Boosting investment is central to advancing resilient and sustainable development in Caribbean countries. While the region has strong natural and human capital and is well integrated into global markets, long-standing structural constraints and rising exposure to climate and external shocks continue to weigh on development. Addressing these challenges calls for a renewed investment agenda, focused on resilience, sustainability and better financing to unlock the Caribbean’s development potential.
Caribbean Development Dynamics 2026
Investing in Sustainable and Resilient Development
Introduction
Key figures
2.1%
Average annual climate-related damages as a share of GDP in the last four decades
4.2%
FDI net inflows as a share of GDP in 2024
Excludes Guyana (6.3% including Guyana)
USD 2 bln
International issuances by Caribbean countries of green, social, sustainability, sustainability-linked and blue bonds, 2019-2024
Investing in resilience and sustainability is vital in a region where climate exposure has increased and infrastructure gaps are large
The Caribbean is among the world's regions most exposed to climate hazards. Between 2004 and 2024, climate-related extreme weather events increased by 84% compared to the previous two decades.
High exposure of coastal and energy infrastructure in the region amplifies the economic impacts, disrupting connectivity and public service delivery while raising the cost of maintaining and expanding resilient infrastructure. Strengthening investment in climate-resilient infrastructure and early warning systems is therefore critical to anticipate and mitigate climate risks and protect livelihoods. Yet public infrastructure investment averaged just over 1% of GDP between 2015-2021.
Public-private partnerships (PPPs) could help mobilise private finance and expertise for resilient infrastructure, but their use remains limited: PPP investment averaged only 0.38% of GDP between 2010-2023, below the Latin American average of 0.54%.
Investment is rising but remains misaligned with long-term resilience needs
Total investment in the Caribbean averaged 28% of regional GDP in 2023, above OECD and Latin American averages. However, investment is often driven by short-term or externally financed projects, including post-disaster reconstruction, rather than long-term development priorities.
Underdeveloped domestic capital markets and high financing costs constrain long-term finance needed to close infrastructure gaps. FDI — which represented 4.2% of GDP in 2024 (6.3% including Guyana) — can help bridge investment gaps, support strategic areas like digital transformation, renewable energy, and export diversification, and foster quality job creation.
Innovative debt financing mechanisms can mobilise resources to support environmental, social and climate resilience objectives
Caribbean countries are frontrunners in the use of green, social, sustainability, sustainability-linked and blue bonds (GSSSB). Between 2019 and 2024, regional cumulative international issuance of these bonds reached USD 2 billion.
The region is also a global leader in debt-for-nature swaps (The Bahamas, Barbados, Belize), sovereign catastrophe bonds (Jamaica and Grenada) and climate-resilient debt clauses (Barbados, Grenada, Saint Vincent and the Grenadines).
These instruments can improve access to finance while boosting resilience to natural disasters and alleviating fiscal impacts, especially when supported by sound regulations and oversight mechanisms.
What can governments do?
Targeted investments in sectors where the region has high potential can unlock development gains and support formal job creation. Priority areas include:
- Sustainable tourism and the creative industries;
- Activities supporting the energy transition and sustainable transport;
- The blue and circular economy;
- Sustainable agriculture and food systems;
- Digital transformation and artificial intelligence.
Expand domestic resource mobilisation; streamline tax incentives; and leverage development banks to increase access to affordable, long-term finance while safeguarding fiscal sustainability.
Scale up the use of GSSSB bonds, debt-for-nature swaps, carbon credits and pre-arranged financing mechanisms, such as catastrophe bonds, climate-resilient debt clauses or contingent loans and grants, supported by strong institutional frameworks and regional co-operation.
Enhance regional integration and international co-operation to improve access to global climate finance and mobilise investment at scale through collective approaches, risk pooling and innovative financing instruments.
