Reaching SDG 3: What role can innovative finance play?
On Monday 2 December, Friends of the Global Fund Europe, together with emerging health ventures, organized a seminar on “Reaching SDG 3: What role can innovative finance play?” in Stockholm, Sweden. The event brought together stakeholders from academia, civil society, public and private sectors for a fascinating discussion on how to harness more financial resources for the fight against the three diseases, health systems strengthening and achieving SDG 3.
Aisling Quirke from the Global Fund to fight AIDS, TB and Malaria set the scene by presenting the importance of innovative finance and private sector engagement for achieving SDG 3. Estimates show that 370 billion is needed annually to achieve this goal, and it is obvious that official development assistance (ODA) cannot do this alone. Aisling highlighted this financing gap, but also stressed the cost of not achieving SDG 3, by highlighting the both the social and economic gains from progress in global health.
She also highlighted how the Global Fund works to fight the three diseases, both vertically and by taking a broader approach by addressing the structural, socio-economic and behavioral factors that contributes to the spread of the diseases, and by promoting strengthening of health system. She explained how in some cases programmes and projects are not having full impact due to different socio-economic and behavioral factors, so the Global Fund is looking at opportunities to work differently to address these, and to reach the key and vulnerable populations. In order to do so, there is a need to focus on innovative ways both for resource mobilization and private sector engagement. Many different actors from private sector, such as banks and telecom companies, as well as civil society and religious institutions play important roles in doing so.
Sony Kapoor from Re-Define gave a background on the issue of development financing, highlighting a number of examples of how private capital have played an important role complementing official development assistance in different sectors. However, the challenge with innovative finance in health sector is that too much more money spent on specialized treatment in developed countries, and it is hard to raise that money for diseases that primarily affects low income countries. However, in a globalized world, he argued that there is a need for high-income countries to work in an interactive way with the rest of the world, even just for self-interest, to stop the spread of diseases such as drug-resistance tuberculosis.
Olivier Schultz, General Director of MSF Sweden, presented the experience from their perspective in the field where they often witness the need for different ways of financing. For example, there is often a financing challenge in humanitarian situation, when emergency funding is running out, and development aid has not yet arrived, which could be filled by private donors as they could have more flexibility. However, he stressed the importance of the independence of capital in order to react to the patient needs, and there is a fear that if capital becomes more reward oriented, it can move away from independence. Also, while innovative finance is having an impact in some middle-income countries, it has so far not reached the countries where the need is largest.
Nina Rawal, funder of emerging health ventures, explained that there is a potential for venture capital in both low- and middle-income countries. While the power of venture capital in medicine has been demonstrated, much is the capital is used for inventing for the rich in high-income countries. Venture capital have transformed other sectors, so what can be done for global health? Global health is an idealistic sector, but venture capital can be used to finance and invent products for low-income countries. She stressed the need to think in terms of cost effectiveness and to be pragmatic in an idealistic world in order to avoid an ideological divide.
Marcus from AP-4, a Swedish public pension fund, stressed the current global search for yield and impact in the financial sector, and the increasing curiosity for innovative and sustainable finance mechanism. There are many actors in Sweden interested in innovative finance, but sometimes the appropriate instrument is not available and there is room for innovation and try out new things. ODA can play an important role in this, and can be used to reduce and move the risk, and to encourage different blended finance instruments. Kalle Hellman from Sida (Swedish international development cooperation agency) explained that is exactly how the guarantees Sida provide work. The guarentees aim is to free up additional financing with ODA money. They are seeking situations where Sida can enable transaction to happen by shifting risk and return in order to crowd-in more capital. He also explained how Sida has a guarantee portfolio within the health sector, which they are working to expand.
The discussion with the audience brought up the question of the how to cooperate with the private sector when conflict of interest arises, and in particular the potential for working with pharmaceutical companies. Aisling Quirke from the Global Fund explained how the organization have a multidimension relationship with pharmaceutical companies, for example in terms of pooled procurement where volume-based agreement has lowered the costs. In terms of antiretroviral medicines this has contributed to a drastic reduction in price. This shows that there are ways to work together with pharmaceutical companies, but what could the relationship look like? Panelists expressed how this discussion reminds in many ways of the discussion on how to engage energy companies in the climate change discussion.
In the end, the panelists highlighted the need to keep pushing for new and innovative funding mechanisms, which has flexibility and maintains independence for the implementing organizations. There is also a need to challenge the current paradigm in the global health arena, and to explore different possible solutions to direct financial resources to health care system in low- and middle-income countries.