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

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

EWEC IWG Financial Innovation Landscape Research Apr 20 2012.docx 1


ACKNOWLEDGEMENTS

The author would like to acknowledge the support received from the PMNCH secretariat
in particular Shyama Kuruvilla, Bjorn Henrik Axelson. In addition, he would like to thank
Andrew Farnum of the Bill and Melinda Gates Foundation, Tone Rosingholm of JP
Morgan, Andrew Taylor of Grand Challenges Canada, Ankur Vora of The Children’s
Investment Fund Foundation, Christopher Edgerton-Warburton of Lion’s Head Capital,
Oliver Sabot of UN Commission on Lifesaving Commodities for Women and Children
and Barbara Bulc, Global Development Impact.



EXECUTIVE SUMMARY

One of the main motivations for creating EWEC and the Innovation Working Group
(IWG) is a desire to drive increased private and public sector commitments to improve
maternal newborn and child health globally. This is important not only for reducing costs
to the public sector for interventions that will improve Maternal, Newborn and Child
Health (MNCH) but also to increase MNCH sector sustainability by introducing market-
driven mechanisms. A critical element in the delivery of increased contributions is the
design and development of new financial mechanisms/investment vehicles/structures
(hereinafter ‘structures’), through which increases in capital can flow into MNCH
alongside core grant funding. An opportunity exists to attract funds to sustainable
projects that reach vulnerable groups by the creation of structures that make use of the
global financial markets to attract and generate both public and private investment
towards MNCH.

Official sector flows -

‘Innovative’ financial structures have generated an estimated USD57.1 bn in official
sector flows between 2000 and 2008, indicating its potential for raising significant new
resources that could be provided in a more sustainable fashion. Innovative sources to
fund development today include a wide range of different types of structures through
which public and private sector capital can flow towards improving development
outcomes. They are not limited to taxes, but include voluntary contributions, market-
based mechanisms as well as a broad range of financial instruments including thematic
global trust funds, public guarantees and insurance mechanisms, cooperative
international fiscal mechanisms, equity investments, growth-indexed bonds, distribution
systems for global environmental services, microfinance and mesofinance.

Private sector flows -

In tandem with the official sector flows, investment capital represents an even larger pool
of potential financing for the global development community. Global financial stock
stands at USD212 trn and is growing. More investment decision-makers are expected in
coming years to consider environmental, social, and governance factors in their
investment policies, leading to more investment flows into structures that explicitly cover
the social/environmental/governance/ethical (ESG) profile of companies; these are
typically called socially responsible investments (SRI). An increasing amount of money
today seeks investments with positive ESG characteristics with the market globally
estimated at USD12 trn in 2012 ballooning to USD25 trn by 2015. Today 850 institutional
investors representing over USD30 trn have signed to the Principles for Responsible
Investment (PRI), an investor initiative in partnership with the UN Global Compact and
the UN Environment Programme Finance Initiative, using six principles in a voluntary
setting to encourage all types of investors to integrate ESG factors into their investment
practice.

Within this market for private capital, impact investments are emerging as an alternative
asset class and are intended to create positive impact beyond financial return. Such
investment structures need to support projects with compelling investments themes.
There is no doubt that impact investing has been growing dramatically over the last few
years and that growth is expected to accelerate with some forecasting the potential over
the next 10 years for invested capital of USD400 bn - USD1 trn.



Opportunity for MNCH –

Overall, the brief assessment of the SRI investment industry reveals no specific MNCH-
themed investment products currently being marketed but that this sub-sector of the
health sector has to date been included as part of wider health sector based investment
structures in funds that seek to increasingly invest in healthcare, hospitals or childcare
themes, and/or that have a focus on primary health or services. Of funds that explicitly
seek to fund health-related themes, the Henderson Horizons Industries of the Future
Fund is the one example of a mainstream institutional investment fund with an advanced
approach to seeking different healthcare models for investment globally – for example in
primary health and clinics in developing countries. The Allianz RCM Wellness
Fund “provides an opportunity for investments in companies driving positive change in
the global healthcare system”. But like other generic healthcare, wellness and lifestyle
theme funds, it does not have a specific MNCH sub-sector focus so the opportunity
remains open.

In the impact investing industry, there exist a few investment funds for the health sector
but these are in early days of development and investing (e.g. Africa Health Fund).
According to JP Morgan research of 2,200 impact investments made over recent years
totaling over USD4 bn, only 59 investments totaling just under USD90 million have been
completed in the health sector - none of which solely focus on MNCH. Nevertheless,
their research indicates a growing market for health sector investments and based on
their review of existing and forecast market demand they also estimate that the total
health market for impact investment could be as large as USD18bn – USD123bn.

Tried and tested models -

Innovative financing approaches can address several key areas impeding efforts to
deliver EWEC’s mandate. The research has considered existing and in-development
structures to channel more public funds, private capital (philanthropic and investment)
for scaling up innovations, encourage cost reduction in new product and service delivery
systems, and address constraints in the value chain of delivering new services. Over 60
innovative finance precedents of what other organizations similar to EWEC have done to
expand funding and consequently their impact horizons have been reviewed, many of
which appear to show promise for application to the MNCH sector. Accordingly, EWEC’s
mandate to improve MNCH could become a theme within such innovative financial
structures and thereby attract more capital, both philanthropic and investment, to close
the current gap in funding.

Open thinking on investment models -

Five very different models have been proposed for consideration to explore. All five
models will directly or indirectly, draw more attention to MNCH issues from investors, as
well as increase public and private sector capital flows to the sector and the EWEC IWG
and its partners. The five presented to generate creative discussion are: The Venture
Capital Value Chain Approach, The Product Development Partnership Facility, The
Working Capital Credit Facility, The Major Company Equity Portfolio and The Major
Index. Many more variants exist; the five described in the paper are for the purpose of
creative discussion only and are not intended to be an exhaustive list of prescriptive
avenues of investigation. This research together with the accompanying EWEC IWG



discussion will clarify whether the conceptualization and refining of interesting models is
something that EWEC IWG will continue to explore and refine in the coming financial
year.



OVERVIEW

Despite the overall increase in development assistance for Reproductive Maternal,
Newborn and Child Health (RMNCH), there remains a massive funding gap, which the
Global Strategy estimates at USD88 bn for the 2011–15 period just for the 49 lowest-
income countries. This funding gap includes not only what is needed for care during
childbirth, postnatal care, prevention and treatment of childhood pneumonia and
diarrhea, and family planning, but also the large financing gap for underlying health
systems.

There has been however some positive news over recent years. A 2010 IHME report
found that overall development assistance for health has risen dramatically, with donor
disbursements increasing from USD5.3 bn in 1990 to USD23.8 bn in 2008 (and,
according to preliminary data, to USD26.9 bn in 2010). Much of this increase is related
to funding for MDG 6. Funding for HIV/AIDS, TB, and malaria grew from 4.4% to 34.0%
of all development health aid between 1990 and 2008, and funding for HIV/AIDS alone
rose from 3% to 26% of total health aid in this period (from USD0.2 to USD6.2 bn).
Funding to RMNCH also increased, from USD0.95 bn in 1990 to USD3.1 bn in 2008.
However, the share of RMNCH funding out of total development aid for health fell from
17% in 1990 to 13% in 2008 (this is partly explained by the very large rise in funding for
HIV/AIDS; if this HIV/AIDS funding was removed from the analysis, the share of RMNCH
funding out of total health aid would have been flat between 1990 to 2008).

