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

Partnering For Impact

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Utilise innovative finance models to deliver EWEC’s mandate

Goa

l

•  Develop thinking and way forward on financial innovation to attract sustainable funding to support EWEC’s objectives by creating innovative financial structures to channel more capital, philanthropic and investment, to meet mandate needs

Fund

ing

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 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 N

ew a

ppro

ach

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Official sector flows •  Innovative fundraising for development

generated an estimated USD57.1 billion between 2000 and 2008

•  Potential for raising significant new resources is considerable

Private sector flows •  Investment capital represents a large pool

of financing with global financial stock standing at USD212 trn and growing

•  Investment managers consider Environmental, Social, and Governance (ESG) factors - market will reach USD25 trn by 2015

•  Impact investments emerging as an alternative investment asset - create positive impact beyond financial return

•  Forecasting over the next 10 years for invested capital of USD400 bn - USD1 trn

Global innovative finance

• Brief assessment of the investment industry reveals no specific MNCH-themed investment products

• To date incorporated as part of wider health sector investment structures (e.g. Henderson Horizons Industries, Allianz RCM Wellness)

• Within impact investing, a few investment funds for the health sector (e.g. Africa Health Fund) but it is early days

• Out of 2,200 impact investments worth over USD4 bn, only 59 investments totaling just under USD90 million have been completed in the health sector – none focus on MNCH

• Nevertheless, research indicates a growing appetite for health sector investments - could be as large as USD18bn – USD123bn

• EWEC’s mandate to improve MNCH could become a theme for such innovative financial vehicles and thereby attract more capital and close the current gap in funding

Opportunity for MNCH

Financial innovation opportunity for MNCH appears promising

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Numerous innovative finance precedents to learn from

•  UNITAID, Financial Transactions Tax

Taxe

s/Le

vies

•  Product Red Initiative, GAVI Matching Fund

Volu

ntar

y C

ontr

ibut

ions

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Smart shopper notes that (product)RED items from top brands cost the same as non- (product)RED items. But choosing the (red) items means that up to 50% of profits made from those sales will go to help eliminate AIDS in Africa

The Global Fund uses 100% of this money to finance HIV health and community support programs in Africa, with a focus on women and children

The contribution helps people affected by HIV in Ghana, Swaziland, Rwanda, Lesotho and other countries to be granted (red) money in the future

The Result? Shopper has new (product)RED items from favorite brands at the same time helping to eliminate AIDS in Africa. They can continue to help when they choose other (red) products or donate directly to the Global Fund

When shopper chooses to purchase the (product) RED items the makers send a contribution of up to 50% of profits directly to the Global Fund – not to (red)

Added value to purchase decision

Funds direct to Global Fund

100% for HIV programs

Further (red) support

Direct private sector support

Source: The Global Fund press release, analysis

•  Solidarity contribution or 'tax' on airline tickets is 70% of UNITAID's financial base •  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 country's level of development and there is an

extra option to vary the charge according to the distance traveled •  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

UNITAID - funding through airline ticket tax

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Financial Instrument precedents have achieved success !  Front-loaded support for strategic

immunization programs: – Measles Initiative –  Yellow Fever Initiative – Global Poliomyelitis Eradication

Campaign – Maternal and Neonatal Tetanus

Elimination Campaign –  Supporting pentavalent vaccine

introduction and other new vaccines

– GAVI health systems, immunization services, and injection safety support

!  Raised more than $ 4.5 billion for the GAVI Alliance s immunization programs

$3bn (23 yrs)

$1.7bn (20 yrs)

$600M (20 yrs)

$264M (15 yrs)

$240M (20 yrs)

$114M (8 yrs)

$38M (15 yrs)

$20M (20 yrs)

UK

France

Italy

Norway

Spain

Netherlands

Sweden

South Africa

Funding

Noteholders

Notes pro- ceeds

Notes issues

World Bank Treasury

Management Services

Disburse-ments

IFFIm issues AAA/ Aaa/ AAA-rated bonds in the international capital markets

Manages bond proceeds as liquid investments until they are needed for programs in recipient countries

Impact Structure

Donors

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

!  GSK introduced its first vaccine (Synflorix™) to Kenya in Feb 2011 at 90% discounted price

!  The long-term price of pneumo vaccine for developing countries will be $3.50/dose (vs. >$70/dose in industrialized countries currently)

!  Anticipated to help 60 countries to introduce pneumo vaccine by 2015 and prevent more 7 million childhood deaths by 2030

