Why Peace Finance Matters for Investors

By Dominique Habegger

Global investors are increasingly familiar with the language of climate finance. Twenty years ago, most companies downplayed their impact on the climate; today, few dispute that their emissions contribute to climate change, systemic risks to economies, and portfolio risks for investors. A similar blind spot exists today regarding the involvement of global investors in contexts shaped by conflict and social instability. While companies recognise the risks and costs of operating in fragile or conflict-affected settings (FCS), they often underestimate the reverse: the ways their activities influence or shape social or political stability. This double materiality—risks from conflict and impacts on conflict—is still a missing link in sustainable finance.

The emerging field of Peace Finance seeks to fill this gap. It provides investors with a framework to identify, manage, and mitigate conflict risks across their portfolios while encouraging investees to adopt context and conflict-sensitive practices. The stakes are high: according to the Global Peace Index 2024, the global economic impact of violence is estimated to be $19 trillion annually, accounting for 13.5% of global GDP. Ignoring these risks is not only ethically fraught but financially costly.

The First Materiality

Conflict is at a historic peak. The number of civil wars has nearly tripled since 2010, while coups and political violence have resurged. For investors, this translates into multiple risks, including operational disruptions, supply chain fragility, market volatility, and legal, regulatory, and normative liabilities. Examples of how these risks are already affecting existing supply chains are given in Box 1 below.

These risks are systemic in nature — difficult to manage or diversify away from, and often invisible within even the most diversified portfolios. Investors frequently underestimate their exposure to these risks. Part of the reason lies in the conceptual ambiguity surrounding FCS: fragility is not a legal category but a policy construct, open to varying interpretations. Misleading statistics also play a role; according to the OECD, fragile and conflict-affected settings account for only 2% of the value of global exports, a figure that appears marginal, yet this value-based perspective obscures their true significance. If these exports were to collapse, entire industries, and potentially the global economy, could face severe disruption. 

The explanation is straightforward: FCS supply the raw materials that drive the digital and energy transition, as well as the agricultural commodities that sustain global food chains. Moreover, these exposures often lie buried deep within corporate supply and value chains, making them harder to detect and manage. The apparent 2% value thus masks a much deeper systemic dependence, turning conflict into a profound cost driver across markets. Should conditions stabilise, however, the same 2% value could also account for a considerable share of global GDP growth opportunities by 2050.

Box 1- Examples of how conflict-related risks are already affecting existing supply chains

Operational disruption:  Violence halts production and displaces workers. In Mozambique, as insurgency increased in provinces like Cabo Delgado, companies such as TotalEnergies were forced to evacuate staff and declare force majeure on their LNG Projects in April 2021. Based on our analysis, this has cost TotalEnergies billions of dollars. Similarly, in Niger, following the 2023 coup and border closures, exports via Benin were blocked, and operations at the Arlit and SOMAÏR mines were suspended by the corporation Orano in 2024, disrupting a key nuclear fuel supply. These examples capture only a small proportion of the operational disruptions caused by FCS over the past few years.

Supply chain fragility: Essential raw materials, including cobalt, rare earth minerals, cocoa, cotton, and coffee, are disproportionately sourced from FCS, creating a risk of dependence.  The war in Sudan has turned gum arabic, a natural resin essential for food, beverages, cosmetics, and pharmaceuticals, into a vivid example of supply chain fragility. Multinationals such as Coca-Cola, Nestlé, Mars, and L’Oréal rely on these raw materials for core product lines but face growing operational, compliance, and reputational risks. With few viable substitutes and limited alternative suppliers outside Sudan, companies are exposed to both supply disruptions and the danger of being linked, even indirectly, to the financing of armed groups.

Market volatility: Conflicts can send shocks to a range of sectors with little to no warning. The war in Ukraine reshaped global energy and food markets overnight, sending ripples through portfolios far beyond the region. Following the 2022 invasion of Ukraine by Russia, the FAO Food Price Index hit an all-time high, reflecting sharp jumps in cereals and oils. The IEA and World Bank describe the war as one of the largest commodity supply shocks in decades, triggering a global energy crisis and re-wiring gas and oil flows. Wheat prices also surged by around 40% by May 2022, as Black Sea exports were disrupted, leading to increased volatility in wheat futures.

