Harnessing the power of finance to address urgent social challenges

Cyrus Ardalan

Chair, The board of the International Finance Facility for Immunisation

One of the most encouraging and dramatic developments I’ve experienced in the decades I’ve spent working in international finance is the rise of socially responsible investing.

The idea – tapping the vast resources and liquidity of the private sector to address persistent and urgent public social challenges – has been around for more than two decades now. But the most remarkable and rapid changes in socially responsible investing have arguably come largely in the last half a decade when investors moved from scepticism about what seemed like exotic investments to widespread embrace, and their appeal is still growing.

The reason goes directly to one of the factors that I believe motivates effective private and public sector collaboration: confidence.

In the case of socially responsible investments, investors were, in those earlier years, wary about whether they could generate a competitive financial return, even when they supported the important social good that would come of it. But as these financial instruments became more sophisticated, investors have gained the confidence that they could not just do real public good, but also do well through respectable rates of return. We have learned that financial engineering can align risk return needs of the private sector and application for a social purpose.

That’s very much the story of the International Finance Facility for Immunisation (or IFFIm), whose board I chair. Launched in 2006, IFFIm is a unique piece of social financial engineering that has dramatically increased the availability of vaccines to children in the world’s poorest countries. In capital markets around the world, IFFIm spreads the burden of large-scale public sector funding over time and allows benefits to be realised upfront.

IFFIm issues “Vaccine Bonds” against $6.6 billion of long-term, legally binding commitments from 10 governments spread over 23 years. Vaccines Bonds accelerate the availability of that long-term funding so that Gavi, the Vaccine Alliance can provide vaccines to millions of children in developing countries when they need it, not just when the financing materialises.

The outcome has been breathtaking. IFFIm’s funding has helped Gavi immunise more than 760 million children over 20 years, saving more than 13 million lives in the long term. Recent analysis shows that IFFIm’s frontloading mechanism has allowed more than 80 million children (and counting) to be vaccinated ahead of receiving donors’ grants.

IFFIm has financed a number of impactful immunisation programmes, including one that provided US$191.28 million to help develop and license oral polio vaccine and stockpiling it for outbreaks. This has contributed to a striking 95% decline in polio cases in Nigeria and India, and an 85% decline in type 3 polio cases globally. IFFIm also finances countries’ health infrastructure. allowing them to provide many other essential health interventions to otherwise under-served communities.

And just last year, IFFIm issued a bond for 600 million Norwegian Krone to help finance research and development by the Coalition for Epidemic Preparedness Innovation (CEPI), a public private initiative that accelerates development of vaccines against emerging infectious diseases.

With the guidance of The World Bank, which serves as IFFIm’s treasury manager, Vaccine Bonds have offered terms and earned high credit ratings that compete favorably with conventional commercial bonds. The result: the more than three dozen IFFIm bond issuances in capital markets around the globe have been universally met with enthusiasm from the investment community. That’s a sign of growing confidence not only in Vaccines Bonds but in socially responsible investments generally.

As gratifying as it is been to watch the growing acceptance of these investment instruments over the recent past, it will be exciting to watch the new and ultimately effectively ways they evolve in the years and decades to come.

About the Author

Cyrus Ardalan, who chairs the board of the International Finance Facility for Immunisation, is currently is the Non-Executive Director and Chairman of Citigroup Global Markets Ltd., Chairman of OakNorth Bank and Chairman of the Financial Services Advisory Board of Alvarez and Marsal.