Testing the Feasibility of Financial Innovation to Support Every Woman Every Child’s Mandate - Landscape Research

Testing the Feasibility of FinancialInnovation to Support Every Woman EveryChild’s Mandate- Landscape Research Partnering For Impact

Utilise innovative finance models to deliver EWEC’s mandate Funding gap •  Despite the overall increase for Reproductive Maternal, Newborn and Child Health (RMNCH), there remains a massive funding gap •  Global Strategy estimates at USD88 bn for the 2011–15 period just for the 49 lowest-income countries •  Recent UN strategic assessment pointed out, “the history of financing for New approach development has been characterized by fickleness, volatility and uncertainty. There is little to suggest that matters will be any different in the future.” •  Financing from investors and increased investment by companies can be more significant •  Develop thinking and way forward on financial innovation to attract sustainable funding to support EWEC’s objectives by creating innovative Goal financial structures to channel more capital, philanthropic and investment, to meet mandate needs 2

Financial innovation opportunity for MNCH appears promisingGlobal innovative finance Opportunity for MNCHOfficial sector flows • Brief assessment of the investment industry reveals no specific MNCH-themed investment•  Innovative fundraising for development products generated an estimated USD57.1 billion between 2000 and 2008 • To date incorporated as part of wider health•  Potential for raising significant new sector investment structures (e.g. Henderson resources is considerable Horizons Industries, Allianz RCM Wellness)Private sector flows • Within impact investing, a few investment funds for the health sector (e.g. Africa Health•  Investment capital represents a large pool Fund) but it is early days of financing with global financial stock standing at USD212 trn and growing • Out of 2,200 impact investments worth over•  Investment managers consider USD4 bn, only 59 investments totaling just Environmental, Social, and Governance under USD90 million have been completed in (ESG) factors - market will reach USD25 the health sector – none focus on MNCH trn by 2015•  Impact investments emerging as an • Nevertheless, research indicates a growing alternative investment asset - create appetite for health sector investments - could positive impact beyond financial return be as large as USD18bn – USD123bn•  Forecasting over the next 10 years for invested capital of USD400 bn - USD1 • EWEC’s mandate to improve MNCH could trn become a theme for such innovative financial vehicles and thereby attract more capital and close the current gap in funding 3

Numerous innovative finance precedents to learn from Contributions Added value Funds direct to 100% for HIV Further (red) Direct private Voluntary to purchase Global Fund programs support sector support decision •  Product Red Initiative, Smart shopper When shopper The Global The The Result? notes that chooses to Fund uses contribution Shopper has GAVI Matching Fund (product)RED items from top purchase the (product) RED 100% of this money to helps people affected by new (product)RED brands cost the items the finance HIV HIV in Ghana, items from same as non- makers send health and Swaziland, favorite (product)RED a contribution community Rwanda, brands at the items. But of up to 50% support Lesotho and same time choosing the of profits programs in other helping to (red) items directly to the Africa, with a countries to eliminate means that up Global Fund – focus on be granted AIDS in Africa. to 50% of not to (red) women and (red) money in They can profits made children the future continue to from those help when sales will go to they choose help eliminate other (red) AIDS in Africa products or donate directly to the Global Fund Source: The Global Fund press release, analysis 5 UNITAID - funding through airline ticket tax Taxes/Levies •  UNITAID, Financial •  Solidarity contribution or tax on airline tickets is 70% of UNITAIDs financial base Transactions Tax •  Tax is applied to all flights departing from countries imposing it and is paid by passengers •  For passengers, the cost of the air tax is very low compared to the total cost of a ticket •  Different rates can be set according to a countrys level of development and there is an extra option to vary the charge according to the distance traveled •  As of September 2011, nine of UNITAIDs 29 member countries were implementing the airline tax: Cameroon, Chile, Congo, France, Madagascar, Mali, Mauritius, Niger, and the Republic of Korea 4

Financial Instrument precedents have achieved success Structure Impact Donors World Bank !  Front-loaded support for strategicGenerate New Treasury immunization programs: UK $3bn (23 yrs) –  Measles Initiative France $1.7bn (20 yrs) Management –  Yellow Fever Initiative Services –  Global Poliomyelitis EradicationResources Italy $600M (20 yrs) Manages bond proceeds as liquid Campaign Norway $264M (15 yrs) –  Maternal and Neonatal Tetanus International Finance Facility Spain Netherlands $240M (20 yrs) $114M (8 yrs) Funding investments until they are needed for programs in Elimination Campaign –  Supporting pentavalent vaccine for Immunization (IFFIm) introduction and other new recipient countries Sweden $38M (15 yrs) vaccines South Africa $20M (20 yrs) –  GAVI health systems, Notes immunization services, and pro- IFFIm issues AAA/ injection safety support Notes ceeds Aaa/ AAA-rated issues Disburse- bonds in the !  Raised more than $ 4.5 billion for ments international capital the GAVI Alliance s immunization markets programs Noteholders Reduce Costs Impact Financing !  4 suppliers submitted the offer, and GSK Advance Market Global partnership and Pfizer agreed to supply pneumococcal vaccines through the AMC in March 2010 Commitments (AMC) for Pneumococcal vaccines !  GSK introduced its first vaccine $1.5 Billion $1.3 Billion (Synflorix™) to Kenya in Feb 2011 at 90% discounted price Operations An Independent !  The long-term price of pneumo vaccine WHO establishes for developing countries will be $3.50/ Assessment UNICEF procures the target product dose (vs. >$70/dose in industrialized Committee (IAC) new vaccines, and profile (TPP) – countries currently) will approve the countries have to minimum product pneumo vaccine submit request specification !  Anticipated to help 60 countries to once developed introduce pneumo vaccine by 2015 and prevent more 7 million childhood deaths by 2030 Global PremixConstraints Procurement FacilityAddress (GPPF) 5

