Funding peace: innovative financing solutions for peace responsive investment

Peacebuilding expenditure declined as a percentage of global Official Development Assistance (ODA) from 17% in 2012 to 11% in 2021. These historically low levels of peace financing contrast with mounting peacebuilding needs. Innovative solutions to fund development in fragile and conflict-affected settings are urgently needed, such as the creation of a market and approaches for private and concessional finance investment in peace that have both a positive impact on peace and also reduce financial risk, to the benefit of investors and communities alike.

Finance for Peace is a multistakeholder initiative conceived and incubated by lnterpeace which seeks to create internationally recognised and applied standards, market intelligence and partnerships for peace-positive investment. Finance for Peace brings together investors, private-sector actors, norm-setting entities, development finance institutions, governments, peacebuilding and development actors, civil society and local communities to catalyse peace-positive investments. By building and enabling the creation of a financial market ecosystem for peace-positive investment, it aims to reduce risks for both investors and communities and to achieve outcomes that are both bankable and create peace impact while opening the space in which various peace actors, including lnterpeace, would be beneficiaries of investment through the increased demand for their technical peacebuilding expertise.

The initiative’s focus in 2023 was primarily to build support, commitment and a network to take forward efforts to establish blended financing for peace. The initiative established a partnership with the African Development Bank and built on Interpeace’s existing partnership with the Food and Agriculture Organization of the United Nations (FAO).

The key achievements of the Finance for Peace initiative in 2023 included:

Launching a draft Peace Finance Impact Framework following multistakeholder consultations, to guide future investments toward peace-responsive outcomes

• Launching first iterations of a Peace Bond standard and Peace Equity standard to support private-sector investment in peace-responsive outcomes
• Securing funding from the FAO to develop the outline of a possible bond to finance a food storage facility in the Horn of Africa;
• Supporting the African Development Bank to integrate peacebuilding approaches into the design (terms of reference) of its pre-feasibility studies on peace-positive investment in six country offices.
• Supporting the African Development Bank to plan a regional wheat transformation programme involving Djibouti, Egypt, Ethiopia, Kenya and Sudan, as well as the Feed, Fodder and Water Security for Livestock Resilience programme in Djibouti, Ethiopia, Kenya, Somali and Uganda, specifically on programme design in the context of research concerning the dynamics of agriculture and peace in the Horn of Africa.

These efforts are helping to shape the work of others and catalyse the innovative and purposeful investment in peace by key actors in the peacebuilding landscape, whose engagement is key to the future of peacebuilding:

• The African Development Bank are working on originating future peace-aligned investments through their Security Index Bonds initiative, the scope of which has been influenced by Finance for Peace.
• The German Federal Foreign Office has funded the United Nations Capital Development Fund and the United Nations Peacebuilding Support Office (PBSO) to create a USD 12 million (United States dollars) fund for peace-aligned investments that is aligned with the Peace Finance Impact Framework.
• The FAO is funding a feasibility study for a renewable-energy project in Ghana and Burkina Faso.

African Development Bank and Interpeace join hands to promote Peace Finance in Africa

On 3 October 2023, Interpeace and the African Development Bank signed a memorandum of understanding to jointly promote economic investment and social development that positively impacts peace. The memorandum is accompanied by a practical work plan with goals and outcome targets.

The initiative also aims to offset the fiscal implications of elevated security sector spending. “The Finance for Peace initiative by Interpeace, supported by Germany, complements the bank’s own efforts in this space, as it aims to develop protocols and pilots around peace finance, including for a Peace Bond asset class”, remarked Akin-Olugbade Bank’s Vice-President for Regional Development, Integration and Business Delivery . “This partnership will demonstrate to the wider multilateral and international development financing system the need, benefits, potential and practicality of Peace Finance approaches on the continent and beyond. It will grow Peace Finance as a thematic investing approach by developing early and successful pipeline development of Peace Finance and by fostering on-the-ground networks and capacities in Peace Finance in Africa.”