For project owners, issuers and investors
Conflict risks pose real costs, even if they are not well understood or priced.
Peace, like a stable climate, is a condition for investment, and its absence is a risk that investments already carry or that keeps capital out. The Finance for Peace Standards help make these risks better understood, and the measures to reduce them comparable and independently verifiable.
Why understanding and addressing conflict risk matters
Conflict risk isn’t limited to frontier and developing markets, it can arise wherever a project affects the people and places around it. When a project is designed with a sound understanding of local conditions, and the risks are addressed from the start, the case for investing changes.
When conflict risk is left unaddressed
The benefits of addressing conflict risk
Conflict risk costs money
Disputes and unrest around a project can stop work, delay schedules and push up costs. On a large project the losses can reach millions of dollars a week*, and in some cases projects have been written off after billions were spent. These costs often show up long after the investment decision was made.
It can save the costs the risks would otherwise bring
Fewer disputes mean fewer stoppages, delays and cost overruns. The money that would otherwise go into dealing with conflict stays in the project, and the project is more likely to deliver what it promised.
It makes investing more expensive
When investors can’t see the actual risk, they price projects on the country’s reputation or the latest headlines. Good projects then pay for risks they don’t carry, while others look safer than they are. In both cases the price doesn’t reflect how a project is run, which often decides whether it succeeds.
It can lower the cost of capital
A project that can show lower risk is in a stronger position with lenders. Over time this can mean better borrowing terms, for example through a better credit rating or a coupon linked to the measures being in place.
It keeps capital out
Many sound projects never get financed, because investors who can’t judge the risk stay away. Pulling out of a market doesn’t remove the exposure, since companies in a non-conflict affected region may still depend on suppliers or customers in affected areas.
It can attract capital that would otherwise stay away
Once the risks are understood, reduced and independently checked, investors can judge a project on its merits. Projects that were too uncertain to finance can come within reach, including for investors who would not normally look at these markets.
It can cause unintended harm
A project can deepen local tensions without meaning to, for example when land is acquired without proper consent or the benefits reach only one group. That harms the people around it, and in the end the investment too. This can also be true for impact investments which can do more harm than good if they are not designed with a sound understanding of local conditions and risks.
It can create value for communities and beyond
When peace measures are built in, communities become partners in a project. Local jobs, contracts and a fair share of the benefits can strengthen local economies, ease tensions and support stability beyond the project itself.
* Davis and Franks, Costs of Company-Community Conflict in the Extractive Sector, Harvard Kennedy School, 2014.
Case study
How peace measures can reduce risk and generate net savings
In 2021, Interpeace and SEB modelled a 50 MW solar PV farm on the Ghana/Burkina Faso border as a commercial peace bond. The study found risks from disputes over who controls land in northern Ghana, and from competition for land and resources in Burkina Faso, where people distrust a state that is largely absent from rural areas. Risks like these would normally be priced in as a higher interest rate. To address them, the study proposed a conflict analysis with local partners, fair land acquisition with agreed compensation, local jobs and training, power set aside for under-served communities, and a share of profits for local peacebuilding. In the modelled appraisal, the cost of these measures was more than recovered through cheaper financing.
Result
+$6M*
net present value
$4.4M*
net saving over the project lifetime, after paying for peace measures
Financial outcomes
Without peace measures
With peace measures
Total investment
$35.1M
$36.73M
Interest rate
19%
17%
Peace measures
None
$1.63M
Impact outcomes
1 million people
supplied with electricity in Burkina Faso, about 5% of the population
$130/MWh
power price, against a $220–250/MWh regional average
14% of imports
of Burkina Faso’s energy needs replaced with domestic supply
* Modelled, not a realised transaction.
Read the full case studyHow to work with us
The Standards are for companies and project owners, bond issuers, lenders, and fund and asset managers. They cover all asset classes, including bonds, loans, equities and blended structures, in public and private markets.
About the Market NetworkSupport towards certification
We host briefings and seminars on what the Standards require and how independent verification works, and provide personalised guidance on the certification process.
Understand your conflict risk
We help assess the conflict risks in your existing portfolio and planned investments, and think through how peace measures could reduce them.
Convenings around a live pipeline
We host working groups and in-person convenings around live transactions, and where appropriate facilitate introductions between project owners, issuers, investors and peace experts to help bring a transaction to market.
Tools, knowledge and market updates
We develop tools and research and share the latest market developments that help inform peace aligned investment decisions.
Where to start
Understand the conflict risks in your portfolio, prepare a transaction for certification or find partners to help bring it to market. Get in touch or join the Market Network.