The international peacebuilding community needs to confront three hard truths about how peacebuilding is funded:
- Despite the increasing complexity and duration of conflict, financial resources for peacebuilding work are declining
- Relying solely on a few ‘traditional donors’ will never be sufficient to address the world’s peacebuilding needs
- Existing sources of finance for peacebuilding are expected to decline
So, what can be done? There are at least two major areas that can be leveraged for change.
Firstly, we need to do more with the existing resources allocated for peacebuilding. Concessional finance from Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) holds massive untapped peacebuilding potential. With 75% of the world’s extremely poor living in fragile settings, these institutions cannot ignore peace and its close link to development. Given that the financing they allocate is at least 50 times higher than grant-based investment for peacebuilding (USD 50 billion compared to USD 1 billion), their potential impact on peace is enormous.
Yet, evidence shows that the majority of concessional finance is committed without adequate conflict sensitivity, let alone intentional peacebuilding strategies. This is one of the largest blind spots in multilateral development approaches today. A recent CGIAR study reviewed 22 multilateral climate funds and found only 4% of financing in fragile settings had active conflict sensitivity measures in place. And a mapping study by the Finance for Peace initiative of Interpeace showed most MDB and DFI investment frameworks largely ignore peace and conflict considerations. That is why the Finance for Peace initiative is working with institutions such as the African Development Bank to implement a new Peace Finance Impact Framework (PFIF) that aims to align investment strategies to intentional peace impacts.
Secondly, we need to leverage private sector resources, despite evidence showing that private sector investments in low-income and fragile areas often exacerbate conflict dynamics by altering access to land, livelihoods, and other resources. Currently, most conventional approaches to conflict prevention and peace promotion do not engage with private sector actors.
At the same time, there is a major demand from institutional investors for green, SDG-compliant, and socially positive investments in emerging markets where peace considerations are key to their risk mitigation and success (see IFAD’s article).
This is why Finance for Peace works with private and public finance partners to establish favorable market conditions for a new category of Peace Bond and Peace Equity.
Creating the space for peacebuilding actions to be embedded in these financial instruments makes investments conflict sensitive. This leads to lowered risk for communities and investors, making new peace-aligned projects possible.
The potential to grow peacebuilding financing is massive – if only 1% of the USD 1.6 trillion Green and Social Bond market became peace-aligned, it would total 16 times the Official Development Assistance (ODA) currently allocated to peacebuilding and conflict resolution.