Initial view reveals promising innovative financial structures for MNCH •  EWEC IWG and partners know the different product/service markets and the constraints preventing the public and private sectors from realizing their potential to improve MNCH Product Design and Manufacturing Research and Packaging Distribution Sales Development Supply Side: Access to Theme-Based Funds (e.g. Maternal, Newborn and Child Health Fund) Capital Product Development Partnership FacilityConstraints Lack of Advance Market Commitment innovation, high costs !"!##$ Innovation Fund (e.g. Scaling Grant Challenges Winners) Advisory Services Grant Facility (e.g. Catalysing Partnerships Along Value Chain) Risk Credit Guarantees (e.g. Working Capital Credit Facility ) Vouchers Demand Side Performance Based Mechanisms (e.g. Country-wide Insurance/Health Finance) Information/ Every Woman Every Child Index Incentives Source: EWEC IWG Task Force on Sustainable Business Models, interviews, analysis

Model 1: MATERNAL, NEWBORN AND CHILD HEALTH SHARED VALUE INVESTMENT FUND•  Numerous areas exist where Potential structure for MNCH SVI companies are well-positioned MNCH SVI Asset Management (MNCH Investors, Banks Governments, Foundations, other partners SVI AM) is composed of 3 groups: to fill gaps in the provision of –  Private Equity/Debt –  Credit MNCH SVI Asset Management –  Foundation health care !  The Capital Advisors Group ( CAG ), managed by bank, makes investments•  Structure provides opportunity in MNCH value chain opportunities !  The Credit Group ( Credit ), managed by global banking partner, sources debt to ‘de-risk’ investments made by financing for MNCH SVI investment opportunities !  The Foundation, managed by Capital Advisors Investment Group Credit Group Commercial Bank Foundation - Nonprofit Vehicle (Foundation, EWEC members other both public and private sector Foundations/EWEC members/others, provides grants, loan guarantees, and technical assistance for MNCH SVI partners)•  Thorough investigation needed investment opportunities !  Objective is to support private sector Manages Private Equity/Debt Pool of Providers of Debt Capital/ Market Grants, Loan Guarantees, Technical companies that as a core part of their to determine where opportunity Capital Interface Assistance operation is to implement strategies involving products/services that for a Maternal, Newborn and improve MNCH at the BOP globally by providing equity/debt funding and technical assistance MNCH SVI AM investment sources of capital (Equity, Debt, Foundation/Nonprofit) Low cost of capital = more attractive projects, better financial/social returns Child Health Fund may best focus

Model 2: MNCH INNOVATION PRODUCT DEVELOPMENT PARTNERSHIP FACILITYFinancing facility to catalyze product innovation focused on underserved markets Loan Provide Guarantee guarantees PDP Financing loans Bond Donors Facility Markets Issue R&D bonds Funding Repayments Product Development PDP Premiums Royalties on their purchases Product Production Firm Official Sales Donors revenues Product Purchase Developing Developed Markets Markets

Model 3: HIGH LEVEL WORKING CAPITAL CREDIT FACILITY•  IWG develop a working capital loan facility to offer loans to !C!*D *-+1#) EWEC/Partners Credit Facility Procurement/ Partner Certification importers, wholesalers, health E$-#,+-) B<?=#@) F$-#,+-) B<?=#@) */"#9:+-) B<?=#@) Agent shops, pharmacies, Central Process •  Provide capital •  Raise lending funds •  Potential to dispensaries and community- !"#$%&"()*+,#-$&) ./$-$,#++)0/,1)23456) to guarantee loans to leverage EWEC/ Partners guarantee add Procurement based distributors to maintain >1+,?8@)</"#9:+-") 5-$7)8-9:);/$-$,#++)8/,1) •  Participate in joint fundraising capital •  Use local contacts to and/or Certification direct potential stock of pre-specified maternal -+A/-,;)<-+1#) #9)<9=+-)&9$,)1+8$/&#)23456) efforts •  Market facility customers to facility Agent to certify, •  Qualify and approve procure and and child health products Country Level Process offering to win potential potential customers who ask for credit fulfill orders customers •  Receive •  Make loans and payment •  Determine monitor repayments from•  Provides much needed B""+"")<-+1#) 79-#(,+"") !G+</#+)5+%#) H+<9=+-@) whether customers want •  Manage debt recovery in event of customers both prepaid working capital to businesses credit to pay for orders default •  Manage FX risk and credit customers — and simultaneously •  Bear bulk of default risk, •  Bear commensurate default risk to •  Pay suppliers commensurate incentivise recovery ensures availability and */"#9:+-) 1+8$/&#")9,) with capital provided •  Provide financial capacity building as &9$,)23456) provision of vital public health needed to customers (depends on partner) products•  IWG could work with •  Model could potentially be used to institutions such as Aureos, support certain commodities as well IFC, Standard Chartered, African Development Bank, etc.

Next steps – use task force format to drive innovative finance strategy to fruition !  Clear perspective on the feasibility and potential impact of investment vehicle(s) for EWEC IWG and/or its partners •  Established decision making framework with related criteria to assess investment vehicles •  Initial shortlist of potential investment vehicle offerings together with related preliminary business case/value proposition •  High-level view on potential facility size (based on market appetite) !  Foundation for a clear “go” or “no-go” decision to proceed with a follow-on phase of investment vehicle development. 10

Thank You 11

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Testing the Feasibility of Financial Innovation to Support Every Woman Every Child’s Mandate - Landscape Research

by EveryWomanEveryChild on May 18, 2012

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Testing the Feasibility of Financial Innovation to Support Every Woman Every Child’s Mandate - Landscape Research Presentation Transcript