Consequently, one of the main motivations for creating EWEC was a desire to drive
increased private and public sector commitments to improve maternal newborn and child
health globally. This is important not only for reducing costs to the public sector for
interventions that will improve maternal/child health but also to increase maternal/child
health sector sustainability by introducing market-driven mechanisms. A critical element
in the delivery of increased contributions is the design and development of existing and
new financial structures that grow the capital flow into maternal newborn and child health,
alongside existing and new core grant funding.

Access to capital, cost reductions and sustainable local markets are essential for the
ability to scale up promising innovations. The global financial environment may well limit
the access to public capital for global health in the near-term future. Financing, not only
from overseas development assistance and philanthropic capital, from investors and
companies can therefore become more important.

INVESTMENT LANDSCAPE

Market Size and Opportunity for Innovative Finance

Innovative fundraising for development generated an estimated USD57.1 bn in official
sector flows between 2000 and 2008, indicating its potential for raising significant new
resources that could be provided in a more sustainable fashion.

In March 2002, the Monterrey Consensus recognized “the value of exploring innovative
sources of finance” and sparked what has become a far-ranging effort to pilot and
implement a variety of new mechanisms, mobilizing countries of different levels of
development to meet internationally agreed UN Millennium Development Goals. In



March 2008, the Secretary-General noted that the “post-Monterrey period has seen a
flourishing phase in the number and variety of new initiatives for financing development.
In the context of a new spirit of partnership between developed and developing countries,
various groupings have explored together innovative ways to increase financing for
development. This partnership “modality” could increasingly become the distinguishing
feature of the exploring and implementing of new initiatives for financing development”.
In the midst of a global financial and economic crisis, it is important to continue to
support efforts in this new modality of international development cooperation in light of
the creativity that has been unleashed building on consensus for enhanced cooperation
in the revenue-raising side and the potential for large scale funding that could be
generated.

The first concrete outcome in the innovative financing framework came with the
publication of the Landau report in 2004. It identified the feasibility of new financial
sources such as solidarity levies and market-based mechanisms that could be
coordinated internationally but implemented at a national level. In 2005, the Declaration
on Innovative Sources of Financing for Development was endorsed by 79 Heads of
State at the United Nations. This high-level declaration has been regularly readdressed,
at the call of the Leading Group on Solidarity Levies to Fund Development, which was
renamed in May 2009 as the Leading Group on Innovative Financing for Development.
Now, the pilot phase is completed. Several structures are in place and new ones are
being planned beyond the initial activities in the health sector. Innovative sources to fund
development today include a wide range of different types of structures. They are not
limited to taxes, but include voluntary contributions, market-based mechanisms, and
loans guarantees as well as levies. They are characterized by being stable, long-term
and complementary to official public aid and oriented toward widening the sharing of the
benefits of globalisation. New actors have also emerged. The topic of innovative
financing has received considerable international attention, in particular through the work
conducted by the High-Level Task Force on Innovative International Financing for Health
Systems, as well as the Leading Group. The concept of innovations now extends to
such diverse forms as thematic global trust funds, public guarantees and insurance
mechanisms, cooperative international fiscal structures, equity investments, growth-
indexed bonds, countercyclical loans, distribution systems for global environmental
services, microfinance and mesofinance, and so on. Tailoring these instruments to the
specific needs and vulnerabilities of the international community and well-identified
market inefficiencies remains one of the ongoing challenges of development finance.
Much progress has been made in terms of both practical accomplishments and
international mobilization since then and innovative sources of financing for development
have been recognized at the highest level in a number of multiparty declarations.

In tandem, investment capital represents an even larger pool of potential financing for
the global development community. Global financial stock stands at USD212 trn and is
growing. In the developing world, meanwhile, rapid economic growth is creating an
immense amount of new wealth. Savings in Asia, apart from Japan and Australia, are
expected to increase by 100% to USD6trn in the next three years, according to Cerulli
Associates, the research house. A host of different models is emerging, from tiny
specialists with a few hundred million dollars of assets to retail giants such as Fidelity or
hybrids such as the Bank of New York Mellon, which has more than USD1 trn of assets
spread among a collection of boutique managers.



Emergence of Sustainable Investment

As Al Gore’s recent thought piece argues, the business of asset management in the 21st
century happens in a changing socio-economic environment, suggesting investment in
the context of “Sustainable Capitalism”.

“To address these sustainability challenges, we advocate for a paradigm shift to
Sustainable Capitalism; a framework that seeks to maximise long-term economic value
creation by reforming markets to address real needs while considering all costs and
stakeholders… governments can contribute significantly by, among other things,
developing key infrastructure and policy frameworks. Programmes related to human
rights, public health and education are just some of the essential pillars necessary to
help support the private sector’s transition to a more sustainable model.”

More investment decision-makers are expected in coming years to consider
environmental, social, and governance factors in their investment policies, leading to
more investment flows into structures that explicitly cover the
social/environmental/governance/ethical (ESG) profile of companies; these are typically
called socially responsible investments (SRI). Trillions of dollars today seek investments
with positive ESG characteristics. Sustainable investment is an investment theme where
ESG factors are explicitly integrated into investment practice. Investment structures with
specific ESG objectives have increased. There are an increasing number of sustainable
investment products from both mainstream and boutique investors. The most recent bi-
annual survey of ESG investment structures in the US published in 2010, identified
USD3.1 trn in assets under management (AUM), while in Europe over USD5 trn has
been reported. In 2012 a global study is underway, and expectations are that the global
AUM will have risen to over USD12 trn when the results are released in December 2012,
with at least USD450 bn is in emerging markets. Some analysts predict that this could
top USD25 trn by 2015. Today 850 institutional investors representing over USD30 trn
have signed to the Principles for Responsible Investment (PRI), an investor initiative in
partnership with the UN Global Compact and the UN Environment Programme Finance
Initiative. This uses six principles in a voluntary setting to encourage all types of
investors to integrate ESG factors into their investment practice. The Carbon Disclosure
Project’s CDP 9 in 2011 counted over USD78 trn AUM from about 655 institutional
investors focused on climate change impacts, counting carbon footprints revealing the
risk in their investment portfolios. But not all Millennium Development Goals, and the
issues they represent, receive investment interest.

Impact investment Market

Within the market for private capital, impact investments are emerging as an alternative
asset class and are intended to create positive impact beyond financial return. Such
investment structures need to support projects with compelling investments themes.

