Conflict risk is a significant material risk, largely unsighted by investors today
It can show up in the cash flows of projects and companies, in credit ratings and share prices, and across whole portfolios. The Finance for Peace Standards are designed to help project owners, companies, issuers and investors reduce it proactively, in any asset class, by building in peace measures that are independently verified, so markets can recognise and reward them.
Conflict risk can cost projects billions
Losses from conflict risk are rarely modelled as a core financial risk, yet they can be among the largest a project or company faces. They arrive as delays, stoppages, write-downs and lost licence to operate, in numbers that lenders and investors already review. Operators in the same countries and sectors avoided similar losses, which suggests the difference lay in how projects were run, not where. Across those cases, the losses were 3 to 450 times larger than the cost of engaging communities.1
About USD 20m a week
in lost value from delayed production, for a world-class mine facing community conflict
Large mining project
USD 4–5bn+
in losses, and the owner’s credit rating cut from BBB to BB
Hydropower dam, South America
USD 5bn
mining project cancelled outright after community opposition
Mining project, South America
About USD 9.5m a day
in lost exports during community blockades, over 661 blockade days from 2016 to 2023
Operating copper mine, South America
Addressing conflict risk creates financial and impact opportunities, even where the risk is not obvious
Conflict risk isn’t limited to frontier and developing markets. It can be carried through value chains and arise wherever a project or a company’s operations affect the people and places around them. When a project is designed with a clear understanding of its risk exposure, and these risks are addressed from the start, the case for investing changes.
✕ When conflict risk is left unaddressed
✓ The benefits of addressing conflict risk
01
Conflict risk costs money
Disputes and unrest can stop work, delay schedules and push up costs. On large projects, losses have run into billions of dollars, and some projects have been cancelled outright.
It can save the costs the risks would otherwise bring
Fewer disputes mean fewer stoppages, delays and overruns, so more money stays in the project and it is more likely to deliver.
02
It can cause unintended harm
A project can deepen local tensions, for example when land is taken without proper consent or benefits reach only one group. This harms communities and, in the end, the investment, including impact investments.
It can create value for communities and beyond
With peace measures built in, communities become partners. Local jobs, contracts and benefit sharing can strengthen local economies and support stability beyond the project.
03
It keeps investment out
Where conflict risk is high or hard to assess, sound projects go unfinanced, and the places that most need jobs, energy and services are passed over.
It can unlock investment that would otherwise not happen
By reducing the risks that block investment, and with independent verification as a further layer of due diligence, peace measures can bring projects to market in places now considered too risky, making them highly additional.
The benefits can outweigh the cost
Peace measures typically cost around 1 to 1.5% of total project value, and much of that is management practice rather than capital spending: participatory dialogue, engaging key stakeholders on the issues that affect them, creating transparent hiring mechanisms and sharing benefits on agreed terms.
The benefits tend to arrive in a set order. Steadier cash flows come first, with fewer disruptions and delays. A stronger social licence and access to capital that needs verified claims, such as development finance guarantees and institutional mandates, come next. A lower risk premium comes last. It is likely to be modest, but on a large bond, loan or equity raise even a small reduction can be worth a great deal.2
One example: a bond
Move the slider to change the yield reduction.
Net saving of 1.5% of proceeds. In this illustration the measures more than pay for themselves.
Conflict risk reaches across asset classes and value chains
Conflict risk is often treated as a project finance problem. In practice, the same local grievances can cut an operating company’s cash flows, weaken its credit and weigh on its bond or share price, and through contagion to suppliers and customers they can decrease the diversification benefits of portfolios. Nor is it limited to extractive industries: renewable energy, agriculture, infrastructure, small businesses and thematic funds can all be exposed.
Peace measures act at the source, on how an operation relates to the people around it. That is why the Finance for Peace Standards cover all asset classes, including fixed income and equities, in public and private markets. Certification can apply to specific projects, or to an instrument linked to a company’s overall activity, in which case it covers everything the company does.3
How conflict risk can travel from its source to investors
Select a ring to follow the risk outward.
It can start in any sector
Conflict risk builds wherever people feel shut out of decisions, land, jobs or benefits. For example:
- a wind or solar farm built on grazing land or farmland without the consent of the people who use it
- a small business that hires and buys from only one group, in a town where communities are divided
- a thematic fund, such as a climate or infrastructure fund, whose investments bypass poorer or marginalised regions and widen the gaps between them
- a mine or plantation that takes land without agreed compensation
Protests, blockades, legal challenges or political backlash can follow, and work slows or stops.
Cash flows fall faster than output
Sales stop, but wages, contracts and debt service carry on, so earnings and free cash flow fall further than output. Guidance can be cut and expansion plans put on hold.
19 years vs USD 100m+Two gold mines in West Africa: one that shared a dollar an ounce and 1% of profits with its community ran for 19 years without interruption; another, after a forced eviction, faced six years of mediation and more than USD 100m in conflict-related losses.
Credit weakens
Weaker cash flows strain coverage ratios and covenants. Ratings can fall and borrowing costs rise, for the company and for new projects it wants to finance.
About 70 basis pointsthe rise in debt financing costs after social and governance incidents, in a study of firms in China
Markets discount the assets
Equity investors price in the risk that assets will not produce as planned, and local relationships move that discount.
72% to 13–37%Across 26 gold mines owned by 19 listed firms, stronger local support cut the discount markets applied to the value of the mines’ assets from 72% to between 13% and 37%.
Risk contagion
Conflict risks can not only impact a company’s bonds or shares in an investment portfolio but also cause contagion to the company’s suppliers and customers, often present in index funds. This erodes the diversification benefits of the portfolio.
4 to 7 pointshigher stock returns during the 2008–09 financial crisis for firms that had built more trust with their stakeholders, measured by their social responsibility, than for those that had built less
How to work with us
Prepare for certification
We host briefings and seminars on what the Standards require and how independent verification works, and provide personalised guidance on the certification process.
Develop peace-aligned investment opportunities
We work with you to identify which projects could be peace-aligned and how, shape early ideas into investable projects, and connect you with the right partners to bring them to market.
Join convenings around a live pipeline
We host working groups and in-person convenings around live transactions, and where appropriate facilitate introductions between project owners, issuers, investors and peace experts to help bring a transaction to market.
Access tools, knowledge and market updates
We develop tools and research and share the latest market developments that help inform peace-aligned investment decisions.
Sources
- Hyslop and Sonno (2026), When Peace Pays, a research report for PeaceNexus; Franks and others (2014), Proceedings of the National Academy of Sciences; industry and press reporting.
- Finance for Peace.
- Finance for Peace Standards.
Get in touch
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