Globally 2.2 billion people do not have access to safe domestic water supply services and 4.2 billion do not have access to safely managed sanitation services1. In order to achieve the Sustainable Development Goals, accelerated action and multiple resources are required for financing sustainable water management. According to the World Bank, in Sub-Saharan Africa, 315 million people remain without access to clean drinking water and recurrent water scarcity and drought lead to chronic food insecurity, environmental migration and civil instability affecting millions living in the region2.
Non-sovereign entities such as river basin organizations and local governments do not have direct access to international capital markets. The current financing approach to water and related investments is overly administrative, country-based and sectoral. At present, these non-sovereign entities mainly obtain financial resources for their projects from individual member state contributions. The process is usually slow and inefficient for regional non-sovereign entities, resulting in a complex web of conditionalities and contracts for oversized projects, and with a lack of holistic planning. In addition, there is a peace dividend that comes along with transboundary, cross-sectorial and intergenerational water management, which is currently overlooked or undervalued by policymakers and investors. Especially in times of increasing water stress, joint and inclusive water management is vital to promoting peaceful cooperation and sustainable development.
Towards a Solution
To address the above challenges, UNCDF together with the Swiss Agency for Development and Cooperation (SDC) and the Gambia River Basin Development Organization (OMVG) designed the Blue Peace Financing Initiative to promote access to capital for non-sovereign entities using water as an entry point for cross-border multi-stakeholder cooperation frameworks, leading to more sustainable economies and peaceful societies. This initiative aims to invest in peace through water and thus creates a peace dividend by giving value to peaceful and sustainable agreements between stakeholders. This initiative directly contributes to SDGs 6, 11 and 16 as well as IPoA priority areas 1, 2, 5, 7 and 8. This innovative approach provides a new financial incentive for countries and sectors to cooperate for more sustainable management of shared resources, reducing social, political, health and economic risks.
The initiative offers impact investment opportunities by promoting access to the investment ecosystem for non-sovereign entities such as local governments and regional organizations and facilitating access to financial capital for joint investment schemes. Currently the financial ecosystem works well for sovereign states and big private companies. However, non-sovereign entities such as river basin organizations do not have access to this financial ecosystem. The Blue Peace financing initiative will change this by using water as the entry point to create transboundary and multi-sectoral cooperation frameworks and transform them into investment platforms through joint investment plans (portfolio approach) and a new financial instrument (Blue Peace Bond). From an investor's perspective, multi-sector investment plans offer very attractive risk reduction properties. Indeed, the likelihood of political, social or economic conflicts driven by divergent interests can be reduced if all interested parties are involved in negotiating an agreement based on the reality of water availability.
The Blue Peace financing initiative is a co-creation by SDC and UNCDF as the main implementing agency. It provides long-term capacity development to the non-sovereign entity, allowing it to have access to new forms of capital by issuing a Blue Peace Bond. The capital thus raised is used to implement the projects of a joint investment plan, including infrastructure projects. This allows the non-sovereign entity to upgrade the livelihood assets and hence its own creditworthiness, and in turn to scale up its capital mobilization activities.
As a follow-up to the recommendation by the Global High-Level Panel on Water and Peace on innovative financing for transboundary water cooperation, SDC together with UNCDF and the Geneva Water Hub (the Secretariat of the Panel) reviewed different RBOs and their cooperation frameworks (including legal agreements). After this reconnaissance phase, OMVG was identified as a pilot case to demonstrate the Blue Peace financing initiative and how water can be used as an entry point to strengthen South-South cooperation, particularly in the LDCs. The OMVG was created in 1978 for the coherent management of shared resources in the Gambia, Kayanga/Geba and Koliba/Corubal river basins with The Gambia, Guinea, Guinea-Bissau, and Senegal as member states. With its strong political support from member states and having 4 LDCs as member countries, OMVG showed a “high degree of readiness” to demonstrate the Blue Peace financing initiative. An MoU between OMVG and UNCDF, signed in January 2020, kick-started the implementation phase (led by UNCDF) in two stages:
- Technical assistance to support OMVG in developing its master plan and gaining capacity to issue a financial instrument on the capital markets and absorb the financing;
- Support for OMVG during the process of issuing the financial instrument on the capital markets (fund raising).
The OMVG master plan is a strategic plan for the integrated development of its basin aiming at food self-sufficiency for the populations, and the reduction of the vulnerability of the economies of the Member States to climate hazards and wider economic trends. It also contributes to the strengthening of resilience to climate change, the sustainable development of the territories of the Gambia River basin and the consolidation of peace, stability and cooperation between the member states – all four of which are LDCs. Key achievements so far include:
- A resolution signed by the Council of Ministers of OMVG, allowing OMVG to explore new financing mechanism to implement its masterplan, including the Blue Peace financing initiative.
- A diagnostic study for sectoral plans and the OMVG master plan conducted.
- The Blue Peace financing initiative for OMVG has been declared a certified project for the World Water Forum in Dakar 2022.
- Technical assistance including the financial model, review of legal and institutional framework and a joint investment plan for OMVG is being provided.
Through the implementation of this pilot project, the initiative is a global model replicable for other transboundary basins, particularly in Southern countries. There are almost 300 transboundary aquifers and 263 transboundary river and lake basins in the world; 145 states have part of their territory within the boundaries of these basins and 30 countries are fully included3. And two-thirds of these transboundary rivers do not have a cooperative management framework. The Blue Peace Financing Initiative will be able to provide financial incentives for such cooperative management frameworks, including South-South and Triangular cooperation.