At the Corner of Healthy and Profitable: Impact Investing for Health

By Sandy Garçon, Manager, External Relations and Communications, PSI

One of the biggest challenges facing global health is not an epidemic, but of funding.

A look at the current state of development funding shows a stark contrast between the cost of achieving the Sustainable Development Goals (SDGs) by 2030 and the actual resources that are available.

As pressure mounts on traditional funding streams, the only way to bring real change and lasting health impact is to remain innovative and create new solutions that respond to the ever-changing environment we live in.

One such groundbreaking approach is the development impact bond (DIB), a new financing mechanism that brings together funding partners motivated by social and financial returns. With encouraging results in other key development areas, impact investment offers a promising way to mobilize private capital to solve some of the world’s most vexing health issues.

At this year’s World Economic Forum Annual Meeting in Davos, PSI joined partners USAID, MSD for Mothers, UBS Optimus Foundation and Palladium to present how this bold approach will play a role in reducing maternal and neonatal mortality—the chief aims of SDG3.

Launched in November 2017, the Utkrisht Development Impact Bond is the largest and most ambitious DIB to date. Watch this video to better understand what a DIB is and how this one will work.

 

With an initial upfront investment from UBS Optimus Foundation, implementation partners Palladium, PSI and the Hindustan Latex Family Planning Promotion Trust (HLFPPT) will undertake activities to improve the quality of maternal and newborn health care in India’s Rajasthan state.

This means going where the customer is—the private sector. In Rajasthan, private health facilities account for over 25% of institutional deliveries and are used by women across all socio-economic levels.

PSI and HLFPPT will train providers (i.e., doctors, midwives and nurses) of up to 500 private sector facilities towards achieving quality standards and government accreditation. An estimated 600,000 women stand to benefit from the initiative. It could potentially save as many as 10,000 lives over a five-year period.

Far from business as usual, the model offers a type of results-based financing, since the outcome payers—USAID and MSD for Mothers—only pay back the investors in full if the pre-agreed performance targets are met, plus a success premium dependant on whether additional or stretch-targets are met. With the focus on achieving outcomes rather than specific activities, implementers will be able to shift gear to ensure desired results, adapting approach and activities as circumstances dictate.

In a further innovation, PSI and other implementation partners are also co-investors, contributing more than 20% of the capital required, thereby fully aligning risk and reward across the impact bond.

Looking beyond Rajasthan, the program could be replicated and rolled out across the country, contributing to much improved maternal and neonatal care and reducing mother and child deaths significantly.

But equally as important perhaps, this initiative aims to create a ‘proof of concept’, showing potential donors and investors how DIBs could contribute to health impact while also offering financial returns, unlocking huge reservoirs of private capital to assist in achieving the SDGs.