Statement
Chair,
I have the honour to deliver the following statement on behalf of the Alliance of Small Island States (AOSIS).
Current credit rating methodologies remain heavily short-term in focus, prioritizing near-term fiscal and macroeconomic indicators. While these metrics are important, they fail to capture the long-term systemic risks and resilience-building efforts that are critical to Small Island Developing States.
Ratings today are largely anchored in near-term fiscal and macroeconomic indicators. However, climate change, sea-level rise, and increasingly intense disasters shape our economies over decades, not quarters.
But what is also striking is how these impacts are reflected in credit ratings.
In addition to the example earlier of Grenada, in Papua New Guinea, a severe drought in 2015 led to a steady decline in its rating, despite relatively stable economic outlooks before the shock.
In fact, from 2000 to 2022, the average credit rating for the 13 SIDS fell over three points.
These examples point to a clear conclusion: current methodologies are capturing the shock, but not capturing resilience, recovery or long-term potential.
For this reason, AOSIS calls for a shift toward longer-term, forward-looking, nuanced credit assessments.
First, we need the integration of scenario-based analysis and stress testing, particularly for climate risks. Ratings should assess how economies perform not only under current conditions, but under plausible future scenarios. A more holistic evaluation of national wealth, natural and human capital as strategic assets, alongside economic indicators can paint a fuller picture.
Secondly, we must also recongize resilience investments as strengthening creditworthiness. There is sufficient evidence that investments in resilience, such as climate adaptation, renewable energy and disaster risk reduction can generate significant long-term returns.
For instance, renewable energy investments can generate three to eight times their economic value. In the Pacific, marine resources can sustainably generate immense economic growth and support livelihoods.
When these dimensions are properly accounted for, the picture changes significantly. Analysis shows that incorporating resilience investments into credit assessments could increase average SIDS ratings, with corresponding improvements in growth prospects.
Therefore, if credit ratings are to guide investment effectively in today’s world, they must evolve.
They must move beyond a narrow, short-term lens and reflect the full trajectory of risk, resilience, and development potential.
If we are to mobilize long-term investment at scale, credit assessments must evolve to reflect both risk and resilience over time.
It is essential that the system recognizes and supports long-term sustainability I thank you.
