The UN estimates that $5 - $7 trillion will be required to achieve the Sustainable Development Goals (SDGs) by 2030. Investing in Blue Peace supports the achievement of the SDGs while also transforming water from a potential source of crisis into an instrument of cooperation and peace.
Here, we provide an overview of the conceptual investment framework with the goal of inspiring local governments and financial institutions as well as multilaterals to develop innovative financial instruments to support Blue Peace.
The international community should create incentives (financial or otherwise) to promote transboundary water cooperation.Countries in transboundary watercourses, lakes and aquifers should use conventional sources of finance for institution building, capacity building and similar activities.Preparation for transboundary infrastructure projects should be rigorous and focus on making the projects bankable.The international community should encourage riparian countries to undertake Joint Investment Plans.The international financial sector should gradually include transboundary water cooperation in the expanded ESG principles.The ESG framework should include the Blue Peace framework and serve as an incentive for investment in transboundary water projects.An international task force should be established to assess the evolution of sustainable finance practices and their application to transboundary water cooperation.Multilateral development organizations (e.g., the International Development Association) should consider collaborative projects on a preferential basis and spread awareness of facilitiesNew and old sources of finance, including the Asian Infrastructure Investment Bank, the Islamic Development Bank, and development assistance programs of emerging economies should give priority to collaborative projects.New instruments such as the Blue Fund should be created to provide preferential and concessional finance to subsidize interest, insurance and related ancillary costs of large infrastructure projects for the countries that are willing to work together in a collaborative way to develop transboundary water projects.The private sector should be encouraged to develop innovative financial instruments such as blue bonds to finance transboundary water cooperation.The problem of preparing bankable projects should also be addressed by providing a neutral, independent “safe space,” through pre-negotiation opportunities at an early project development stage, with the aim of addressing the major implementation issues early and proactivelyThe Blue Peace approach to investment is based on the development of transboundary, multisectoral joint investment plans. These plans involve multiple sectors (energy, agriculture, manufacturing etc.) as well as multiple countries or municipalities. Joint investment plans include investments required for the provision of electricity or water for irrigation, industrial use, human consumption such as infrastructure, data, monitoring and marketing or other water-related projects.
This transboundary and multisectoral approach incentivizes cooperation and political agreements with water as the ‘entry point’ or reason for engagement, leading to a reduction in social, political and economic conflicts and supporting peace.
Taking the Blue Peace joint investment plan from concept to reality requires a new financing structure blending public money and private capital – or blended capital. This blended capital can be used to invest in a new type of financial instrument – the Blue Peace Bond.
Blue Peace Bonds will be issued by a municipality, transboundary water organisation or another non-sovereign entity and they will be backed by cash-flows from the underlying projects. They will take on different structures depending on the revenue expectations of a specific joint investment plan and will match cash-flows generated by projects.
The Blue Peace approach uses water as a mechanism for enhancing peace and cooperation between governments. The investment framework also provides concrete opportunities for local governments, financial institutions and multilateral organisations.
Sustainable impact: Investing in Blue Peace enables the investor to generate positive, measurable social and environmental impact alongside a financial return.
The risk-return profile: De-risking mechanisms improve the risk-return profile of Blue Peace investments.
A long-term investment: Investing in Blue Peace means investing for the long term. Long-term investments face lower volatility and are therefore less risky. Long-term investments also often provide tax advantages and have lower transactions costs.
A multisectoral investment: An investment in Blue Peace means investing in multiple sectors including water, energy and food. These multisectoral investments are based on pre-negotiated joint investment plans which means the needs and interests of the different actors have already been considered in the planning process. This reduces the risk of tensions between different actors and provides an improved risk-return profile.
Blended finance: Like achieving the Sustainable Development Goals, investing in Blue Peace requires a blended finance approach, where public financing coupled with philanthropic capital, takes over important part of the risk mitigation, allowing private investors to step in. This helps improve the risk-return profile and provides more security for private investors in the long term.
Transboundary investment: Investing in Blue Peace means investing in transboundary water projects that incentivize cooperation and peace in the region. This supports economic growth and development in the region by reducing risk through diversification thereby facilitating other investments.
Investing in water: Water is expected to become more valuable than oil as rising demand from people, industries and agriculture will apply pressure on the scarce water supplies worldwide. To assure long-term returns on investments in water related goods and services, water has to be preserved, ensuring it does not become a scarce resource.
First-mover advantage: Early investments in Blue Peace will allow these investors to establish strong brand recognition and customer loyalty before competitors enter the arena.
Resources
Investor Guide on Basin Water Security Engagement Blue Peace - Invest In Peace Through Water Blue Peace Investors Brief: A New Way of Impact Investing The Finance’s Sector Contribution to Water and Peace Financing Climate Change Adaptation in Transboundary Basins Blue Peace in International Finance Financing of transboundary water cooperation High-Level Workshop: Financing Transboundary Basin Development - Co-Chairs summary (2018)Partners
Geneva Water Hub UNCDFNews
Virtual workshop on financing transboundary water cooperation (UNECE and partners, December 2020) Water and Financial Markets (Federal Office for the Environment, 2020) Blue Peace in International Finance (Covalence, 2019) "Blue Peace": Financing Peace Through Water (Ooska News, 2019) New sustainable finance brief highlights opportunities for investors to address global water scarcity and conflict (Earth Security Group, 2018)
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