Impact

$1.3 Billion

Financing

Operations

WHO establishes the target product profile (TPP) – minimum product specification

An Independent Assessment Committee (IAC) will approve the pneumo vaccine once developed

UNICEF procures new vaccines, and countries have to submit request

Global partnership

$1.5 Billion

International Finance Facility for Immunization (IFFIm)

Gen

erat

e N

ew

Res

ourc

es

Advance Market Commitments (AMC) for Pneumococcal vaccines

Red

uce

Cos

ts

Global Premix Procurement Facility (GPPF)

Add

ress

C

onst

rain

ts

Research Product

Design and Development

Manufacturing and Packaging Distribution Sales

Con

stra

ints

Access to Capital

Information/ Incentives

Risk

Supply Side:

Demand Side

Every Woman Every Child Index

Credit Guarantees (e.g. Working Capital Credit Facility )

Theme-Based Funds (e.g. Maternal, Newborn and Child Health Fund)

Product Development Partnership Facility

!"!##$ Innovation Fund (e.g. Scaling Grant Challenges Winners)

Advisory Services Grant Facility (e.g. Catalysing Partnerships Along Value Chain)

Advance Market Commitment

Vouchers

Performance Based Mechanisms (e.g. Country-wide Insurance/Health Finance)

Lack of innovation, high costs

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

•  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

Initial view reveals promising innovative financial structures for MNCH

•  Numerous areas exist where companies are well-positioned to fill gaps in the provision of health care

•  Structure provides opportunity to ‘de-risk’ investments made by both public and private sector

•  Thorough investigation needed to determine where opportunity for a Maternal, Newborn and Child Health Fund may best focus

MNCH SVI Asset Management (MNCH SVI AM) is composed of 3 groups:

–  Private Equity/Debt –  Credit –  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 opportunities

!  The Foundation, managed by Foundations/EWEC members/others, provides grants, loan guarantees, and technical assistance for MNCH SVI investment opportunities

!  Objective is to support private sector companies that as a core part of their 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 Asset Management

Manages Private Equity/Debt Pool of Capital

Providers of Debt Capital/ Market Interface

Grants, Loan Guarantees, Technical Assistance

MNCH SVI AM investment sources of capital (Equity, Debt, Foundation/Nonprofit) Low cost of capital = more attractive projects, better financial/social returns

Capital Advisors Investment Group

Credit Group Commercial Bank

Foundation - Nonprofit Vehicle (Foundation, EWEC members other partners)

Potential structure for MNCH SVI

Investors, Banks Governments, Foundations, other partners

Model 1: MATERNAL, NEWBORN AND CHILD HEALTH SHARED VALUE INVESTMENT FUND

Product Production

Product Development

Product Purchase

PDP Financing Facility

PDP

Firm

Developing Markets

Developed Markets

Sales revenues

Premiums on their purchases

Loan guarantees

R&D Funding Repayments

Provide loans

Issue bonds

Royalties

Bond Markets

Guarantee Donors

Official Donors

Model 2: MNCH INNOVATION PRODUCT DEVELOPMENT PARTNERSHIP FACILITY

Financing facility to catalyze product innovation focused on underserved markets

Model 3: HIGH LEVEL WORKING CAPITAL CREDIT FACILITY

•  IWG develop a working capital loan facility to offer loans to importers, wholesalers, health shops, pharmacies, dispensaries and community-based distributors to maintain stock of pre-specified maternal and child health products

•  Provides much needed working capital to businesses— and simultaneously ensures availability and provision of vital public health products

•  IWG could work with

institutions such as Aureos, IFC, Standard Chartered, African Development Bank, etc.

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Central Process

Country Level Process

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EWEC/Partners

Credit Facility Partner

Procurement/Certification

Agent

•  Provide capital to guarantee loans

•  Participate in joint fundraising efforts

•  Market facility offering to win potential customers

•  Determine whether customers want credit to pay for orders

•  Bear bulk of default risk, commensurate with capital provided

•  Raise lending funds to leverage EWEC/Partners guarantee capital

•  Use local contacts to direct potential customers to facility

•  Qualify and approve potential customers who ask for credit

•  Make loans and monitor repayments

•  Manage debt recovery in event of default

•  Manage FX risk •  Bear commensurate

default risk to incentivise recovery

•  Provide financial capacity building as needed to customers (depends on partner)

•  Potential to add Procurement and/or Certification Agent to certify, procure and fulfill orders

•  Receive payment from customers both prepaid and credit customers

•  Pay suppliers

•  Model could potentially be used to support certain commodities as well

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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.

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Thank You