© Finance for Peace 2023
Finance for Peace is an independent initiative incubated by Interpeace that seeks systemic change in how private and public investment supports peace in the world’s developing and fragile contexts. No individual organisation can achieve this ambitious goal – that is why it aims to create multistakeholder approaches that can co-develop alongside many partners the critical market frameworks, networks of political support, partnerships and knowledge required to scale what we call peace finance - investment that has an intentional and positive impact on peace. The governance and administration of the Initiative is supported by Interpeace from Geneva, Switzerland. It is financially supported by the German Federal Foreign Office.
There is an urgent need to increase the scale and peace impact of private finance to fragile and conflict affected places where most of the world’s poor live. Poverty and hunger linked to conflict is increasing, private financial flows are falling and Official Development Assistance (the key form of financial flow to the world’s low-income fragile places) is under huge pressure. Existing blended finance approaches are not reaching these places at large enough scale and do not focus enough on peace.
The opportunities for both investors and communities are significant. Peace actions properly connected to investment can lower risks, improve bankability and result in more inclusive and peace positive development. It is a win-win-win scenario: for conflict affected communities, for governments and investors.
Peace finance has the potential to mitigate risks to investors and business actors operating in conflict affected and fragile places. By developing rigorous standards and metrics that have wide buy-in from a broad array of credible actors it will be possible to develop market trust in peace finance aligned investment. Finance for Peace has developed feasibility work on Peace Bonds which have significant promise as a new category of sustainable investment alongside Green or Social Bonds, but importantly bring further additionality in terms of positive impacts on financing and operational risks which improve Net Present Values (NPVs).
Further, by engaging government, DFIs and investors and showcasing the emerging examples of various peace bonds and peace equity structures, Finance for Peace will be able to demonstrate active peace finance approaches such as peace bonds or peace equity funds that are under development with various actors.
Peace Finance standards and impact approaches can be linked to new bond or equity structures that can bring significant potential additionality in terms of reducing the risk of projects resulting in improved NPVs, market premiums, and/or project level feasibility enhancement either through the regulatory/political environment, blending and/or bankability.
Unlike many existing ESG, business and human rights frameworks, Impact and/or performance frameworks, peace finance standards seek to incentivise investors by helping them realise bankable additionality to their investments. This can assist them to meet fiduciary obligations to fund holders or investors as well as demonstrable social impact reporting. Closing the incentive loop for investors to align to Peace Finance standards is critical as existing ESG frameworks can be perceived to be burdensome and administratively costly.
If only 1% of 2021’s global issuance in sustainable investment categories was aligned with peace finance standards and impact frameworks, that would represent more than $16 Billion of peace enhancing finance, that would be equal to:
Thus even very modest success in catalysing existing private bankable finance in ways that realise peace outcomes could be significantly impactful.
Current ESG, SDG and Impact and other frameworks for environmental and social initiatives are not sufficiently sensitised to the risks related to peace and conflict in fragile, post-conflict emerging contexts. Yet, as has been well established in the development and investment literature, peace is foundational to sustainable long-term development and to investment risk. Standards related to new categories of sustainable investment, such as peace bonds can redress this significant gap and catalyse finance in some of the largest emerging markets today.
In order to grow the potential market for investment that directly addresses peace in the world’s emerging and fragile developing settings, it is necessary to have defined and consistent standards for bond issuers, enterprises and equity funds related to peace. This will help them better mitigate risks, improve the bankability, certainty and trust related to their investments. It will also be foundational for achieving impact in other areas of ESG or SDG alignment.
Learning from the experience of the Green Bond market and other sustainability investment categories, it is critical clear guidance and standards are established to understand whether impacts on peace are real, verified and legitimated. Relevant metrics, frameworks and standards are key to growing the market, realising the opportunity for these potential new investment categories and ensuring peaceful outcomes for communities.
Enterprises and businesses that have or are looking to make bankable investments in fragile and emerging markets that want to mitigate project and investment risks and also achieve social impact.
Institutional investors who are looking to deploy capital towards peace, SDG 16 and demonstrate more rigorous and intentional peace impacts.
Governments and Donors that are looking for new ways to catalyse private finance for conflict sensitive and peace responsive development and peacebuilding.
Development Finance Institutions (DFIs) looking to explore new risk mitigation mechanisms and blended finance approaches that catalyse private finance in conflict affected settings.
Consulting, industry and market norm settings entities that are looking to improve existing ESG and/or Impact frameworks, better implement existing ones, advise on ways to verify and certify peace impact frameworks. Also inclusive of risk assessment agencies and rating agencies that are interested in better risk pricing in fragile, emerging and developing settings.
Peacebuilding, development, international organisations and communities looking to scale their own impact, work with private actors to improve the peace impact of their investments and engage constructively with private sector actors.
Academics, scholars and independent researchers who can advise and contribute to the conceptual impact framework, impact metrics, standard setting process as well as draw upon the wide literature on peace and business to input into proposed approaches.