Pacific Island countries are among the most climate vulnerable in the world and face huge unmet adaptation financing needs, especially for investment in physical infrastructure. This policy brief outlines how it is in Australia’s interest to help meet this need. Australia has recently made progress in scaling up its investment, but its main mechanisms for doing so – the Australian Infrastructure Financing Facility for the Pacific (AIFFP) and its dedicated climate window – have almost run out of concessional financing firepower. Australian investment is still modest relative to the Pacific’s financing needs, but an increase will require difficult trade-offs given the limited scope to lift the overall Australian aid budget.

The Pacific’s extreme climate vulnerability means investing more in climate adaptation is good for the region’s development. It is also smart diplomacy, providing highly visible and tangible evidence of Australian support on the Pacific’s most pressing concern. Australia should direct more of its aid resources to the AIFFP for adaptation purposes. A review of the AIFFP should also be conducted to ensure that it has the right institutional capacity to deliver on this agenda.

Key findings

• Pacific Island countries are among the most climate vulnerable in the world and require substantial additional adaptation investment. It is in Australia’s interest to help meet this need.
• Australian investment in Pacific adaptation infrastructure is scaling up but has almost run out of concessional financing firepower. Directing more of Australia’s aid to this is smart development and smart diplomacy.
• Australia can fund this most effectively by reducing some of its current heavy use of technical advisers, shifting its aid to enable increased adaptation infrastructure investment, and linking this to partner country governance and reforms.
• Doing so could dramatically increase Australia’s adaptation infrastructure investment in the Pacific to almost half a billion dollars annually and form the basis for a major new initiative.

The brief is accompanied by an audible version.