Legal, regulatory, and normative liabilities: Companies may face severe consequences if their operations, financing, or supply chains are linked to violations of international norms and regulations, including International Humanitarian Law, human rights treaties, UN sanctions regimes, and the emerging EU Corporate Sustainability Due Diligence Directive. The persecution of the multinational cement company, Lafarge, before French courts for criminal offences in relation to its activities during the Syrian armed conflict, is a landmark case in corporate accountability for operating in conflict zones and paying armed groups. Such breaches carry not only legal risk but also reputational damage and potential exclusion from global capital markets.

The Second Materiality

If the first materiality is about what conflict does to business, the second is about what business does to conflict. Corporate presence is never neutral in fragile contexts – decisions regarding land use, hiring, resource extraction, and security influence local dynamics. Examples of how corporate practices impact local dynamics are provided in Box 2 below.

Conversely, inclusive practices can strengthen stability and operational resilience. For example, some companies have worked directly with coffee farmers through formalised cooperatives in conflict zones to improve the welfare of farmers, ensure supply security, and enhance brand value among ethically conscious consumers. This second materiality is often underestimated, yet it has a direct impact on portfolio resilience. Ignoring this materiality might result in misallocation, mispricing, and reputational damage.

Box 2 - Examples of how corporate practices are affecting local conflict dynamics

Resource extraction: Projects that displace indigenous populations without consent exacerbate grievances and fuel unrest. In FCS, extractive companies may also be accused of indirect complicity if payments or concessions benefit armed groups.

Employment practices: Hiring practices that privilege one group over another can entrench inequalities and tensions, sometimes amounting to discriminatory practices that violate fundamental rights and feed cycles of violence.

Technology misuse: Platforms that fail to curb hate speech or disinformation may amplify violence while incurring financial and reputational penalties. In fragile contexts, technology can also be instrumentalised by dominant parties to monitor populations and to control information flows, undermining democratic space. In such settings, failure to act may also raise questions about accountability for enabling or contributing to incitement.

Infrastructure and logistics: Companies providing transport, construction, or logistical support in conflict areas may see their assets commandeered or used for military purposes, creating exposure to allegations of aiding violations of international humanitarian law.

Financial flows: Firms that maintain operations by making informal payments or “security contributions” in war-affected areas risk accusations of financing armed groups, with potential criminal and regulatory consequences.

Consumer goods: Food, beverages, and household goods companies sourcing from conflict-affected agricultural regions may be linked to forced labour, child exploitation, or violent land seizures, embedding hidden risks deep within their supply chains.

Occupation-related exposure: Companies that continue commercial operations in areas under occupation also risk allegations of contributing to the maintenance of an unlawful occupation, including through tax, fees, logistics, or infrastructure support—concerns reflected in recent reports of the many UN Special Rapporteurs—with potential civil, criminal, and regulatory consequences.

From Climate Finance to Peace Finance: Learning the Lessons

The parallels with climate finance are striking. Twenty years ago, emissions were treated as externalities. Today, investors demand climate disclosures, conduct stress tests, and adjust portfolios for transition risk.

Peace finance is at a similar inflection point. Conflict is systemic, portfolios are exposed, but disclosure and management continue to lag. Just as climate finance shifted from denial to integration, peace finance requires a recognition that peace is a precondition for sustainable development and financial stability.

Peace finance is at a similar inflection point. Conflict is systemic, portfolios are exposed, but disclosure and management continue to lag. Just as climate finance shifted from denial to integration, peace finance requires a recognition that peace is a precondition for sustainable development and financial stability. This principle is enshrined in the Sustainable Development Goals, conceived by the United Nations as a blueprint for a more sustainable, equitable, and peaceful world, where economic prosperity and environmental stewardship cannot be separated from just and inclusive societies.