In summary, impact investments are investments designed to create positive
developmental impact beyond financial return. Although the term spans a wide variety of
investment structures and sectors, they can be defined through the following
characteristics:



Investments intended to create positive impact beyond financial return

Provide Capital Expect Financial Returns
•  Transactions currently tend to be private •  The investment should be expected to
debt or equity transactions return at least nominal principal
•  More publicly traded investment •  Donations are excluded
opportunities will emerge as the market •  Market rate of marketing beating returns
matures are within scope

…to generate positive social and/or
Business designed with intent…
environmental impact
•  The business into which the investment
•  Positive social and/or environmental
is made should be designed with intent
impact should be part of the stated
to make a positive impact
business strategy and should be
•  This differentiates impact investments
measured as part of the success of the
from investments that have unintentional
investment
positive social or environmental
consequences

Source: JP Morgan research December 2011, interviews, analysis
1

Impact investments span a wide range of activity both in terms of financing structures, as
well as the sectors that they seek to support. Sectors that figure most prominently in the
space include agriculture, health, housing, education and mobile technology. While there
have been innovative concepts such as the International Finance Facility for
Immunization (IFFIm) bonds which have raised more than USD3 bn for the GAVI
Alliance’s immunization programs, the majority of investments are private debt and
equity instruments which run the gamut from low interest loans to agricultural
cooperatives to high risk/high return investments in new technologies which mirror
traditional venture capital.

Types of Investors -

Although all investors in the impact investing space share the vision of combining
financial returns with positive social/investor returns, their motivations and emphasis on
either of those metrics tends to place them into two broad groups:

1. Financial First Investors: These are investors who seek to optimize financial returns
with a floor for social/environmental impact. This group tends to consist of
commercial investors who search for investment structures that offer market rate
returns and simultaneously yield some social/environmental benefit. They can
accomplish this by integrating social and environmental value drivers into investment
decisions (e.g. Development Finance Institutions such as the IFC and OPIC), by
looking for high returns in a way that leads them to create some social value (e.g.
clean technology funds), or in response to regulations or tax policy (e.g. the Green
Funds Scheme in the Netherlands or affordable housing in the U.S.).



2. Impact First Investors: These investors primarily aim to optimize social or
environmental returns with a financial floor. This group considers
social/environmental benefit as their primary objective and are willing to accept a
wide range of returns, from return of principal (e.g. Acumen Fund) to market rate (e.g.
Ignia). This group is also willing to accept a lower than market rate of return in
investments that may be perceived as higher risk in order to help reach
social/environmental goals that cannot be achieved in combination with market rates
of financial returns.
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There is also the possibility of “Layered Structures” where both types of investors work
together, blending different types of capital with different requirements and motivations.
In this structure, Impact First investors accept a sub-market risk-adjusted rate of return
enabling other tranches of the investment to become attractive to Financial First
investors. This symbiotic relationship allows Financial First investors to achieve market
rate returns and Impact First investors to leverage their investment capital thus achieving
significantly more social impact than they would if investing on their own. One should
also note that these structures can also include purely philanthropic organizations
combining their grant money with Financial and/or Impact First investors to generate
higher levels of impact than any of those institutions could achieve on their own.

Size of Market –

The current and potential size of the Impact Investing market is probably the most
controversial aspect of the sector. Although exact numbers are hard to ascertain, there
is no doubt that impact investing has been growing dramatically over the last few years



and that growth is expected to accelerate. The Monitor Institute estimates that impact
investing could be a USD500 bn industry over the next decade. A November 2010
research report from J.P Morgan looking at selected businesses within only 5 sectors –
housing, rural water delivery, maternal health, primary education and financial services –
is even more bullish, forecasting the potential over the next 10 years for invested capital
of USD400 bn - USD1 trn and profit of USD183 - USD667 bn.

Microfinance is the most mature of the impact investing sectors and has been
instrumental in driving interest in impact investment in general. On the positive side, we
have seen how, despite the financial recession, foreign investment in microfinance has
grown explosively over the last five years, increasing from roughly USD2 bn in 2005 to
USD13 bn in 2010.

A number of foundations have entered the space with significant funding behind them. In
2009 the Gates Foundation announced that it would seek to leverage its grant giving
with social investments from its endowment, and that their initial commitment to impact
investing will be USD400 million. The same year, the Kellogg Foundation also
announced that it would dedicate USD100 million to “mission-driven investing”, USD25
million of which would be for international investing. A number of other foundations, both
new and old have also got into the act with Rockefeller Foundation, Soros Economic
Development Network, Omidyar Network, Skoll Foundation and the Children’s
Investment Fund Foundation (CIFF) among the prominent players. The impact investing
world has also attracted a number of DFIs, with the IFC being most prominent amongst
them. Although they have for the most part shied away from direct investing, they have
played a catalytic role, both as funder and as chief promoter, in some of the newer
impact investment funds such as the Africa Health Fund and Leapfrog.

One important sub-note to the impact investing market one must remember is that over
recent years several social investment structures have been created where the
underlying project and/or security to which the facility invested had little or no link to the
desired development outcome. In these cases limited funding has been raised and
consequently the respective structures’ sustainability is limited. Moreover, it is evident
from interactions with the investment community that a programmatic track record of
achieving impact, may it be for health or some other development outcome, is of great
importance to investors.

Making the Investment Case for Maternal Newborn and Child Health

If MNCH fits into this segment of the investment marketplace where ESG is integrated
into investment themes (and increasingly ESG is being integrated across all portfolios),
then one may make a case for the need for more investors to be thinking of the MNCH
theme as an investable theme – one that generates investment returns, especially where
investments seek opportunities in developing countries and emerging markets. For
example, the UN Secretary Generals describes “[t]he private sector, for its part, is
beginning to find that sponsoring innovation in the health systems of developing
countries serves its long-term interests by spawning new industries or yielding new
generations of healthy consumers.” The investable value proposition must make the
case how paying customers will benefit from the MNCH intervention or product.



New investment structures may want to exploit the MNCH theme. Investable themes
have characteristics of simplicity, accessibility and market-entry timing, where a value
proposition is created that offers a compelling case for why investment should be placed
within the theme. The investment managers offering the investment structure must have
the competency to exploit the investment theme and its opportunity, and sufficient capital
must be raised to fund the strategy – investment management is an expensive business
and requires scale. Current examples of new or emerging themes as investment ideas
include: commodity type (e.g. carbon dioxide emissions); company characteristics (e.g.
corporate governance); natural capital themes (e.g. water, biodiversity); market niche
(e.g. clean technology, wellness, agriculture/food security); and geography (e.g.
Vietnam).

The healthcare sector is vast, and “there are many large and small companies to choose
from in various industries.” Investment strategies marketed to investors today focus on
investment that generates cash-flow, for example, in companies that operate across the
healthcare continuum, including the pharmaceuticals, medical devices, healthcare
services and healthcare IT sectors. Investment firms offering these opportunities include
private equity funds Altaris, Apposite Capital and NewSpring Capital, hedge fund Perella
Weinberg Partners, GE healthymagination fund, and mutual funds Invesco Global Health
Care Fund, Delaware Healthcare Fund and Putnam Global Sector Healthcare Fund.
MNCH may be covered in funds that seek to invest in healthcare, hospitals or childcare
themes, and/or that have a focus on primary health or services. Of funds that explicitly
seek to fund sustainability themes, the Henderson Horizons Industries of the Future
Fund is the one example of a mainstream institutional investment fund with an advanced
approach to seeking different healthcare models for investment globally – for example in
primary health and clinics in developing countries. The Allianz RCM Wellness
Fund “provides an opportunity for investments in companies driving positive change in
the global healthcare system”. But like other generic healthcare, wellness and lifestyle
theme funds, it does not have a specific MNCH sub-theme. Overall, the brief
assessment of the investment industry reveals no specific MNCH-themed investment
products currently being marketed but that this sub-sector has to date been incorporated
as part of wider sector based investment structures.

