.xml
[7] https://www.weforum.org/agenda/2024/04/climate-finance-debt-nature-swap/
[8] https://www.nature.org/content/dam/tnc/nature/en/documents/TNC-Barbados-Debt-Conversion-Case-Study.pdf
[9] https://climatecasechart.com/non-us-case/thomas-de-freitas-v-guyana/
[10] https://www.jcpc.uk/cases/docs/jcpc-2021-0116-judgment.pdf
[11] https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII-18&chapter=27&clang=_en
[12] https://www.thecorporategovernanceinstitute.com/insights/guides/what-is-esg-and-why-is-it-important/
[13] https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
[14] https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en
[15] https://www.sec.gov/news/press-release/2024-31
Rosana John is an Attorney-at-Law with a Master’s Degree in Environmental Law and Policy from UCL, which she pursued through a Chevening Scholarship.
During her academic tenure, her research focused on identifying equitable and practical sources of finance to mitigate Loss and Damage, a contribution that garnered her the Maxi Alexander Prize for Research in Environmental Law and Policy in 2018.
Presently, she spearheads Dentons Delany’s Caribbean-wide ESG Steering Committee, where she provides strategic guidance to corporations on implementing sustainability best practices.
All nations, countries and islands have contributed to climate change be it significant or insignificant percentage. Ecological predictions model warnings were made decades ago and continuing to be made. Nations, rich or poor, need to be prepared for these climate change meteorological situations, as best as they can, and not on a ‘its not our fault’ model, and not base decisions on discriminatory ‘hit or miss’ of countries or islands, because as we all know, the hurricane is form in tropical waters, can change its ‘hit or miss’ curvature path with consummate ease, and the ‘brunt’ of it comes at a high cost of damage to the least involved or the maximisation of involvement.