Quantifying Conflict Risk: The RIPE Model

A central barrier remains the difficulty of measurement. While ESG ratings capture human rights in broad terms, they rarely account for conflict sensitivity systematically. To address this gap, Sustainable Finance Geneva, together with Finance for Peace and the PeaceNexus Foundation, has developed a conflict risk model. Its purpose is to assess the exposure of companies—and by extension, portfolios—to the risks inherent in conducting business in fragile and conflict-affected settings. The RIPE model (Risk, Impact, Posture, Exposure) provides a structured framework that integrates the principle of double materiality, highlighting the extent to which corporate behaviour may either foster peace or, even unintentionally, contribute to conflict:

• Risk scenarios (e.g., civil war, coup, deterioration).
• Impact matrices translating risks into potential losses across assets, operations, sales, and supply chains.
• Posture multipliers reflecting how corporate behavior—such as responsible sourcing and community engagement—affects exposure.
• Exposure values expressed in dollar terms, enabling comparability across portfolios.

By modelling how a company’s posture influences its exposure, investors can see how proactive, peace-sensitive practices reduce risk. This model transforms peace from an abstract ideal into a quantifiable material investment concern. The objective is not to encourage companies to exit fragile and conflict-affected settings — least of all those pursuing sustainable practices — as disengagement should remain a last resort. Nor is it to urge investors to divest merely to limit risk exposure. Rather, the aim is to recognise that companies can proactively influence their risk environment and exert a positive influence, and to raise investor awareness to strengthen stewardship, individually and collectively, along shared supply chains.

Geneva and Switzerland: A Strategic Role

Just as climate-conscious investors pushed for decarbonisation, peace-conscious investors can push for conflict-sensitive business practices. This is not only a moral imperative but a fiduciary one: portfolios that ignore conflict risk are exposed to unpriced, non-remunerated risks.

For too long, companies have clung to a myth of neutrality in conflict zones. Yet neutrality is itself a position—often one that tacitly sustains the status quo. The reality is that business choices either reinforce peace or aggravate conflict. Investors must recognise this and adapt accordingly. Just as climate-conscious investors pushed for decarbonisation, peace-conscious investors can push for conflict-sensitive business practices. This is not only a moral imperative but a fiduciary one: portfolios that ignore conflict risk are exposed to unpriced, non-remunerated risks.

Switzerland, and Geneva in particular, are uniquely placed to lead this agenda. With a concentration of UN agencies, NGOs, financial institutions, and multinational firms, alongside housing the offices of many leading global businesses, it is a natural hub for peace finance initiatives. Swiss companies are already experimenting to this end. Sika, Geberit, and Nespresso have moved beyond the “façade of neutrality,” adopting proactive strategies to strengthen local ecosystems. Geneva can leverage its status as a diplomatic and financial capital to convene multi-stakeholder alliances, integrating peace into sustainable finance globally.

Conclusion

The message is clear: managing insecurity is not only about protecting portfolios—it is about ensuring that finance plays its rightful role in fostering peace, stability, and sustainable prosperity.

Conflict and instability are defining challenges of our time, just as climate change is. Both are systemic, both create double materiality, and both demand integration into investment decision-making. The costs of insecurity—economic, reputational, legal—are too high to ignore. Peace finance provides the needed framework to account for risks emerging from global conflicts and instability. By recognising that no investment is neutral, investors can safeguard returns, comply with emerging regulations, and contribute to more stable societies. Geneva and Switzerland, with a unique ecosystem hosting peace, finance and business actors, can lead the way in turning peace finance from an emerging idea into a mainstream industry practice. The message is clear: managing insecurity is not only about protecting portfolios—it is about ensuring that finance plays its rightful role in fostering peace, stability, and sustainable prosperity.

About the author

Dominique Habegger is the Chief Sustainability Officer at de Pury Pictet Turrettini and is Chairing the Peace Finance Hub Committee at Sustainable Finance Geneva