A humanitarian way to invest

Humanitarian and climate disasters are forcing more people to flee their homes, prompting the United Nations High Commissioner for Refugees (UNHCR) to rethink how it responds over the longer term. It’s led to the adoption of innovative financing opportunities, pairing social impact with market-based activity.

UNHCR delivers lifesaving support in emergencies and safeguards fundamental human rights, helping people find a safe place to call home. It works across the globe: from Ukraine to Afghanistan, Sudan to the Middle East.  

As more people are displaced, UNHCR is utilising creative financing solutions to support refugees, complementing a primarily grant-based model with innovative financing strategies. 

One area of focus is climate change, which impacts refugees disproportionality. 

“Traditionally, humanitarian response has been focussed on addressing the immediate impacts of disasters or emergencies or conflicts, so it’s relied on various short-term funding models, but we’re finding the traditional form of giving needs to be complemented – in some cases significantly complemented – by the financial tools and investments the rest of us take for granted,” UNHCR senior innovative finance officer Siddhartha Sinha says. 

Investment options vary, ranging from loan guarantees and revolving funds to grants with a specific, creative purpose to leverage additional capital for a designated intervention. These give UNHCR and its partners a chance to pivot towards building longer-term solutions to support refugees, many of whom can be displaced for decades. Importantly, UNHCR is working with investors to find the right mechanism for them. 

One initiative is the Refugee Environmental Protection (REP) Fund. The focus is reforestation and cleaner cooking programs in climate-vulnerable countries that host refugees. 

UNHCR estimates that 20-25 million trees near refugee settlements are cut down annually for cooking fuel. That can exacerbate social tensions with the host community, and with fewer trees, women are more vulnerable to violence as they walk further for firewood. 

Over the next decade, the goal is to plant 120 million trees and enable 1 million refugees and host community members to access cleaner cooking solutions (carbon reduction is expected to be more than 2.5 million tonnes of C02 per year). 

The REP fund scales up investment in climate-vulnerable communities by linking them to the carbon markets and generating sustainable funding by monetising each project’s carbon and social benefits, which can then be re-invested. 

UNHCR has also created a Green Financing Facility, which transitions the Agency’s offices to renewable energy, including in remote, off-grid settings. It involves many different partners, including investors who can finance upfront capital for renewable energy assets and guarantors to ensure the UN agency can secure long-term contracts. 

“One development partner has worked with us to help us set up a guarantee facility, which backs power contracts and makes it easier for energy companies to make the necessary investments,” Sinha says. 

Once the capital investment is secured, further investments can support the company scale up its operations in the area. 

“The power company needs to finance its assets and operations as well, so an investor can come in and finance those opportunities too. Suddenly, we’ve created an entire value chain,” he says, pointing out the additional positive social impacts. 

Australia for UNHCR is the UN Refugee Agency’s partner in Australia. CEO Trudi Mitchell says there are many exciting initiatives that companies and philanthropists can support.  

“Displacement and climate change are two of humanity’s greatest challenges, and we need a whole-of-society approach to address them.” she says. 

“That means leveraging Australian expertise and innovation from the private sector. I’d encourage anyone interested in these issues to talk to us.” 

To find out more, email srobinson@unrefugees.org.au or visit unrefugees.org.au