Research and analysis providers that sell their analysis to investment managers to use
in building their portfolios include ESG-specialists like MSCI ESG, Sustainalytics, EIRIS,
Oekom, Responsible Research and GES as well as the research teams within major
sell-side broker houses like Deutsche Securities, Goldman Sachs, JP Morgan Chase,
Societe Generale, and Credit Suisse all have healthcare analysts. The extent of
coverage in 2012 of MNCH as a specific sub-sector within overall health sector does not
appear to exist.

In the impact investing industry, examples of structures funding MNCH or healthcare-
related work may be extrapolated from some efforts to fund poverty, social
entrepreneurs, and other bottom-of-the-pyramid (BOP) directed funding, and impact
investing funds with generic healthcare themes. More specifically, there exist a few
investment funds for the health sector as seen in Annex 1 but these are in early days of
development and investing. According to JP Morgan estimates of 2,200 impact
investments totaling over USD4 bn only 59 investments totaling just under USD90
million have been completed in the health sector over recent years. Nevertheless, these
estimates indicate a growing market and based on their review of existing and forecast
market demand they also estimate that the total health market for impact investment is



growing and could be as large as USD18bn – USD123bn. Regarding the opportunity to
create investment structures surrounding the MNCH theme, interviews with the financial
community suggest there is a growing appetite for investments in the health sector. It is
important to note however the appetite lies in investing along the health sector value
chain given the attractive returns both socially and financially. Therefore, when
considering potential investment structures one cannot be too restrictive as to what
markets investee companies can produce products/services for (i.e. solely for women
and/or children) but to be accommodating so as to ensure the entire market opportunity
can be realized by the investee company.

A key determinant of the mix of mainstream investors wanting an investment return and
philanthropic investors wanting some level of return together with material social impact,
depends upon the underlying components of the investment, the investment return
expectations of the investors/philanthropists, and the degree to which MNCH is seen as
a new megatrend impacting all elements of the health care chain, from medical
equipment makers, to biotech, to distribution, to hospitals. Any future investigation by
EWEC and its partners will need to analyse the market potential more completely in line
with the various financial structures explored within this paper.

EWEC’s mandate to improve MNCH could become a theme for such innovative financial
structures and thereby attract more capital, both philanthropic and investment, to close
the current gap in funding.

UNDERSTANDING THE INVESTMENT STRUCTURES IN PRACTICE

Methodology
!
To identify innovative financing structures for this analysis, a literature review and select
expert interviews have been undertaken. The review encompassed both structures that
are currently operational and those that remain proposals yet to be implemented. Not all
structures identified were included in the final list, only a selection. As such, the list of
structures is meant to be representative, and not entirely exhaustive of all innovative
financing options available.

In order to determine which financing initiatives the EWEC IWG should focus on, a set of
goals and guiding principles that support a high-level decision making framework should
be defined. The criteria for this could include i) potential impact on public health, ii)
amount of capital generated/leveraged, iii) ability to develop and implement and iv)
financial sustainability, amongst others.

In addition to these criteria, a key aspect of creating any new structure is determining the
best metric for measuring the social return on investment that would be generated.
While such metrics are relatively well developed for investment themes such as the
environment or governance, additional work is needed on health metrics (e.g., DALYs).

After determining the list, each structure was placed into one of the 3 structure
categories, namely Voluntary Contributions, Taxes/Levies and Financial Instruments.
When a given structure spanned more than one category, it was assigned it to the
category considered most directly captured its primary approach and purpose. The list



of financial structures considered for this research is included in the tables found in
Annex 1.

Overview of Findings

Innovative financing approaches can address several key areas impeding efforts to
deliver EWEC’s mandate. To date, the research has considered new structures to
channel more public funds, private capital (philanthropic and investment) for scaling up
innovations, encourage cost reduction in new product and service delivery systems, and
address constraints in the value chain of delivering new services. Specifically the
research looked at modalities in the following categories:

Voluntary Contributions -
Typical modalities of Voluntary Contributions have included credit card rounding plans,
lotteries and Cause-Related Marketing schemes. For these to be successful a strong
brand is critical to raise the contribution levels and the link between the contribution and
the cause to be funded needs to be clear. Without a clear link the contribution will not be
sustainable, and it will be eroded by competition.

Examples of Voluntary Contribution funding structures include -

Product RED:

Funding secured through high-profile leveraging of major global brands

Added value Funds direct to 100% for HIV Further (red) Direct private
to purchase Global Fund programs support sector support
decision

Smart shopper When shopper The Global The The Result?
notes that chooses to Fund uses contribution Shopper has
(product)RED purchase the 100% of this helps people new
items from top (product) RED money to affected by (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

Taxes/Levies -



Innovative structures in this category aim to provide additional funding through the
creation of an additional tax or levy structure.

Examples in this category include -

UNITAID:

The solidarity contribution or 'tax' on airline tickets represents 70% of UNITAID's
financial base and is complemented by multi-year budgetary contributions from a
number of member countries.

The tax is applied to all flights departing from countries that impose it and is paid by
passengers when purchasing their tickets, normally as an addition to existing airport
taxes. Airlines then are responsible for declaring and collecting the levy. Passengers in
transit are exempt, thus avoiding any further administrative burden for airports in
participating countries. The solidarity levy fully respects countries' tax sovereignty. For
passengers, the cost of the air tax is very low compared to the total cost of a ticket; it can
range from USD 1 for economy-class tickets to USD 10 and USD 40 for business and
first-class travel. Different rates can be set according to a country's level of development
and there is an extra option to vary the charge according to the distance traveled. For
example, some countries in Africa have chosen to impose the levy only on international
flights or on business and first-class tickets. As of September 2011, nine of UNITAID's
29 member countries were implementing the airline tax: Cameroon, Chile, Congo,
France, Madagascar, Mali, Mauritius, Niger, and the Republic of Korea. Norway
allocates part of its tax on CO2 emissions from aviation fuel to UNITAID.

Financial instruments -
Financing from investors and increased investment by companies could be more
significant and sustainable sources of funding than donor money.

a) Generating new resources – Structures to mobilize financing from investors and
companies, leading to more investment flows into structures that explicitly cover the
ESG profile of companies and impact investments. Asset classes of this nature
include active/passive publicly traded equity/debt funds, private equity funds, social
impact bonds, revolving funds, index-linked products, receivable financing structures
and procurement structures.

