Work Streams

"The private sector and security are linked in many ways, most obviously because thriving markets and human security go hand in hand. Global corporations can do more than simply endorse the virtues of the market, however. Their active support for better governance policies can help create environments in which both markets and human security flourish."

Kofi Annan
Secretary General
United Nations

UNEP FI, in collaboration with the International Institute for Sustainable Development (IISD) and with funding from the German Ministry of Environment (BMU), has conducted a project to develop and promote the business case for conflict prevention within the financial sector and to raise awareness of the opportunities of engaging proactively with the issue of conflict prevention.

The project sought to map the links between the activities of banks, insurers and asset managers, and the drivers, triggers and financial means for sustaining conflict, arguing that it makes good business sense to adopt a proactive approach to ensuring that finance contributes to peace, not violence.

Risk, stability, and conflict sensitive finance

Increasingly, financial institutions are coming under scrutiny because of unintended negative aspects of projects they finance or financial transfers they facilitate. Investments in regions where the functioning of legal systems, democratic procedures and conflict resolution mechanisms are limited can undermine social and environmental stability.

The exposure of the banking and insurance industry to political and reputational risk out of civil war, conflict or terrorism may lead them to retreat from financing projects in countries with high political risk. The challenge today is to maintain financial flows to countries with high political risk, while at the same time ensuring that these funds contribute to environmentally-sustainable development and promote social development and peace-building.

Further work is recommended in order to improve financial institutions' conflict risk management and to explore public policy measures and incentives to support conflict sensitive finance.

A full summary of the project is available in the finance and conflict publications.

Related resources

Websites

• International Institute for Sustainable Development (IISD): Environment, Business and Conflict
• International Alert: Business and Conflict Publications
• International Business Leaders Forum (IBLF): Business and Peace Programme
• Carnegie Commission on Preventing Deadly Conflict

Publications

Natural Resources and Civil War: An Overview (345 KB) - Dr Michael Ross, UCLA (2003)

Finance in Conflict and Reconstruction (87 KB) - Tony Addison, Philippe Le Billon and S. Mansoob Murshed, United Nations University (UNU) / World Institute for Development Economics Research (WIDER) (2001)

Environmental Conditions, Resources, and Conflicts: An Introductory Overview and Data Collection (226 KB) - Ashbindhu Singh, United Nations Environment Programme (1999)

Contact

UNEP Finance Initiative

International Institute for Sustainable Development (IISD)