When

Date: 28 October 2024

Time: 1:15 PM to 2:30 PM

Where: In-person participation- CR 8 UN Building, New York (Only participants with official badge issued by the UN will be able to join)

Context

The current credit rating methodologies predominantly assess fiscal and economic risks based on conventional indicators like GDP, fiscal balance, and external debt. However, for SIDS, these models fail to capture the realities they face, particularly the impact of climate change. IIED’s most recent analysis Redefining credit ratings for Small Island Developing States explains SIDS' growing climate vulnerability is compounded by inaccessible, opaque and inappropriate credit rating processes, which lead to higher borrowing costs and hinder the ability of SIDS to invest in resilience and sustainable development.This can widen the adaptation gap, preventing these countries from breaking free from the downward spiral of recurrent disasters that cause significant loss and damage and exacerbate debt burdens.

This side event aims to address these challenges head-on by bringing together a diverse coalition of stakeholders to discuss innovative approaches to reforming the credit rating sector. The event will explore the need for a new credit rating mechanism that not only evaluates economic and fiscal risks but also explicitly recognises opportunities for investments that enhance climate resilience and promote sustainable development.

Key Objectives of the Event:

• Highlighting the limitations of current credit rating systems: The event will begin by outlining the current limitations of traditional credit rating methodologies, focusing on how they fail to account for the specific vulnerabilities of SIDS. Presentations will illustrate how climate risks are often treated as liabilities without acknowledging the proactive resilience efforts undertaken by these nations.
• Introducing a new credit rating mechanism: Present a proposed credit rating mechanism that incorporates a multidimensional assessment of risk and opportunity. This new framework will evaluate not only traditional financial metrics but also factors such as human capital, natural capital, social networks, and physical infrastructure—all of which play a role in enhancing return on investment and a crucial role in enhancing resilience.
• Exploring collaborative solutions and stakeholder engagement The event will foster dialogue among representatives from governments, international financial institutions, credit rating agencies, and investment firms. Participants will explore collaborative strategies for advocating credit rating reform, ensuring that these new methodologies reflect the realities of climate-vulnerable nations.
• Engaging FFD4 to prioritise credit rating reform: A key focus of the event will be to urge the FFD4 to prioritise the reform of the credit rating sector. Stakeholders will discuss concrete steps that can be taken to push for this reform and the role that FFD4 can play in supporting fairer financial systems for SIDS.

Event format and agenda

The side event will feature a mix of presentations, panel discussions, and interactive Q&A. It will begin with keynote addresses by high-level representatives from SIDS, followed by presentations on the shortcomings of current credit rating systems. A moderated panel discussion will include representatives from government, UN agencies, development banks, and the private sector, focusing on actionable recommendations for reform. The event will conclude with an open discussion, inviting contributions from all participants to identify pathways for collaboration and advocacy.

• Welcome and Keynote Addresses (5 minutes): Overview of the event's objectives
• Keynote Addresses (10 minutes): by Strategic Advisory Group (SAG) Co-chairs of SIDS Debt Sustainability Support Service.
• Presentation of the proposed approach for reforming the credit ratings for climate resilience (15 minutes): shortcomings of current credit rating system and proposed approaches for addressing them.
• Panel Discussion: Regional needs and global support (40 minutes): A moderated panel discussion with representatives from government, UN agencies, development banks, and the private sector, focusing on actionable recommendations for reform.
• Closing remarks (5 minutes): Summary of key takeaways and next steps.

Expected Outcomes:

• - Raise awareness among stakeholders about the shortcomings of existing credit rating methodologies and their impact on SIDS.
• - Develop a collaborative framework for advocating credit rating reform that takes into account resilience investments and sustainable development opportunities.
• - a joint call to action urging FFD4 to prioritise credit rating reforms as a critical step toward achieving sustainable financing for climate-vulnerable nations.