Recognising the Hidden Global Value of Small Islands

Why should Small Island Developing States (SIDS) with relatively high incomes still receive official development assistance (ODA) and concessional finance when international aid is declining and there are so many competing needs?

Critics regularly ask variants of this question, and for them the answer is intuitively obvious: there is not enough money to go around and only the very ‘poorest’ should receive it.

Our response in this mini-series so far has been to make two arguments. First, gross national income (GNI) per capita is a poor measure of SIDS’ development because it overstates their wealth and understates their exposure to devastating shocks. Second, large-scale transfers can help offset the disproportionately high costs of investment and statehood, acute fiscal constraints, and high borrowing costs they face to alleviate them, which often lead to elevated debt burdens.

But what if we reject the premise of the question entirely?

In this final piece, we challenge the tendency to treat development assistance to SIDS as a private subsidy to them alone.

What if we treated aid as a public investment in – or payment for – the underacknowledged value that SIDS provide to the rest of the world? This turns the conventional argument on its head: SIDS are not simply claimants on scarce resources, but providers of ‘global public value’ (including, but not limited to, global public goods) that goes uncounted, unpriced and uncompensated. From this perspective, it could be actually SIDS subsidising global sustainability, while the rest of the world would be free riding.

We first explored this idea in The State of SIDS Report 2026. It explains how SIDS embody a UN-mandated ‘special case for sustainable development’ due to their distinctive vulnerabilities, but this has not resulted in much of the implied special treatment, with access to concessional support in particular declining. The very fact that the special case is not recognised in the OECD-DAC process itself, only partially recognised by the World Bank’s Small Island Economy Exception and largely ignored in trade and other development agendas, is evidence of this.

But rather than continuing to rely solely on vulnerability – an argument many SIDS are frustrated at having to repeat – we suggest a twin-track defence of the special case, with ‘value’ as a second core concept. SIDS generate substantial global value: in particular, through ocean custodianship, climate leadership and as champions of multilateralism.

These contributions sustain different forms of global capital – natural, political, social, cultural – and could provide an additional basis for SIDS to make legitimate claims on the international system. Crucially, this would mean that support need not depend solely on demonstrating vulnerability, or risk being withdrawn as countries make developmental progress.

The hidden global value of Small Island Developing States

Our thinking on this is still developing. The dual vulnerability-value argument will form the foundation of the 2028 State of SIDS Report, and the evidence for SIDS’ underacknowledged contributions to global value is stronger in some areas than others. Nevertheless, even a cursory look at the numbers is instructive.

Take ocean jurisdiction: SIDS account for less than 0.5% of global territory, yet their average Exclusive Economic Zone (EEZ) is 28 times their landmass, and they manage 19% of the world’s EEZs. They also contain 19% of the world’s coral reefs, while generating just 0.2% of global greenhouse gas emissions. Protection of coral reefs, seagrass and other forms of natural capital within these EEZs is vital for the health of the entire planet.

These figures illustrate a striking imbalance: SIDS contribute very little to climate change yet face some of its most severe impacts, with some at risk of disappearing entirely. At the same time, they are custodians of significant parts of the planetary systems on which the rest of the world relies.

The Pacific tuna fishery illustrates the value of stewardship. The Parties to the Nauru Agreement have collectively limited fishing to sustain a resource that accounts for half the global supply of skipjack tuna, while securing a greater share of its economic value.

By contrast, the Caribbean cruise industry illustrates what happens when this value is not adequately captured. The region hosts over a third of global cruise tourists, yet the firms that supply them have long free ridden on its natural assets while using their bargaining power to secure subsidies and concessions from individual states.

The key point is that stewardship produces value, but this is only rewarded when institutions exist to capture it. For most of the global value provided by SIDS – from protecting reefs and marine biodiversity to sustaining carbon-rich ecosystems – few equivalent mechanisms exist. The costs of stewardship remain national, while the benefits spill across borders. Development finance should, therefore, increasingly be understood as one way of correcting that imbalance.

How can development cooperation recognise the global value of SIDS?

The basic principles already exist: payments for ecosystem services are becoming increasingly institutionalised and lucrative for some SIDS, such as rainforest preservation in Guyana, but they remain piecemeal. To build on these examples, we need to take three steps:

1. Develop a framework for recognising the global value that SIDS provide but for which they are insufficiently compensated. 2. Explore how this framework could apply to the full range of natural, political, social and cultural capital that SIDS preserve and generate. 3. Determine how to measure that value and reflect on who should provide relevant financing.

The first step is relatively straightforward. GNI per capita measures income accruing inside a country. It tells us little about who benefits from that income and, crucially, nothing about the value generated by a country's ecosystems, institutions or leadership externally. We discussed at length in the State of SIDS Report how the international system underestimates both the vulnerability-based needs of SIDS and their value-based contributions. SIDS remain under-compensated on both counts: they bear costs imposed by others while also generating benefits enjoyed beyond their borders. As we put it in the report, ‘rather than being net recipients from a generous multilateral system – as they are generally perceived – SIDS are actually net contributors to a miserly one’.

The second step is to recognise that SIDS produce or sustain value well beyond the environmental realm. They have played an outsize role in shaping international responses to shared global challenges through: sustained climate diplomacy, including advocacy that produced the 1.5°C target that the world is failing to meet; ocean governance, including a foundational role in establishing the very concept of EEZs; the establishment of the Loss and Damage Fund and recent advances in international law as encompassed in the ICJ Advisory Opinion. This understanding of ‘value’ could also extend to the wider preservation of global cultural heritage and diversity or other types of capital. The key point, here, is not that every contribution should attract compensation; it is that some can generate disproportionate global benefits while imposing diplomatic, administrative and fiscal costs on those providing them. These positive externalities are largely invisible in conventional measures of development need and decisions about access to multilateral finance.

The third aspect is the hardest: how can this value be measured, and what mechanisms would ensure that SIDS are compensated for it and by whom?

Answering these questions will require substantial research, but they connect directly to the broader ‘future-of-development-finance’ or ‘post-aid’ debate. As our ODI Global’s Nilima Gulrajani recently pointed out, ODA is contracting, the traditional donor-recipient distinction is increasingly ill-suited to cross-border challenges, and development cooperation is shifting towards questions of ‘collective existential survival’. She proposes a post-aid framework that distinguishes between core development, humanitarian assistance and global public goods, with the latter requiring dedicated financing instruments for challenges that transcend national borders.

Such instruments should compensate countries for the global public goods they provide. In a post-aid world, the case for financing SIDS need not become weaker simply because some of them cease to resemble typical aid recipients. It may, in fact, become stronger if finance is organised around shared global challenges and the value countries contribute to addressing them, rather than income thresholds alone. As Nilima puts it, ‘solidarity’ thus becomes ‘a shared interest’.

Towards a new approach to financing SIDS

This brings us back to our opening question: why should the multilateral system extend concessional finance to countries whose income appears relatively high? Vulnerability remains a sufficient justification, but the accounting is incomplete. Development partners count the transfers SIDS receive, but not the global value they produce.

As we potentially enter a post-aid world, the challenge is therefore not simply how much financing SIDS should receive, but how to measure and compensate them for the global value they provide. This will require additional, predictable and genuinely concessional instruments that recognise those contributions.