Brian Commettant, First Deputy Governor, Central Bank of Seychelles

Flooding, drought, storms, landslides, sea level rise, damage to ecosystems, and the impact of climate change is very real, and the need for action is urgent. So what can central banks and financial regulators do about it?

Seychelles, like many small island nations, is on the frontline of climate change. As a result, building resilience and adaptability to climate challenges, and enabling the transition to a sustainable economy, has become a core component of the Central Bank’s mandate.

We approach the challenge in various ways. On one hand, we are integrating climate-related financial risk in our regulatory and supervisory framework, which aligns with global best practices. This includes encouraging stress testing and evaluating the vulnerability of our financial institutions to climate change impacts in order to mitigate risks as well as identify opportunities. 

We’re also supporting the development of sustainable finance instruments, transformative tools for channeling capital or financing to sustainable projects that support climate-resilient and inclusive growth, and which directly benefit small businesses and communities.

Simultaneously financing sustainable development and ocean conservation

Seychelles was the first country in the world to launch a sovereign blue bond, a pioneering financial instrument designed to support sustainable marine and fisheries projects. Today, the blue bond is helping artisanal fishers and small-scale operators in adopting environmentally responsible practices, simultaneously building their resilience and ensuring the long-term viability of our natural resources.

The blue bond is financing capacity building, access to markets, and adoption of technology, empowering local entrepreneurs to innovate and grow their business sustainably. This translates to more stable incomes, greater food security, and improved livelihoods.  

Without a healthy ocean, however, none of this matters. So, in addition to promoting economic growth, the blue bond protects biodiversity by supporting the setting up of marine protected areas, and the effective governance of industrial fishing.

Financial inclusion is at the heart of our efforts

Climate resilience and financial inclusion go hand in hand: vulnerable groups are the most exposed to climate risk, yet they have the least access to financial tools that would enable them to adapt and recover from climate shocks. Through financial inclusion, we can build people’s climate resilience, and empower them to be a part of a just transition to a sustainable future. 

We are tackling this through initiatives such as MSMEs loans for climate adaptive livelihoods, insurance schemes that cover for climate-related losses, and financial literacy programs that empower individuals to make informed decisions.

Ultimately, a population with a high degree of climate resilience and financial inclusion helps safeguard the wider economy from systematic shocks.  

Collaboration is critical

The Central Bank works closely with the government, development partners, civil society and the private sector to ensure that financial policies take into consideration wider, development goals. Through our joint efforts, we are working to build a financial ecosystem that is adaptive, inclusive, and resilient against future shocks.  

Ultimately, our actions are motivated by opportunity just as much as by risk. Yes, facing up to the challenge of climate change is an environmental imperative. But it can also serve as a strategic foundation, building a resilient, equitable and sustainable economy that can cope with whatever the world throws at it.