Pioneering Capital Market Solutions for Transboundary Water Security
The Brief:
In 2018, Earth Security was commissioned by the Swiss Development Agency’s Global Water Programme to develop a practical and investable pathway for global capital markets to contribute to the global agenda of transboundary water cooperation. The objective was to align private finance with the Swiss Government’s Blue Peace Initiative, a flagship diplomatic effort to support water cooperation in high water risk regions such as the Middle East and North Africa, Central Asia, and South Asia.
Why It Matters – Investment Flashpoints in Water Stress:
More than half of the world’s land surface is covered by transboundary river basins, which account for 60% of global freshwater flows and serve around 3 billion people. By 2030, nearly half the global population will live in water-stressed transboundary regions. For long-term investors, this presents a mounting material risk—particularly for water-intensive infrastructure and operations in regions where cooperation between countries is fragile and underfunded. Until now, investors have had limited mechanisms to influence or mitigate these systemic risks.
Earth Security’s Role – From Risk Insight to Market Innovation:
Earth Security engaged global investors, asset managers, banks, and insurers in dialogue with leading water governance experts to explore innovative financial instruments that could translate systemic water risks into investment opportunities. This resulted in a landmark report, The Finance Sector’s Contribution to Water and Peace, proposing a suite of practical opportunities to embed principles of transboundary water cooperation into investor decision-making and water intensive assets.
A central innovation proposed by Earth Security was the ‘Blue Peace Bond’—a sustainability-linked financial instrument with which to finance infrastructure aligned with the masterplans of governance institutions managing transboundary water.
These bonds would channel capital into investments in hydropower, irrigation, navigation, and other water-related projects, where the coordination with existing river basin organizations would provide risk management. Such a thematic bond would directly contribute to target 6.5 of the Sustainable Development Goals (SDGs).
From Vision to Structuring – Partnership with UNCDF:
Earth Security partnered with the United Nations Capital Development Fund (UNCDF), which recognized the potential of the Blue Peace Bond and took forward its development. UNCDF set up the Blue Peace Financing Initiative with support of the Swiss Development Agency. Together, Earth Security and UNCDF convened a series of investor roundtables in London to refine the instrument’s structure, market positioning, and implementation pathways.
As a result, UNCDF selected the Organisation for the Development of the Gambia River Basin (OMVG) as the pilot entity for an inaugural bond. OMVG brings together Gambia, Guinea, Guinea-Bissau, and Senegal in joint stewardship of the Gambia River, providing a ready-made institutional framework for cross-border cooperation. The pilot is designed as a scalable model for other river basins.
“Earth Security’s insights and vision turned what is a systemic risk and diplomacy agenda into a workable idea for capital markets, enabling us at UNCDF to begin work to design and operationalize this innovative instrument.”
— Jaffer Machano, Team Leader, UNCDF
What Is a Blue Peace Bond?
The Blue Peace Bond is a groundbreaking financial instrument intended to fund water infrastructure in transboundary basins, in a way that is aligned with regional water cooperation plans. It aims to:
- Invest in infrastructure projects such as hydropower, irrigation, and navigation/transport projects.
- Provide additional assurances on water risk management and the sustainable water use across borders, by aligning with basin governance institutions.
- Use blended finance to de-risk investments and attract institutional capital.
“The Blue Peace Bond proposes a thematic product labelling for large infrastructure projects in water-stress prone regions based on their alignment with transboundary water cooperation systems. This signals good risk management and a direct impact contribution to SDG 6.5”— Alejandro Litovsky, Founder/CEO Earth Security
The bond is being structured under UNCDF leadership, its issuance will involve a Special Purpose Vehicle (SPV). It will focus on infrastructure projects already prioritized in an agreed master plan. An inaugural bond is likely to focus initially on one or two large projects, but the total number of projects identified by the basin’s masterplan amount to some USD 2 billion in investments, suggesting the potential for replicability and scalability. The instrument has attracted interest from pension funds and institutional investors across 7-, 12-, and 15-year maturities.
From Concept to Reality – A Blueprint for Financial Innovation:
The Blue Peace Bond has evolved from a bold conceptual idea in 2018 into a structured investment instrument poised for launch in 2025. Its development underscores Earth Security’s role in bringing creative, systemic thinking into financial markets—bridging policy, environmental risk, and capital strategy. Crucially, the project also demonstrates the power of agile, mission-driven partnerships, in this case through the leadership, expertise and implementation capacity brought forth by UNCDF.
“Through the Blue Peace Financing Initiative, OMVG can now assess the investment-readiness of infrastructure projects and bring the Blue Peace Bond to reality. Earth Security's thought leadership has been instrumental in creating this innovative approach."— Rukan Manaz, Global Program Manager, UNCDF
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