The environmental and social risks associated with project finance can be severe and far reaching. The implication of this finance needs to be fully understood to prevent unforeseen consequences on recipient nations and also to prevent lenders exposing themselves to undue reputational risks. This report provides helpful advice on the potential problems and solutions.
International Alert (Alert) have prepared a background paper which focuses on the linkages between project finance and conflict. Project finance is frequently used to fund investments in higher-risk developing countries – particularly for large infrastructure and natural resource extraction projects.
These investments are often linked to violent conflict at local and national levels due to interactions with certain structural and proximate causes of conflict, including economic underdevelopment and natural resource dependence.
Even where conflict appears to be geographically far from a project, it is possible that investments, in contexts where resources are scarce, will soon become part of the conflict dynamic, boosting government access to revenue that can be used to prosecute conflict; attracting attention and demands from conflict actors; bringing migrant workers into a locality; and becoming a source of heightened competition locally.
International Alert (Alert) is a UK-based peacebuilding NGO committed to the just and peaceful transformation of violent conflict.