Red Cross launches world’s first £20m humanitarian impact bond

08 Sep 2017 News

The International Committee of the Red Cross has set up the world’s first humanitarian impact bond, worth more than 26m Swiss Francs (£20m).

The money raised will be used to build and run three new physical rehabilitation centres in Nigeria, Mali and Democratic Republic of Congo over a five-year period.

It will also go towards training for new staff as well as the testing and implementation of new efficiency initiatives.

The ICRC says a growing annual budget and a rising number of conflicts are the reasons why the new funding model has been created.

Peter Maurer, the ICRC's president, said: “This funding instrument is a radical, innovative but at the same time, logical step for the ICRC. It is an opportunity not only to modernise the existing model for humanitarian action, but to test a new economic model, designed to better support people in need.

“We hope that once the pilot project is proven, it will demonstrate that non-traditional financing models can work.

“There is great potential for investments that are built around improving the social, environmental and economic conditions so that humanitarian action advances in impact, effectiveness and scale in ways never seen before.”

How it works

The Humanitarian Impact Bond is actually not a bond put a private placement. The initial payments by social investors – including New Re, part of Munich Re Group and others identified by co-sponsor Lombard Odier – fund the ICRC’s activities at its rehabilitation centre.

At the end of the fifth year, outcome funders – comprising the governments of Belgium, Switzerland, Italy, the UK and Spanish banking foundation la Caixa – will pay the ICRC according to the results achieved.

These funds will in turn be used to pay back the social investors partially, in full or with an additional return, depending on how well the ICRC performs in terms of the efficiency of the new centres.

Independent auditors will verify the ICRC’s reported efficiency based on how many people receive mobility devices per physical rehabilitation professional compared to existing centres.

If above the benchmark, social investors will receive their initial investment plus an annual return but if the performance of the new centres is below the benchmark, they it will lose a certain amount of their initial investment.

 

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