Examples of these include -

International Finance Facility for Immunization:



International Finance Facility for Immunization accelerates the
availability and predictability of funds for immunization
International Finance Facility for Immunization (IFFIm)
!  Created 2006 at initiative of U.K. government as a multilateral development institution
!  Created to accelerate availability of predictable, long-term funds for health and immunization programs through GAVI
!  Sells bond on the international capital markets thereby increasing immediately available development funds, in exchange for expected
long-term grant payments of its sovereign sponsors
!  Exposures to IFFIm are assigned a 0% risk

Structure Impact
Donors World Bank !  Front-loaded support for strategic
Treasury immunization programs:
UK $3bn (23 yrs)
–  Measles Initiative
France $1.7bn (20 yrs) Management –  Yellow Fever Initiative
Services –  Global Poliomyelitis Eradication
Italy $600M (20 yrs) Manages bond
proceeds as liquid Campaign
Norway $264M (15 yrs) –  Maternal and Neonatal Tetanus
Funding investments until
Spain $240M (20 yrs) they are needed Elimination Campaign
Netherlands $114M (8 yrs) for programs in –  Supporting pentavalent vaccine
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 $ 3 billion for
ments international capital the GAVI Alliance s immunization
markets programs as of Feb 2011
Noteholders

SOURCE: IFFIm website; DfID; expert interviews; analysis

Commons Global Health Fund:

Commons Global Health Fund is supported by a Technical
Assistance facility to de-risk investment portfolio
Commons Global Health Fund (CGHF)
•  Commons Global Health Fund is a $100M healthcare venture capital fund being launched by Commons Capital Oxford Bioscience
Partners, with support from the Bill and Melinda Gates Foundation.
•  Pioneering fund will invest in entrepreneurial companies developing cutting-edge healthcare technololgies for « dual market » use.
•  Technical Assistance facility supported by foundations to de-risk the underlying portfolio companies.

!"#$%"&'(%")*&+,-./#01&2#%0,3&7%%,#)(,1&E6-.&,F:,3-%&G3"#&
Team: Joint venture between a leader in
!"##"$%&'(")*(&+,*(-.&/0$1& double-bottom –line venture capital,
-.,&H6((I?,(6$1*&'*-,%&/"0$1*J"$K&D+LK&!(6$-"$&
/"0$1*J"$K&MNON&'*6-"$1,&!,$-3,&G"3&7PB<&O,%,*35.&*$1&
Commons Capital and Oxford Bioscience
>105*J"$&QP$16*RK&!.,#)6"&B6*A$"%J5%S&;$6C,3%6-T&"G&
Partners.
U6#)*)E,N&

4,5.$65*(& Technical Assistance group: The mission of the Technical Assistance Group is to provide highly
2,$-03,&/0$1&
7%%6%-*$5,& targeted expertise enabling the Fund’s portfolio companies to develop health innovation that will reach
global helath markets and achieve widespread public health imnpact through sustainable business
models.

8"39"(6"&!"#:*$6,%& Partners for Technical Assistance:
Commons Capital is already working with RTI International, JSI Logistics, The Clinton Foundation
(CHAI), EngenderHealth, Concord Health Strategies and the WHO.

;<=>;& >#,3A6$A=B,C,(":6$A& Investment stategy:
?*3@,-& D"3(1&!"0$-36,%& Size: $100M
Number of Investment: 10-12 ($5-10M per company)
Return expectation: Competitive venture rate returns
(15-25%)
Representative Investments:

SOURCE: Commons Capital website, press release, interviews; analysis



AGRA Fund:

African Agriculture Fund is supported by donors first loss guarantee and
technical assistance to catalyze private sector investment
African Agriculture Fund (AAF)
!  Private Equity fund created in 2009 in response to the 2008 food crisis by a group of European and African DFIs
!  Objective is to support private sector companies that implement strategies to enhance and diversify food production and distribution in
Africa by providing equity funding and technical assistance
!  Three key features: (i) DFIs to take first loss to provide accelerated return to private investors; (ii) curve-out portion of fund specifically
for SMEs as a sub-fund; (iii) Technical Assistance Facility to complement capability building

Investors Investees
Development financial institutions AAF Up to $20 million per portfolio
($300-500M target) company in:
First loss
guarantee
!  Food production,
processing and
distribution in cereals,
livestock farming, dairy,
Initial !  Regular fund fruit and vegetables
funding
!  Crop protection
!  SME sub-fund !  Logistics
($60M target) !  Fertilizers
!  Seeds
!  Edible oils

Focusing on smallholders and
Invest- cooperatives
ment
Private investors Technical Assistance Facility
($14M)
Accelerated
return
Initial close
on $135 M
in Nov 2010

SOURCE: AAF press release (Nov 29, 2010); websites; interviews; analysis

The Dow Jones Global Fund 50 Index:

The Dow Jones Global Fund 50 Index measures the performance of the largest
companies that support the mission of the Global Fund. A portion of revenues generated
through the licensing of the index will go to the Global Fund. The index universe of
eligible securities is created according to the methodology of the Dow Jones Total Stock
Market Indexes. The top 50 companies that contribute to the mission of the Global Fund
are selected for the index. The collaboration between Dow Jones Indexes and the
Global Fund enables Dow Jones Indexes to create a new socially conscious measure
and generate income for The Global Fund. A similar initiative has been created by the
London Stock Exchange (FTSE4Good) whereby it contributes monies to UNICEF based
on index fee income.

UNHCR Kashmir Relief Note:

Over recent years several social investment structures have been created where the
underlying project and/or security to which the facility invested had little or no link to the
desired development outcome. In these cases limited funding has been raised and
consequently the respective structures’ sustainability is limited. For example, the
Kashmir Relief Fund a joint project launched by the UN High Commissioner for
Refugees (UNHCR), Zurich-based Société Générale Corporate & Investment Banking,
and derilab s.a., a derivatives company allocated portion of invested capital to support
disaster relief. For the Kashmir Relief Note, at inception, a 2 per cent fee was



automatically donated to UNHCR’s earthquake relief operations. However, the offering
was not deemed a financial success (estimated USD 25,000 raised) given the fund’s
underlying investments were in no way related to the region or burden.

b) Reduce costs - Innovative financing can reduce the costs of certain interventions (i.e.
maternity-related treatments, insurance, diagnostic equipment). New financing
instruments can contribute to lower the cost of such solutions by stimulating research
and development by companies into new product/service delivery systems,
encouraging innovations to make distribution networks more efficient, and/or spurring
improvements in production technology


Advance Market Commitment for Pneumococcal Vaccines:

Advance Market Commitments (AMCs) try to overcome upfront
investment challenge by future volume and price guarantees
Advance Market Commitments (AMC) for Pneumococcal vaccines
!  Effort launched in 2009 to stimulate the development and manufacture of new vaccines for developing countries
!  Donors commit funds to guarantee the price of vaccines once they have been developed, to provide incentives to manufactures to
invest in R&D, and to expand manufacturing capacity; in exchange, manufacturing companies sign a legally-binding commitment to
provide the vaccines at a price affordable to developing countries in the long-term
!  Country government can budget and plan for their immunization programs knowing that vaccines will be available in sufficient quantity
and at a price they can afford over the long term, with some co-payments

Impact
Financing
!  4 suppliers submitted the offer, and GSK
Global partnership and Pfizer agreed to supply
pneumococcal vaccines through the AMC
in March 2010

!  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

SOURCE: GAVI web site; AMC web site (http://www.vaccineamc.org/); press search; analysis

c) Address constraints across the value chain of delivering new products and services
to women and children at the base of the pyramid, such as high production and
distribution costs, low or fluctuating demand, and small effective markets. The
potential magnitude and scope of innovative finance structures to attract investment
capital by reducing constraints across the value-chain, sharing risk, and building
sustainable markets are significant. Re-defining the marketplace, which is often small
and conducive to high-cost value-added services, may make it easier for low-
cost/high-volume products. Potential structures to overcome market bottlenecks and
help to make products and services more available, and thus also attract more local



spending creating more sustainable local markets.


