Conflict-sensitive project finance: Better lending practice in conflict-prone states

Violent conflict presents a serious challenge for businesses operating abroad. Evidence shows that investments in conflict-prone countries, and the interaction with the dynamics of violent conflict at local and national levels that frequently follows, often lead to operational, reputational and even legal costs.

Political risk analysis and environmental and social impact standards as well as other approaches to managing risk have been evolving since the 1980s, complemented by increasingly sophisticated understandings of the appropriate relationship between business and host societies, and of corporate social responsibility.

Despite this, understanding of the interrelationship between particular investments and violent conflict has been limited. This briefing paper highlights the risks associated with financing projects in conflict-prone areas, and proposes better lending practices in conflict-prone states.