Part 4

The Invisible Trap

The Inheritance Trap Index identifies where climate vulnerability, debt pressure and child-focused fiscal risk converge. Yet some of the most severe forms of the Trap remain difficult to see.

In some contexts, weak institutions make it harder to generate the data, plans and systems on which international finance and risk assessment depend. In others, conventional economic and fiscal indicators struggle to reflect the relative scale of shocks. Fragile and conflict-affected states (FCAS) and Small Island Developing States (SIDS) illustrate these different forms of invisibility.

Fragile and conflict-affected states (FCAs)

The trap runs deeper than the data suggests

Fragile and conflict-affected states face some of the world’s most severe and overlapping pressures. Weak institutions, displacement and violence can interact with climate vulnerability in ways that compound risks for children.49 Around two billion people now live in highly or extremely fragile contexts,50 while more than 460 million children live in conflict zones and depend on humanitarian assistance to meet basic needs.51

Climate change can amplify these existing pressures. While climate shocks do not necessarily cause conflict, they can intensify food insecurity, displacement and competition over resources where institutions are already under strain.52 Conflict can in turn worsen climate vulnerability because it fuels environmental degradation, erodes people’s incomes and assets and takes resources away from adaptation efforts.53 This deepens instability in fragile states making them more precarious places for children and drastically reducing their future potential.54

Many countries that are conflict-affected, emerge as among the most climate vulnerable.55 When climate shocks occur in fragile states, they often cause more damage and require longer recovery times because the institutions that would normally absorb shocks – functioning markets, health systems, safety nets, insurance – have already been weakened by conflict. Children may therefore experience not only repeated crises, but the erosion of the very institutions intended to protect them.

Where fragility becomes obscured

The challenge goes further than heightened vulnerability. Many of the systems used to assess climate risk, allocate finance and measure fiscal capacity depend on functioning state institutions. Yet these are precisely the capacities that fragility and conflict can undermine.

Fragility can therefore become obscured at several points:

in climate-vulnerability assessments;
in access to climate finance; and
in the fiscal data used to assess governments’ capacity to respond.

Global climate-vulnerability indices do not generally treat conflict itself as a direct measure of vulnerability. Access to climate finance often depends on institutional readiness, accreditation, national planning and project-development capacity, all of which can be weakened by conflict. Fiscal indicators similarly depend on governments being able to collect, report and manage reliable public-finance data. Conventional measures can therefore become least informative in some of the contexts where risks are greatest.

10%

“Fragile and conflict-affected countries received only around 10% of global climate finance despite some of the world's highest levels of climate vulnerability.”

The consequence: financial exclusion

These blind spots have practical consequences. Analysis of OECD’s climate-related development finance data found fragile and conflict affected countries received only around 10% of global climate finance in 2022, despite some of the world’s highest levels of climate vulnerability.56

The gap extends even to grant-based finance. UNDP analysis57 found that extremely fragile states received around $2 per person from vertical funds, compared with $10.8 per person in other fragile and least developed states. Access to these funds often depends on accreditation, project preparation and institutional capacity – precisely the capabilities conflict can weaken.

The form of finance matters too. Research by Oxfam found that more than half of climate finance provided to FCAS in 2019–20 came in the form of loans and other forms of debt-inducing financing, and almost 10% as non-concessional loans.58 This is despite 78% (29 countries) of fragile and conflict-affected states being classified at medium to high risk of debt distress in 2022.59 60 For countries already facing severe fiscal constraints, financing resilience through additional repayment obligations can add to future pressures.

A further challenge is the divide between humanitarian and development finance. Climate-finance systems are generally designed for long-term investment, while humanitarian finance can operate in conflict settings but is typically shorter-term and less predictable. Children in FCAS can therefore fall between two financing systems, neither fully designed around the combination of protracted crisis and long-term climate resilience.

Small Island Developing States (SIDS)

Small Island Developing States (SIDS), illustrate another way the Inheritance Trap can be partially hidden by conventional indicators. While their populations and economies are small in absolute terms, the relative scale of climate shocks can be enormous. A single cyclone can affect a substantial share of the population, damage national infrastructure and impose losses equivalent to a significant proportion of GDP.

