In September 2022, private individuals who have invested in the ICRC's “humanitarian impact bonds'' will see the return on this innovative financial vehicle. The organisation’s vice-president, Gilles Carbonnier, says the gains are already there for the hundreds of victims who have been able to access a rehabilitation centre.
Who could have predicted two years ago the scale of the Covid pandemic and its social and economic impact across the world? Every day we react to external shocks and we adapt accordingly. In countries at war, these shocks are particularly violent for communities that are also affected by the pandemic and climate change.
To meet these increased needs, the ICRC issued the first “humanitarian impact bond” in July 2017. We very quickly received the support of investors experienced in financial risks and donors interested in this new instrument, which is making a difference for thousands of people with disabilities.
Tabitha lost a leg in an explosion in Maiduguri, northeast Nigeria. She found medical and orthopedic support from the ICRC and she now earns a living as a seamstress. Without knowing it, Swiss, Belgian and German investors have bet on Tabitha and her ability to engage in a new professional activity.
Thanks to this bond, the ICRC was in fact able to build a physical rehabilitation center in Maiduguri, as well as another in Mopti (Mali) and Kinshasa (DRC). This financing mechanism made it possible to mobilise private investors to raise CHF 18.6 million, as well as donors willing to cover the operation depending on the results obtained. And if our bond has aroused the interest of private investors, it is because it offers the possibility of generating a humanitarian impact in addition to a potential return on investment, depending on the humanitarian results obtained.
A profitable investment?
From the coup d'Etat in Mali to the Covid crisis: there have been so many difficult situations to anticipate. Investing in a bond with a humanitarian impact means accepting that the journey is not without risk. It is also and above all about wanting to be part of a virtuous approach whose aim is not only to yield a potential return on financial investment in the medium term but also to benefit society as a whole in the long term.
When we developed this new funding mechanism, we wanted it to primarily benefit people who require long-term support, and for whom better social and economic integration makes a difference. We thought of the approximately 300,000 people who receive assistance each year in physical rehabilitation centres supported by the ICRC. More than a third of patients are children. These people with disabilities are the potential farmers, doctors and entrepreneurs of tomorrow. By taking a financial risk to support this type of project, private investors are banking on the next generation.
Personal profit, but also societal
A recent example? Alberto Cairo, the ICRC's head of physical rehabilitation activities in Afghanistan, was concerned about the ability of a young patient, Mahmoud, to become an active member of the Kabul physical rehabilitation center. Would he be able to perform the same tasks as others, despite his disability? Weren't they going to put him in a delicate position by giving him a complex task? After just one week, Mahmoud was contributing very effectively to the work of the team and no longer needed anyone to push his wheelchair, thanks to a quick mastery of the prostheses provided to him.
Investing in such projects with a humanitarian impact means becoming an agent of change. It is taking risks with a view not only to personal profit, but also to society. One year from now, in September 2022, investors who supported the first humanitarian impact bond will know to what extent they will recover their stake, with an annual return that can vary between -11 per cent and + 7 per cent depending on related performance indicators. to the services provided by the three physical rehabilitation centers.
For patients and for the ICRC, the gain is already very clear. It lies in the guarantee of being able to finance long-term projects that make it possible to respond to pressing humanitarian needs in a sustainable manner. Faced with a growing gap between the needs on the ground and the resources available, strengthening the bridges between the world of finance and that of humanitarian aid becomes essential and helps us to have a lasting impact.
*Gilles Carbonnier is vice-president of the ICRC and professor of economics at The Graduate Institute in Geneva.
This article has been translated from Le Temps, which, ahead of the Building Bridges conference taking place from 29 November to 2 December, commissioned a series of opinion articles around sustainable finance. The series has been curated by Lore Vandewalle, associate professor in international economics at the Graduate Institute in Geneva.