Vitamin and Mineral Premix Procurement Credit Facility:

Global Premix Procurement Facility to ensure the quality of vitamin and
mineral premix used by industry and governments in emerging markets
Global Premix Procurement Facility (GPPF)
!  Effort launched in 2009 by Global Alliance for Improved Nutrition (GAIN) to address many challenges in the premix procurement process,
such as premix costs and quality assurance.
!  To address these barriers, a more efficient system is needed to procure premix at the best price, through transparent and efficient
processes.
!  Global Premix Procurement Facility (hereafter referred to as GPPF) entails four distinct functions:
1) Certification Process which establishes industry-wide standards and guidelines for premix.
2) Procurement Facility that makes premix more easily accessible to countries and the private industry engaged in fortification.
3) Revolving Fund Mechanism helps projects finance their premix purchases (USD75m financed to date)
4) Grant Mechanism that provides premix for fortification of food products used to reach vulnerable groups, including public
sector programs and emergencies.
!  To date, the GPPF has procured and financed over USD100m worth of vitamin and mineral premix.

SOURCE: GAIN website, interviews; analysis 6

Pledge Guarantee for Health:

The United Nations Foundation (“UNF”) constructed a proof of concept for a novel
financing structure, the Pledge Guarantee for Health (“PGH”) that provided short-term
working capital to recipients of donor funds to smooth and increase the predictability of
financing for health commodities. The proposed PGH supported aid recipients in
arranging pre-financing through local banks of health commodity purchases, initially
focused on reproductive health commodities. Transactions consisted of short-term (3-12
month) loans provided by a bank or other financial institution against an existing
commitment of a donor to an aid recipient, such as a Ministry of Health or NGO. The
approach represents a fairly simple financing structure, allowing for bridge loans to aid
recipients during the gap between commitment by donors and actual cash disbursement.



The associated cost savings generated from eliminating inefficient procurement
practices (e.g., emergency shipments, expedited production) were estimated to be
between 12-21%. The PGH was not successful during its pilot phase due to a failure to
execute transactions in an effective and commercial manner.

Greater attention is now being paid to innovative financing structures and the role they
could play in maintaining and expanding the impact of global health programs. This
growing interest is in part due to worries about the availability and sustainability of global
health assistance made through traditional channels, especially given an environment of
fiscal constraint prevalent in the wake of the recent global economic crisis. While not
expected to serve as a replacement for traditional health financing, such structures may
help to supplement existing funding, increase its effectiveness, and incentivize
innovation in targeted areas.

It is important to note that the innovative finance structures outlined in this paper may not
only generate new resources for EWEC IWG and its partners to deploy through
programs but also would increase the flow of investment capital to efforts undertaken by
private companies, thereby helping to reduce the funding gap for addressing MNCH.
Much of the current conversation around innovative financing to address public health
concerns is focused on raising funds for public institutions’ programs as previously
mentioned (e.g. those recommendations from the Taskforce on Innovative Financing for
Health Systems that will support government health programs and the MassiveGood
campaign to support UNITAID). While such efforts are needed and have the potential
for generating new funds to support these institutions’ initiatives, there is also significant
potential in mobilizing investment capital that will be deployed by private actors to
improve MNCH as seen by some of the new investment structures already launched.

This additional investment capital could come from a range of sources, including
strategic investors, institutional investors such as pension funds, multilateral financial
institutions, social/impact investors, foundations, and others. As previously mentioned,



different types of investors have different risk/return profiles and some place a greater
emphasis on social returns, so each innovative finance structure will likely appeal to a
distinct subset of investors.

MARKET CONSTRAINTS

In addition to generating new resources, innovative finance initiatives can address
market constraints along the value chain that prevent the private sector from more
effectively addressing MNCH. In fact, according to the World Bank, innovative financing
has played a more significant role to date in providing tools to solve development
problems than it has in generating additional resources. The potential magnitude and
scope of innovative finance structures to attract investment capital by reducing
constraints in the health sector, sharing risk, and building sustainable markets are
significant. When constraints are reduced or eliminated, health sector companies will
invest more of their own resources and investors will see more opportunities to deploy
their capital at lower risk.

Structures that overcome market bottlenecks and help to make health sector products
and services more affordable would also attract more spending from low-income
consumers. The large size of the global health care market for low-income consumers—
estimated at USD158 bn and growing—should be a significant selling point in efforts
both to attract more private capital and to encourage more innovation by health sector
companies, improving the prospects of having a sustainable impact.

EWEC IWG and its partners already have considerable knowledge of different
product/service markets and the constraints that have prevented the private sector from
realizing its potential to improve MNCH. These constraints affect both the supply of
specific products and consumer demand for them. For some of these product
categories, additional research will be necessary to gain a more detailed understanding
of the market and how financial structures could solve various problems. This is a key
part of designing any effective initiative. For instance, the creators of the Advance
Market Commitment (AMC) for a pneumococcal vaccine emphasize that a full
understanding of the potential market for such a vaccine, including the price that people
would be willing to pay, was essential in structuring the AMC so as to maximize its
effectiveness. Building on this experience, EWEC IWG has created a Task Force
looking into sustainable business models that can better deliver health care to women
and children at the BOP. To date, the findings reveal many promising business models
across the value chain some of which face market constraints that possibly could be
addressed through some form of financing modality. Such structures could alleviate
both demand- and supply-side constraints along the health sector value chain. A
selection of ideas as well as other potential initiatives, are illustrated below some of
which are discussed in more detail in the following section:



Innovative Finance Structures

Product
Design and Manufacturing
Research and Packaging Distribution Sales
Development
Supply Side:
Access to Theme-Based Funds (e.g. Maternal and Child Health Fund)
Capital

Product Development Partnership Facility
Constraints

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

= Potential Structure

Source: EWEC IWG Task Force on Sustainable Business Models, interviews, analysis

OPENING THINKING ON IDEAS FOR INVESTM ENT INSTRUM ENTS

To date, the research has considered and collated some of the experience and expertise
that exists within EWEC IWG as well as that of some other key stakeholders. In so doing,
innovative financing options and emerging initiatives have been studied to determine
their relevance and applicability to challenges in the MNCH sector. These include
structures that have been designed and implemented to address a broader set of
development issues and other public health issues and which could be adapted to this
sector. Such structures could alleviate both demand- and supply-side constraints along
the MNCH care continuum.

Few companies are currently involved offering products and services in the MNCH
market for the Base of the Pyramid, making it difficult to find good investment
opportunities. Nevertheless, the EWEC IWG’s and the Saving Lives at Birth: A Grand
Challenge for Development’s recent calls for proposals show that opportunities do exist.

