Unlocking the Power of Peace Finance: Bridging the Gap Between Peacebuilding and Investment

In a world grappling with an escalating number of conflicts and the devastating impacts of climate change, the need for effective peacebuilding has never been more pressing. Yet, the traditional funding models for this critical work are falling short, leaving a significant gap in resources and expertise. However, a new and innovative approach is emerging – one that harnesses the power of the finance sector to drive sustainable peace and development.

Unleashing the Potential of Peace Finance

Addressing the Funding Shortfall in Peacebuilding

The current state of peacebuilding is dire, with only 12% of the UN's Sustainable Development Goals on track and none of the targets for SDG 16 on "Peaceful, just and inclusive societies" being achieved in conflict-affected countries. This is exacerbated by a record low in Official Development Assistance (ODA) earmarked for peacebuilding and conflict prevention. The traditional model of short-term government grants is ill-equipped to address the long-term, complex nature of building sustainable peace.

The Economic Case for Peacebuilding

Investing in peacebuilding makes sound economic sense, with every dollar invested potentially reducing the cost of armed conflict by up to $16. Yet, this crucial fact is often overlooked, and the finance sector lacks the necessary expertise to effectively channel resources towards peacebuilding initiatives. By bridging this gap, Peace Finance offers a win-win solution, providing reliable, long-term funding for peacebuilding while also generating attractive returns for investors.

Overcoming the Barriers to Investment in Fragile Contexts

Fragile and conflict-affected settings (FCS) often struggle to attract investment due to perceived risks, both financial and reputational. Current investment products tend to focus on green or development outcomes, with little consideration for conflict-sensitivity. Peace Finance offers a new approach, embedding peacebuilding principles into investment decisions to mitigate risks, create "additionality" benefits, and strengthen community resilience.

Cultivating a Thriving Peace Finance Ecosystem

A growing ecosystem of organizations, including the United Nations Development Capital Fund (UNCDF), the Peacebuilding Support Office (PBSO), and Interpeace, are working to convert Peace Finance into practice. This collaborative effort is garnering interest from governments, development finance institutions, and impact investors, paving the way for a new form of multilateralism.

Bridging the Gap Between Peacebuilding and Finance

Overcoming the historical divide between the peacebuilding and finance sectors is crucial for the success of Peace Finance. Peacebuilders recognize the importance of inclusiveness, mutual respect, and understanding different perspectives. By building partnerships and bridges between these worlds, shared goals of building economically resilient and peaceful societies can be advanced.

Establishing Robust Standards and Frameworks

To ensure the integrity and effectiveness of Peace Finance, the Finance for Peace initiative has developed a Peace Finance Impact Framework (PFIF) to guide investment approaches and achieve rigorous, benchmarked peace impacts. This framework emphasizes intentionality, dual materiality, inclusivity, and trust, providing a roadmap for investors and peace actors to collaborate effectively.

The Role of Peacebuilders as "Peace Partners"

Peacebuilding organizations are indispensable actors in the Peace Finance ecosystem, serving as "Peace Partners" who advise private sector partners on implementing the PFIF, building trust with conflict-affected communities, and managing competing interests. By championing Peace Finance, peacebuilders can secure reliable, long-term funding for their crucial work in conflict prevention and social cohesion.

Unlocking the Synergies Between Peacebuilding and the Private Sector

Peace cannot be built without the expertise and local knowledge of communities, peacebuilders, and civil society. Nor can it be achieved without the private sector, which provides livelihoods and economic opportunities. By overcoming the silos and building bridges between these sectors, Peace Finance offers a pathway to sustainable peace that benefits all.