This creates a form of vulnerability that is difficult to capture fully through conventional economic and fiscal indicators. In larger countries, climate shocks may be absorbed across broader populations, larger domestic markets and more diversified public revenues. In SIDS, the same shock can affect much of the country at once. The absence of many SIDS from the highest exposure categories should therefore be understood as a gap in visibility rather than severity. That invisibility is itself part of the trap.

For people living in SIDS, the climate crisis presents an existential threat. SIDS contribute less than 1% of global greenhouse gas emissions yet are disproportionately affected by rising sea levels, droughts, floods and extreme weather events.61 Their natural resources are often central to their economies, with tourism and fisheries making up more than half of the gross domestic product (GDP) of several states.62 Climate shocks can therefore place pressure on households and communities, national revenues, and public finances simultaneously.

"SIDS contribute less than 1% of global greenhouse gas emissions yet are disproportionately affected by rising sea levels, floods, droughts and extreme weather.”

Image: Children play outdoors on Efate Island, Vanuatu, following Tropical Cyclones Judy and Kevin. Many communities lost power after strong winds damaged electricity lines and other essential infrastructure. © 2023 James Pryor/World Vision

For children, this vulnerability is felt across multiple systems at the same time. Large-scale shocks such as Hurricane Maria in Dominica and Hurricane Matthew in Haiti caused extensive damage to educational infrastructure, destroying schools and disrupting learning for prolonged periods.63 In Fiji, evidence following Cyclone Winston showed increased work burdens, declining school attendance and greater child labour as households struggled to recover.64 In many cases, schools are repaired only to be damaged again by the next disaster, leading to a costly cycle of damage and reconstruction. Climate-related damage to health systems can interrupt routine vaccinations, maternal healthcare and access to treatment, while stagnant water and damaged infrastructure increase exposure to water-borne and vector-borne disease.65 Food systems are also vulnerable. Disruptions to agriculture, fisheries and transport networks can drive food shortages, raise prices and reduce access to nutritious diets.66 In Pacific SIDS, growing dependence on imported food has contributed to a triple burden of malnutrition, including stunting, obesity and micronutrient deficiencies.67 Across 14 Pacific SIDS, 20% of children are stunted, reflecting chronic undernutrition.68

The fiscal consequences can be equally severe. SIDS face substantially heavier debt-service burdens and higher risks of debt distress than many larger economies at similar income levels. Analysis of 33 SIDS found that more than 40 per cent were highly indebted or approaching debt distress, while around 70 per cent exceeded debt-sustainability thresholds.69 The structure of small island economies means that repeated climate shocks can rapidly translate into debt accumulation. When Hurricane Maria struck Dominica in 2017, damages were estimated at 226 per cent of GDP. Coming only two years after Tropical Storm Erika caused losses equivalent to 96 per cent of GDP, reconstruction required substantial borrowing that significantly increased sovereign debt.70

This is where the Inheritance Trap becomes particularly visible. Recovery borrowing, adaptation borrowing and routine debt servicing compete for the same limited fiscal space. The consequences of a disaster can therefore persist long after the immediate shock, potentially reducing the resources available to rebuild services, strengthen resilience and prepare for the next event.

Climate finance has not fully resolved this challenge. Despite being among the countries most exposed to climate risk, SIDS receive international adaptation finance equivalent to just 0.2% of global climate finance.71 Many also face barriers to concessional finance because income classifications can fail to reflect structural vulnerability, while complex application processes and capacity requirements can further restrict access.

Vulnerability does not always translate into access to the finance needed to respond to it. SIDS therefore reveal a particular limitation in conventional approaches to climate vulnerability and fiscal risk. Their economies may be small, but climate losses may be national in scale, simultaneously disrupting public finances and the services children rely on. Where shocks recur before countries, communities and public systems have fully recovered, climate exposure, financing pressures and constrained resilience can converge – leaving children to experience the consequences across successive stages of their development.

Part 5: The Way Out

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