More inclusive investment is key to sustaining development as aid keeps falling
Poverty, jobs, energy and food security are met over time by private investment that is inclusive, conflict-sensitive and peace-positive. With aid shrinking, that investment is key to sustaining countries’ development, above all in fragile and conflict-affected places.
We need new approaches to how development finance catalyses private investment
72%
of the world’s extreme poor live in the 61 fragile and conflict-affected contexts.
2%
of foreign direct investment to developing economies reached the 26 poorest countries in 2023.
−23.1%
the fall in official development assistance in 2025, the largest drop on record, with a further fall projected for 2026.
Why so little investment?
Investment is held back mainly by risk, real and perceived, and by a shortage of investable opportunities. Finance for Peace addresses both, helping projects reduce conflict risk through peace measures and developing a pipeline of peace-aligned investments.1
Little investment reaches the places that need it most
Fragile and conflict-affected countries face the most acute development challenges, including poverty, hunger, exposure to climate shocks and persistent gaps in energy, employment and education. Sustained progress depends on private investment that creates jobs and extends access to energy, water and basic services, and on how that investment is made. Investment that is inclusive, conflict-sensitive and peace-positive can support a country’s development while reducing the risks to the investment itself.
Yet little private investment or development finance reaches these places. Foreign direct investment to developing economies fell to USD 435bn in 2023, and the 26 poorest countries received barely 2% of it. The World Bank Group more than tripled the private capital it mobilised between 2022 and 2026, from USD 35bn to USD 112bn, yet the amount reaching low-income countries remained at around USD 3bn.2
Private finance mobilised by the World Bank Group has tripled since 2022, but not for low-income countries
Peace-aligned investment can help prevent conflict, and prevention pays
Aid that is directed to investments and projects with peace measures is likely to lead to more impact in many ways. Putting peace measures in place from the start not only reduces project risk. It can also change how markets approach conflict risk, and it can contribute to preventing conflict in the places it reaches.
Prevention is far more cost-effective than dealing with conflict after the fact, once lives, livelihoods and development gains have been lost. Yet most spending still comes afterwards: in fragile contexts, humanitarian aid was more than seven times larger than aid for conflict prevention in 2021. The United Nations and World Bank estimate that scaling up prevention could save between USD 5bn and USD 70bn a year, even if most preventive efforts fail.
Peace measures are a low-cost place to start. They typically cost around 1 to 1.5% of a project’s value, and much of that is management practice rather than capital spending.3
Prevention pays
USD 26–103
Estimated return on every USD 1 spent on preventing conflict, depending on the setting.
Catalytic funding can help build a market for peace-aligned finance
Labelled bonds show how quickly a market can grow once investors share a standard and trust independent review. Development banks issued the first green bonds, and green, social and sustainability bonds became a multi-trillion-dollar market in under two decades. Issuance now runs at about USD 1 trillion a year.
Aid and philanthropy can play the same catalytic role for peace-aligned finance. Grants that help establish the Finance for Peace Standards, independent verification, a pipeline of investable projects and the first certified transactions build the track record that markets need. Once that exists, private capital can follow on commercial terms, and the effect of each grant continues long after it ends.4
How a market gets built
Catalytic funding matters most in the early steps, before private capital can price the risk on its own.
- 01
Common standards
A shared benchmark for the peace measures an investment puts in place
- 02
Independent verification
Checks every year that the measures are delivered
- 03
First transactions
Early certified deals show that it can be done
- 04
A track record
Evidence on risk, returns and impact builds up
- 05
A market norm
Investors come to expect peace measures as standard practice
Where grants and catalytic capital help most
Where private capital can take over
How to work with us
Fund our work
Support the work of building the market for peace-aligned finance: developing the Standards, building the Market Network and producing the evidence base.
Collaborate on policy
Work with us to bring conflict-sensitive investment into the policies, mandates and frameworks of public and development finance institutions.
Support the first certified instruments
Back the first certified transactions with guarantees, blended finance or technical assistance, and help show what the Standards can achieve.
Partner on special projects
Work with us on targeted initiatives around peace-aligned investment, such as thematic programmes, Peace Bonds for a specific region or sector, or research on how investment affects stability.
Sources
- OECD, States of Fragility 2025; World Bank, Global Economic Prospects, June 2025; OECD, preliminary official development assistance data, April 2026.
- OECD, States of Fragility 2025; World Bank, Global Economic Prospects, June 2025; World Bank Group, press release, 17 September 2026 (financial years; income groups do not add up to the total).
- OECD, 2023 (2021 data); United Nations and World Bank, Pathways for Peace, 2018; IMF researchers, Working Paper WP/24/256, 2024; Finance for Peace.
- Climate Bonds Initiative; International Capital Market Association.
- Finance for Peace calculation on Climate Bonds Initiative 2025 issuance (USD 1,026bn); Institute for Economics and Peace analysis of OECD data, 2025.
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