United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has warned that Samoa faces rising threats to its financial system as climate impacts intensify, with risks now spilling over into banks, public finances and the wider economy.
“Samoa faces escalating climate-related risks that threaten macroeconomic stability, fiscal sustainability and the resilience of its financial system,” the report said.
The report makes clear that climate change is no longer a future concern for Samoa, but a current economic risk with direct consequences for financial stability.
“This report examines how physical hazards—such as cyclones, sea-level rise and coastal degradation—and transition risks linked to global decolonisation affect the economy and transmit to the financial sector.”
It says Samoa’s exposure is driven by the structure of its economy, where key sectors such as agriculture, tourism and infrastructure are highly vulnerable to extreme weather and environmental change. These risks are now being passed on to financial institutions through loans, investments and insurance gaps.
“High credit exposure to climate-sensitive sectors, combined with limited insurance coverage and operational vulnerabilities, creates significant financial stability risks.”
The report highlights that many businesses and households remain underinsured, leaving banks exposed when disasters strike. At the same time, financial institutions face operational risks, including disruptions to services and infrastructure during extreme weather events.
Beyond the banking system, the report warns that climate shocks are placing growing pressure on government finances. Disaster recovery costs, reconstruction spending and revenue losses are driving up public debt and limiting fiscal space.
“Climate shocks have also intensified fiscal pressures by driving disaster-related expenditure and increasing public debt, while climate-induced supply disruptions complicate inflation management and weaken monetary policy effectiveness.”
These disruptions are also feeding into inflation, as supply chains are affected and the cost of goods rises, making it harder for authorities to manage prices and maintain economic stability.
A key finding of the report is that Samoa’s financial system is not yet fully prepared to deal with these risks. It points to gaps in governance, technical expertise and regulatory alignment across the sector.
“A sector-wide assessment reveals substantial gaps in climate risk governance, technical capacity and alignment with international disclosure standards across financial institutions.”
This includes limited integration of climate risks into lending decisions, weak reporting frameworks and a lack of consistent standards for assessing exposure.
The report stresses that addressing these challenges will require coordinated action at all levels, bringing together government agencies, regulators, financial institutions and development partners.
“Strengthened resilience will require coordinated action among government agencies, regulators and industry stakeholders, supported by expanded access to climate finance and regional cooperation.”
It also highlights the need for stronger regional collaboration, given the shared vulnerabilities faced by Pacific Island countries and the limited resources available at the national level.
To respond to these risks, the report outlines a forward-looking reform agenda focused on strengthening the financial system’s ability to manage and absorb climate shocks.
“The report outlines a forward-looking agenda to integrate climate risks into supervision, enhance governance, mobilise sustainable finance and strengthen risk-transfer mechanisms.”
This includes embedding climate risk into financial supervision frameworks, improving data and disclosure standards, and developing financial products such as insurance and risk transfer tools to better protect businesses and communities.
The report also calls for increased access to climate finance to support adaptation and resilience-building efforts, noting that small island states like Samoa face significant barriers in securing funding.
At the same time, it underscores the importance of aligning Samoa’s financial system with global trends toward decarbonisation, as transition risks linked to changing international policies and markets could also affect the economy.
Without urgent reforms, Samoa’s financial system will remain exposed to increasingly frequent and severe climate shocks.
But with the right policies, investment and coordination, the report says Samoa can strengthen its resilience and better protect its economy from the growing impacts of climate change.