Some investment model ideas are presented below as a starting point for EWEC IWG
consideration. They would attract new investment flows or investors’ interest in MNCH
and cover different types of investment opportunities, with different roles for EWEC IWG
and its partners, and different levels of design and implementation complexity. There are
many models to explore, and this paper offers just five to test different parameters of
how to build and what architecture to test which will best fit the demand from investors,
the need for investment capital, industry players and EWEC IWG partners active in this



space. The five models are not all actual investment structures, but instead touch on
aspects of the investment value chain, answering the question: what economic models,
what business models, and what interested private and public sector players may be
attracted to this theme? The five are not exhaustive, and many more models and
variations of the models may be explored. These five are to generate creative debate,
namely: The Venture Capital Value Chain Approach, The Product Development
Partnership Facility, The Working Capital Credit Facility, The Major Company Equity
Portfolio and The Major Index.

Model 1: THE VENTURE CAPITAL APPROACH : MATERNAL/CHILD
HEALTH SHARED VALUE INVESTMENT FUND

Funding for the BOP: A fund – mostly private equity/debt, some credit by nature -
making many smaller investments, many of which may fail, some will succeed
spectacularly. A Technical Assistance Facility will be included along side the fund to
support companies and thereby de-risk the portfolio of investments. The fund will
necessarily include a geographic mix of projects/investments, a mix of funding but the
largest portion from mission-based investors (institutional, sovereign and foundation).
The goal is to channel funds to projects helping small-medium enterprise level, and
leveraging the EWEC IWG members in each region to establish a footprint of projects
and criteria for selection into the portfolio.i
• Example: EWEC+Rabo Bank Maternal/Child Health SME Fund
• Holdings: to be decided.
• Investors include mission-related investors like Gates Foundation, Rockefeller
Philanthropy Advisors, ultra-high net worth clients of Geneva private banks
and large ESG institutional investors (e.g. PGGM, APG).
• EWEC IWG/partners role: verify maternal/child health component of
investment decision (business positive impact).
• Funds flow: This model offers a very direct injection into small-medium
ventures with unproven or new business models, or models with little
prospect of yielding returns to capital, but that do have a material measurable
impact on the social need. The experience of some philanthropy funds is that
insufficient deals or projects exist to invest into, and capacity constraints are
more likely in the execution of project selection, reporting and management,
than on capital raising. An established investment structure with 7-9 year
horizon should offer a stable cash flow to promising ventures, enhancing
EWEC mission and brand.
• Similar models: IFC Global Health Fund, Calvert Community Investment
Notes/Calvert Social Equity Funds, J.P. Morgan Bay Area Equity Fund,
Commons Global Health Fund.



Model 1: MATERNAL/CHILD HEALTH SHARED VALUE INVESTMENT FUND
FO
RD
ISC
US
Potential structure for MNCH SVI SIO
N
Investors, Banks Governments,
MNCH SVI Asset Management (MNCH Foundations, other
SVI AM) is composed of 3 groups: partners
–  Private Equity/Debt
MNCH SVI Asset
–  Credit
Management
–  Foundation
!  The Capital Advisors Group ( CAG ),
managed by bank, makes investments
in MNCH value chain opportunities
!  The Credit Group ( Credit ), managed
by global banking partner, sources debt
financing for MNCH SVI investment Capital Advisors Credit Group Foundation - Nonprofit
opportunities Investment Group Commercial Bank Vehicle (Foundation,
!  The Foundation, managed by EWEC members other
Foundations/EWEC members/others, partners)
provides grants, loan guarantees, and
technical assistance for MNCH SVI
investment opportunities Manages Private Providers of Debt Grants, Loan
!  Objective is to support private sector Equity/Debt Pool of Capital/ Market Guarantees, Technical
companies that as a core part of their Capital Interface Assistance
operation is to implement strategies
involving products/services that
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

The table below illustrates some key opportunities for product and service innovation
along the “Continuum of Care” for RMNCH. The RMNCH Continuum of Care represents
the ideal delivery of integrated health services and interventions for mothers and children
from pre-pregnancy through to delivery, infancy and childhood. A wide range of medical
technologies and other products are needed to put together comprehensive, integrated
packages of essential interventions and to provide integrated care for women and
children. A Maternal/Child investment fund could focus on investments within the sectors
found within this continuum. Investments will need to be in companies that bring to
market products/services meeting the needs of MNCH sector as well as the needs of the
broader population.



EWEC IWG would play a primary role in convening partners and filtering ideas. EWEC
IWG and its members attract new deals and pre-qualifies fund opportunities using their
expertise in MNCH. Metrics for decision-making and impact evaluation may explicitly
cover performance meeting health-specific needs e.g. what number of children may be
reached by a new method of delivery of a medical device in sub-Saharan Africa?

Model 2: MNCH PRODUCT DEVELOPMENT PARTNERSHIP FACILITY

The facility just discussed could play a significant role in steering additional capital into
firms so that they can better address MNCH. More funding is also needed specifically to
encourage innovation and to reduce the risk to private companies that want to engage in
research and development oriented towards low-income consumers. Several options
are available for innovation facilities. One of the more promising approaches is based
on an initiative being developed by the International AIDS Vaccine Initiative (IAVI) to
stimulate innovation and the introduction of new products on the market. It could have
broad applicability to companies’ work on products for maternal/child health market.

Product development partnerships like IAVI have made significant contributions to the
pipeline of products that address specific health issues in developing countries. They
partner with governments, academia, pharmaceutical companies, biotech firms, and



developing country governments to stimulate research and development. Traditionally
their funding has come from government and foundation grants that have either been
insufficient in size, short-term, restricted, or unpredictable.

To address these shortcomings, IAVI has been developing a Product Development
Partnership Financing Facility. Its premise is to capture a portion of the future value of
products in development and use that money now to finance research and development.
It would do so by issuing bonds, the proceeds of which would finance current research
and development of new products. Future revenues generated by these products would
at least partially pay off the bonds as they come due. This initiative relies on a portfolio
approach to new product development, in recognition that not all R&D efforts would lead
to profitable products. This approach also avoids the need to “pick a winner” in advance.
Official donors would help to guarantee the bonds, and they would pay a small premium
on their purchases of future products that would help to pay off the bonds. This premium
would only be paid once a new product has been developed that meets a set of
established criteria.

Model 2: MNCH INNOVATION PRODUCT DEVELOPMENT
PARTNERSHIP FACILITY
FO
RD
Provide ISC
Loan US
Guarantee guarantees loans SIO
PDP Financing Bond N
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

Within MNCH, a structure modeled on this financing facility could be built to catalyze
product innovation focused on underserved markets, with the added dimension of
encouraging innovations in distribution systems to ensure that products are accessible to
target populations. These innovation efforts would potentially support the objectives of
several EWEC IWG partners. EWEC IWG could convene private and public sector
partners to develop the facility and potentially provide either seed funding or arrange for
a guarantee on the bonds issued to finance the facility.



