This year’s 2023 Annual Meeting of the World Economic Forum is held under the theme “Cooperation in a Fragmented World” – a painful reminder of just how turbulent the past few years have been. A quarter of the world’s population, representing 2 billion people, now live in conflict-affected areas. Global commodity chains are suffering from supply shortages, prices are marching higher and for many, 2022 was the year climate change arrived on their doorstep. From poor farmers whose crops were devastated by floods, to wealthy skiers, whose shock at seeing flowers on pistes normally a meter deep in snow may prove a better catalyst for decarbonization than countless IPCC reports. If we learnt anything from the last couple of years it’s strap-in, life on planet earth is getting choppier.
As Governments struggle under the breadth and complexity of the current “polycrisis” the private sector has started to step up and problem solve. If we look at climate change, while governments nudge populations gently towards net zero, technology innovators are out in front, making the cost of solar power and electric vehicles on par or below their fossil fuel competitors. Unfortunately, a lot of this problem-solving effort still takes place rich or middle-income countries. But to effectively tackle the economic, environmental, migration and conflict challenges we will face in the 2020’s we need market actors to become more adventurous and lean-in to countries trapped in cycles of poverty and violence.
Responsible, sustainable business models are the key to tackling cyclical fragility by creating inclusive growth, in symbiosis with earths biological system and providing employment opportunities to those who are missing out. The information revolution unleashed by the internet and mobile phones means market forces touch every consumer and producer on earth. This has created a micro-multinational entrepreneur class, who want to participate in the global market, but lack the skills, connections, and capital to do so. Sustainably and fairly integrating the poorest 2 billion people into the global market is the major task of this decade. Get this right and the rules-based trading order we have built that sustains growth and peace on our planet can be preserved. Get it wrong, and the cascading crises may sink domestic and foreign cooperation, and the relatively peaceful world we know today.
One particularly underserved area of international cooperation is peace-making. The institutions that were built after the world wars like the UN and the WTO have mostly kept people talking, not fighting. They’ve contributed enormously to the multi-decade run of growth, poverty reduction and relative peace we’ve enjoyed. But this “peace” part has often been taken for granted, especially recently, until the war in Ukraine reminded everyone, particularly those in business, how lucky we’ve been.
The costs of conflict in 2021 were a staggering USD 14 trillion. That’s roughly the size of the Australian economy, the 13th biggest on earth. That’s a huge amount of productivity to leave on the table, especially at a time where growth is anaemic in many parts of the world. Unless we act now, the costs of conflict are sure to increase in coming years, harming the balance sheets of millions of businesses and taking an axe to global GDP growth.
Traditional approaches to financing and securing peace have predominantly been large-scale operations driven by governments. Through the Marshall Plan, perhaps the most famous among these, the United States channelled mass amounts of capital to specific countries to boost Europe’s recovery after the Second World War.
However, Governments today do not have the same appetite or fiscal ability to finance peacebuilding, hence most peace actors and peace efforts are underequipped to address the many interlinked drivers of conflict. In the meantime, conflicts are becoming more complex: wars happen in several spaces beyond on land, air, and sea, such as information, technology, ideology wars. Climate change and its aftermath will become new conflict drivers. It is imperative business and investment actors take a full seat at the table and become part of complex peace-making equations. They have a key stake in preserving a peaceful world, their profits depend on it.
So what can the private sector do? In the past the main form of private sector engagement in peace-making has been philanthropic. The global annual funding for peacemakers is around USD 200m, that is less than the cost of few private jets or a small super yacht – and represents less than 1% of philanthropic donations. More philanthropy, and more innovative philanthropic investments, are needed to support peacemakers to tackle global fault lines before they breakout into open conflict.
But the bigger effort required to secure and strengthen peace, is that the private sector needs to do what it does best – allocate capital, innovate, and build jobs and growth – but do this in the places they haven’t gone before – in places trapped in cycles of conflict and poverty.
We need to transition from a Westphalian peace paradigm – where peacemaking is mainly funded by donor states – to encompass a broader range of actors. The private sector is uniquely positioned to intervene, with the capital, connections, supply chains and digital tools to engage conflict actors and shift their incentives towards peace by offering the carrots of investment and job creation.
To date, high risks to capital, assets and staff, as well as lack of access, connections and, at times, ambition have prevented many responsible businesses and investors from operating in fragile and conflict affected countries. However, a productive economy, supported by local and international investors, is vital to stop the spread or resurgence of violence and secure lasting peace. Peace-oriented investment can make the difference between a fragile ceasefire that fails, and locking-in long-term stable peace. It can be an incentive to engage in dialogue and find a way for conflicting parties to move forward, together, driven by shared incentives.
Investing for peace is a new concept that aims to close the gap between entrepreneurs in fragile areas and investors. In the past, weak local institutions and illicit networks in countries emerging from or still experiencing conflict have meant that reputable businesses, investors, and multilateral organizations moved in cautiously, finding it difficult to allocate capital effectively. As a result, an increase or return to violence remained a high risk, exacerbated by persistent unemployment and economic decline.
Launched in 2021, the Peace Dividend Initiative (PDI) has developed a novel mechanism for innovative multi-stakeholder peace finance to be deployed in areas that need it the most. As an organisation, we are dedicated to bridging the gap between market forces and traditional peace actors. We have created a pluridisciplinary ecosystem of peacemakers, international organisations, governments and investors, and use a unique blend of mediation, humanitarian and impact investment approaches to safely channel capital into at-risk countries.
PDI recognises that frontier markets in fragile countries can be powerful engines for economic growth and stability, where rapid demographic, urban and economic progress generate substantial investment opportunities and jobs to help overcome grievances. Working closely with a network of experienced mediators, PDI scopes peace-promoting businesses and entrepreneurs in hard-to-reach, conflict-affected areas. The businesses that are found to have the highest potential peace impact are incubated and presented to investors in a comprehensive portfolio. Investing in these businesses creates an incentive to work in non-violent economic streams and helps to lay the groundwork for long-term peace.
In 2023 we will scale this work globally by launching the Peace Venture Fund (PVF). The PVF is a peace impact investment vehicle that de-risks investing for private actors who want to support resilient and ambitious entrepreneurs in conflict affected countries, securing a peace plus profit return. This is part of our work with other peacemakers, mediators, investors, to create a new asset class: peace finance.
The alternative, if we don’t repurpose the global peace-making architecture to include market actors in a holistic and inclusive manner, is otherwise terrifying. Business and investment actors have demonstrated they can be powerful agents of change in a fragmented world. Only by including them efficiently can we navigate this era of fragmenting-peace.
by Liam Foran, CEO of the Peace Dividend Initiative.
Photo by Damian Markutt on Unsplash.