Investing in peace: Daniel Godfrey involved in peace investment initiative

Industry figure working with Institute for Economics and Peace

World leaders, from the Pope and the Dalai Lama to Queen Elizabeth II, will soon be delivering their Christmas messages.

With fraternity, prosperity and peace on earth as the themes of their speeches, world leaders will perhaps inadvertently be singing from the same hymn sheet as the UN Sustainable Development Goals (SDGs).

Daniel Godfrey, the former CEO of the Investment Association, the UK fund body, is currently working on a project aimed at providing financial muscle and investment relevance to one of the more structural SDGs, i.e. #16 Peace, Justice and Strong Institutions.

Together with Australian entrepreneur and philanthropist, Steve Killelea, he is putting together a project that for now can be called “Positive Peace Capital” although both admit it is still “very early days”.

Positive Peace Capital is based on the research of the Institute for Economics and Peace (IEP), a think-tank founded by Killelea, known for its Global Peace and Global Terrorism Indexes, which try to measure the economic impact of violence and rank countries accordingly.

But another key area of focus for the IEP is the Positive Peace Index, which measures not only the absence of violence, but also “the attitudes, institutions and structures that create and sustain peaceful societies” as Killelea and Godfrey tell RI.

The Positive Peace Capital project is not about setting up ethical funds and “feel the warm glow”, says Godfrey. It is rather an investment proposition to understand the risk and rewards associated with investing in countries where peacefulness can improve, and therefore potential returns too.

Behind this rationale is IEP’s analysis, for example, the latest edition of the Global Peace Index estimated that the global impact of violence in 2016 was $14.3trn, or 12.6% of world GDP.As a recent IEP report called Business and Peace 2018. Peace: A Good Predictor of Economic Success states, “the lens of Positive Peace offers a new way of assessing the risk of investments and identifying the potentially large opportunities that exist in under-examined countries”.

“Peace could be a very powerful strategy”

As Godfrey explains, Positive Peace Capital would use a methodology of eight pillars in order to identify indicators of competitive advantage that can be applied to investment strategies.

The pillars are: well-functioning government; equitable distribution of resources; free flow of information; good relations with neighbours; high levels of human capital; acceptance of the rights of others; low levels of corruption; and sound business environment.

Godfrey and Killelea say they are in talks with asset managers to partner and develop investable products.

The profile they are looking for at the moment is a European firm of “about €100 million with the capacity to grow” says Godfrey.

The methodology of Positive Peace Capital, he says, could be deployed in sovereign debt, broader credit, infrastructure, property development and equity both private and listed.

“Peace could be a very powerful strategy, particularly in non-OECD countries. And it would be a challenge to deliver the rest of SDGs, which have a high profile brand, if peace is not included.”

Ultimately, he says, the aim is to reach institutional as well as retail investors.