Model 3: HIGH LEVEL WORKING CAPITAL CREDIT FACILITY MODEL

There exist many products and commodities that are very cost-effective interventions to
address MNCH. At the same time, a number of barriers exist for countries in procuring
these products: access to suppliers; inflated prices; huge variance in quality; access to
upfront capital for large purchases; governance challenges in the purchasing process;
lack of quality assurance and monitoring of delivered products; and, often, the lack of
funds to purchase the products. To address these barriers, there may be potential to
establish a new structure, a Working Capital Credit and Procurement Facility, to
specifically help partners in the developing world manage procurement of these products
and commodities that are essential in addressing the MNCH burden.

FO
Model 3: HIGH LEVEL WORKING CAPITAL CREDIT FACILITY RD
ISC
US
SIO
N
Potential opportunity is to capitalise a central fund with one or two partners, which will serve
as a guarantee to make country level loans at preferential interest rates.

Central Process !C!*D
E$-#,+-)
!"#$%&'"()*+,#-$&) B<?='#@)
./$-$,#++)0/,1)23456) *-+1'#)
F$-#,+-)
B<?='#@)
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-+A/'-',;)<-+1'#) #9)<9=+-)&9$,)1+8$/&#)23456) */"#9:+-)
B<?='#@)

Country Level Process

B""+"")<-+1'#) !G+</#+)5+%#)
79-#(',+"") H+<9=+-@)

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1+8$/&#")9,)
&9$,)23456)



Credit Facility Roles & Responsibilities
Roles and responsibilities need to be confirmed after initial discussions with partners

EWEC IWG/Partners Credit Facility Partner Procurement/
Certification Agent

•  Provide capital to guarantee •  Raise lending funds to •  Potential to add Procurement
loans leverage EWEC IWG/Partners and/or Certification Agent to
•  Participate in joint fundraising guarantee capital certify, procure and fulfill
efforts •  Use local contacts to direct orders
•  Market facility offering to win potential customers to facility •  Receive payment from
potential customers •  Qualify and approve potential customers both prepaid and
customers who ask for credit credit customers
•  Determine whether customers
want credit to pay for orders •  Make loans and monitor •  Pay suppliers
•  Bear bulk of default risk, repayments
commensurate with capital •  Manage debt recovery in
provided event of default
•  Manage FX risk
•  Bear commensurate default
risk to incentivise recovery
•  Provide financial capacity
building as needed to
customers (depends on
partner)

Model 4: MAJOR COMPANY EQUITY PORTFOLIO

Liquid asset classes: driving the majors to act, investment grade. Large-cap fund
investing in large listed companies in the health sector (include large pharma, generics,
medical devices, medical services) that are fairly well-known, being a mix of good and
bad, across many countries.
• Example: the EWEC+CREDIT SUISSE Large Cap Global Health Equity
Fund
• Holdings: to be decided.
• Investors include CalPERS, Norwegian Government Pension Fund, Munich
Re and packaging to retail investors through LODH, Pictet or Calvert.
• EWEC IWG/partners role: input into filter for best practice MNCH-supporting
programs and product marketing responsibility performance. Also driver for
next generation MNCH products/services, although 3-5 years from the more
immediate venture capital type.
• Funds flow: This model offers a tool to direct major companies and an indirect
injection into ventures that do have a material measurable impact on the
social need. Potentially, this model may attract the most investor capital
because it is similar to existing investment structures currently marketed in
other ESG themes, such as the Generation IM/LODH joint venture on a
sustainability theme in Switzerland. Being too similar may also be a major
disadvantage for investors seeking new and innovative investment structures.



This fund would seek to attract some of the one-in-ten investors with an
interest in ESG factors, introducing MNCH as primary theme.
• Similar models: WWF Living Fund, American Century Livestrong Portfolios,
Deutsche Bank Global Fund Exchange Traded Fund.

Model 5: THE MAJOR INDEX
Leverage EWEC brand and/or media, own the opinions, create the conversation of
missing investment, investment grade via potential index licensees. This idea model sits
alongside the actual investment flows, seeking to act as an arbiter of opinion regarding
those large or small, old or new, companies that play some part in the production and
distribution of products/services addressing MNCH. By creating an index of ranked
companies based on criteria EWEC IWG approves, and delivered in conjunction with
professional ratings agencies, the index is about attracting interest to the MNCH space
with a mix of positive and negative assessments of players. The impact is less direct,
ranking efforts by companies or existing investment structures to have a positive impact
on the MNCH sector. Here the leverage of EWEC brand and/or media is the power: own
the opinions, create the conversation of missing investment, bad investment, good
investment, no investment structure as such.
• Example: EWEC+FORTUNE Healthy-50, EWEC+FAST COMPANY
Healthy-90
• Holdings: No holdings, but a ranking of the best large and small companies
respectively, using a mix of best EWEC IWG thinking on MNCH with an
established ESG rating firm
• Investors: None in the ranking, but license rank as index for index investment
product sellers to sell to investment managers and investors.
• EWEC IWG/partners role: expert opinion on better performance by large firms
and emerging new MNCH solutions.
• Funds flow: This model depends firstly on building the brand, then monetizing
it over a 3-5 year window. At the systemic level, it is unclear how the market
of opinion, and then investors, may choose to respond to the issue that the
index highlights. Where the index idea proves attractive as an investment
theme, the index may quickly and easily, with low involvement, license out the
index for use by money managers as benchmark or buy-list. If the index gains
credibility – perhaps over years (the Domini 400 is now 18 years old), the
partnership that owns the brand would capture some fees or royalties,
funding the organization or programs, or both.
• Similar models: Fortune 100 Best Companies to Work For; CRO Magazine
Business Ethics 100, Access to Medicines Index, Dow Jones Global Fund 50
Index, Forest Footprint Project, Carbon Disclosure Project, Access to
Nutrition Index.



FO
Model 5: MAJOR COMPANY INDEX RD
ISC
US
SIO
N

Markets covered:
developed countries as well as
Geography emerging and frontier markets

Cohort:
universe of companies to be Frequency:
ranked (drawn from large existing annual review increases scrutiny
grouping or smaller group of and currency
“leaders”)

Index
Value chain components:
constituents Company characteristics:
compare and contrast firms within
initially will cover listed
the same segment of the value
companies; private companies to
chain (begin with medical
be considered for inclusion later
equipment manufacturers)

Maternal/Child Health issues:
Issue covers spectrum of maternal/child
health on continuum of care

SUMMARY

EWEC IWG may investigate several financial structures and models that could have the
potential to help EWEC increase investment into MNCH globally for its partners and
stakeholders. There exist numerous examples of potential models that look worth
further examination by the EWEC IWG.

The research to date offers a basic overview of fundamentals for the architecting of
investment structures within markets and the markets they exist within. EWEC IWG may
consider investigating several financial structures and models that could have the
potential to help EWEC increase investment into MNCH globally for its partners and
stakeholders and/or as investment input to EWEC IWG members programs and projects.

NEXT STEPS

Shortly following the convening of the EWEC IWG in New York in April, a small group of
IWG members from each of the relevant Task Forces (e.g. Business Models) as well as
key individuals from both the Saving Lives at Birth and UN Commission on Lifesaving
Commodities for Women and Children initiatives will convene to consider the Landscape
Research and ensure the greatest level of linkage between the priority needs and
potential investment structures set out in this research. The refinement of the
Landscape Research, taking into account feedback from the IWG New York meeting


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

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

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