KPMG’s best investment idea for Cayman: the reef

The reef as an economic asset

KPMG Islands Group commissioned the research behind Beyond GDP from a team led by economist Matthew Agarwala. It covers 12 island economies, from Bermuda to Malta, and drew on more than 30 expert interviews.

Its page of advice for Cayman is short, and one item stands out. Coral reef restoration, mangrove protection and sustainable coastal planning, the report says, “would increase returns to physical capital by reducing storm surge risks and preserving the ecosystems that underpin tourism.” In other words, the report treats protecting the reef as an investment: it shields coastal property from storm surge and keeps tourism going.

The rest of the Cayman page is about keeping what already works: the credibility of its institutions, international tax-transparency standards such as the Common Reporting Standard peer review, and support for the financial sector.

Housing is the warning

The report’s summary credits Cayman’s strong fiscal position and its place in global asset management. It then lists what the future depends on: climate-proof infrastructure, affordable housing and skills, to address economic concentration, severe weather and rising living costs.

The sharpest line is about people. Young professionals “seeking high quality, affordable housing may emigrate if domestic house prices are too high.” Across all 12 islands, the report finds that without affordable, climate-resilient homes, other infrastructure investment risks underperforming because employers can’t find staff.

Its appendix puts the point in five words: “Fix housing to fix the economy.” Affordable, climate-resilient homes, it says, are essential for retaining talent and for ensuring that other infrastructure investments “deliver their full potential.”

An eleven-year-old number

The report repeats a figure often heard in Cayman: every $1 invested in construction generates $2.56 in output. It is careful about the date. The text says the estimate comes from 2015, and its footnote points to KPMG’s own 2024 Infrastructure Spotlight as the source.

That makes it an eleven-year-old estimate, made before the pandemic. The report gives no newer figure. It also adds a caution that rarely travels with the number: weak project pipelines and short political cycles “often erode those gains.”

Storm money: what other islands did

The report’s examples of climate finance come from elsewhere in the Caribbean. Barbados has “hurricane clauses” that allow debt repayments to pause after a natural disaster. Jamaica has a $185 million World Bank catastrophe bond, which pays out quickly after storms without adding to its debt.

In its advice to Barbados, the report also cites IMF modelling: investing 1% of GDP in adaptation over five years could save up to 5% of GDP in avoided losses by 2029. Cayman’s own page in the report does not mention any of these tools.

The report’s wider answer to small size is to club together. One research participant put it plainly: “Don’t come and build me one airport, come and procure five airports across different locations and do it together.” Pooled projects, the argument goes, are much easier to fund with institutional investors.

Where Cayman is the example

On health, Cayman is the report’s case study. It credits strong public and private healthcare, health tourism, Health City Cayman Islands as a tertiary care hub, workforce development, and coordinated planning across lands, housing, agriculture and infrastructure.

The report also opens with a caveat about everything else. In 2022, KPMG Islands Group found that small island economies cannot reach net zero with the capital available to them. The new report says the situation has “arguably” worsened since.