Sustainable Development Report for Small Island Developing States 2023 Addressing structural vulnerability and financing the SDGs in Small Island Developing States

Executive Summary

Global progress has stalled on the SDGs since 2020; SIDS are particularly off-track. Although they are a rather heterogeneous group of countries, SIDS share a set of common inherent characteristics – including smallness, remoteness, high dependency on strategic imports and tourism receipts, challenging natural environments, and fragile ecosystems – which impede their ability to achieve sustainable development. SIDS also face specific challenges to unlock the financing needed to invest in the SDGs. The special edition of the SDG Index for SIDS presented for the first time in this report, shows that, despite a great degree of dispersion on SDG performance across the SIDS, these countries face greater gaps to SDG achievement than the rest of the world. The SDG Summit and COP 28 in 2023, but also the 2024 fourth International Conference on SIDS in Antigua and Barbuda, represent important milestones to define long-term pathways and unlock financing to accelerate SDG progress in SIDS.

Structural and multidimensional vulnerabilities generate severe obstacles to pursue sustainable development. This report also introduces the Multidimensional Structural Vulnerability Index (MSVI), a new tool used to assess the structural vulnerability of 180 countries worldwide, including 33 SIDS. The MSVI is then used to analyze linkages between structural vulnerabilities and SDG progress. The MSVI reveals that, on average, SIDS face the highest levels of structural vulnerability across all three dimensions: economic, structural development and environmental. It is important to note that while SIDS share common characteristics, there are notable variations in the types of vulnerabilities they face across the three SIDS regions – the Caribbean, the Atlantic, Indian Ocean and South China Sea (AIS), and the Pacific – resulting in each region having a unique vulnerability profile. Being structurally vulnerable is associated with lower SDG Index score but also higher GDP volatility. These findings highlight the urgent need for targeted efforts and financial support to address the specific vulnerabilities faced by SIDS and promote sustainable development in highly vulnerable countries.

It is urgent to respond to the specific SDG financing needs of SIDS. Together, SIDS represent a very low share of cumulative historical greenhouse gas (GHG) emissions, yet they are particularly affected by climate change. As emphasized at the last COP in Egypt, it is now urgent to identify effective international mechanisms to share fairly and globally the burden of financing for human-induced adaptation and L&D costs among responsible countries. More broadly, the SDG Stimulus Plan, the adoption of the multidimensional vulnerability index, the Bridgetown Initiative and the upcoming Summit of the Future in 2024 must lead to substantial reforms of the Global Financial Architecture and significantly increase global financing flows channeled to SDG investments. Multilateral Development Banks, innovative financing mechanisms (including SDG or blue bonds), debt relief, international taxation reforms and revisions of credit rating methodologies (among others) must be further mobilized to recognize the long-term growth potential of investing into the SDGs and of building up resilience, and to provide access to affordable and long-term financing for sustainable development in SIDS and developing economies. Countries’ structural vulnerabilities must be considered to define effective policy and SDG financing pathways. In cooperation with international and national partners, SIDS must also strengthen their economic planning, fiscal frameworks, project implementation, financial operations, and partnerships to effectively channel substantial investment towards sustainable development.