Quaker Universalist Conversations

Quaker Bonds

Using the World Bank’s “Pandemic Bond” model

How do Quakers manage financial investments in a socially responsible way? How can Quakers translate faith into practice with their investments for the universal benefit of us all?

Current careful investment wisdom provides for some social screening gestures1 to remove or avoid investments in some of the negatives in our economy (e.g. alcohol, munitions, etc.). Some Quakers seek to reach beyond the avoidance of these negatives to support the positives by investing in state and local government infrastructure bonds. Can Quakers move forward beyond state and municipal bonds?

World Bank (International Bank for Reconstruction and Development) Now there is a whole new method of matching faith with practice in investment, with global positive impact, with the emergence of Pandemic Bonds (see Resources). We are not quite there yet, since these bonds are not yet offered to the public for small investors, but the train is moving on the track in that direction, thanks to the creative initiative of the World Bank (International Bank for Reconstruction and Development).

The World Bank created the Pandemic Emergency Financing Facility (PEF)2 with the purpose of permitting deployment of bond funds early after initial identification of a potential pandemic,. This would fill the response gap until national governments and politics can release more massive funds.

2014 Ebola Outbreak in West Africa: Outbreak Distribution Map (Total Cases), Centers for Disease Control and Prevention (CDC) The slow global response to the Ebola crisis in West Africa in 2014 exemplifies the dangers of delayed investment in pandemic treatment and control. Learning from this missed opportunity for early intervention, the World Bank developed the PEF model “to make available significant funds to resource-constrained countries early enough to help them fight an epidemic outbreak that is escalating.”2

Pandemic Bonds are currently sophisticated financial instruments. Specialist reinsurance firms, like Swiss Re and GC Securities, have cooperated with the World Bank in the design and structure of these financial instruments in this first foray into anticipatory bonding and insurance.

Pandemic Bonds currently come in two flavors. The PEF provides an objective trigger to release bond funds to address an identified pandemic. It has a cash window for general response to any pandemic, and an insurance window to release bond funds to address six anticipated, specific pandemic viruses.

These bonds transfer the risk to the global insurance market and substantially engage new private actors in helpful response to pandemics. Currently, these bonds are available to big players such as pension funds, for whom the social benefit value of addressing pandemics in developing countries combines with a favorable interest rate to justify the risk.

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A greater benefit from Pandemic Bonds could come through making them available in smaller units to private investors, including small investors. World Bank does not now back the repayment of principal and interest, but should for the future. Creating a global constituency of citizens and nonprofit organizations would increase the likelihood of credible early responsiveness to pandemics. Investors would also have incentives to put early and significant pressures on their own governments to fund international pandemic responses.

Investors will be assured of repayment by the backing of the World Bank. Nonprofit organizations, universities, and foundations can be encouraged and pressured to invest portions of their endowments in Pandemic Bonds. For Quakers, this can mean education and advocacy with American Friends Service Committee, Friends Committee on National Legislation, and Friends Fiduciary, among others.

Pandemic Bonds are a practical model and method for linking Quaker faith with practice for the betterment of us all. In the interim, we can advocate for the extension of Pandemic Bonds to the market for small investors, nonprofit organizations, pension funds, and foundations. This advocacy includes writing letters to World Bank President Jim Yong Kim, urging him to move more forcefully into the private market with Pandemic Bonds (The World Bank, 1818 H Street, NW Washington, DC 20433 USA, (202) 473-1000, @JimYongKim, facebook.com/JimYongKimWBG).

"World in Hands," from World in Hands Clipart
Up until now the international focus has remained on protecting against, or mitigating, the harmful consequences after the pandemic event has occurred. The new thinking is to move toward anticipation of the event with practical resources for the fix or mitigation.

This larger anticipatory bond funding idea builds on the Pandemic Bond model to generate funds for targeting other, non-disease events early, while the destruction is taking place. Here are some similar anticipatory bond financing possibilities:

  1. Famine Bonds
  2. Draught Bonds
  3. Conflict Rehabilitation Bonds
  4. Migration Bonds
  5. Education Bonds
  6. Green Bonds
  7. Forest Fire bonds
  8. Health Bonds
  9. Deforestation Bonds
  10. Water Bonds
  11. Natural Disaster Response Bonds
  12. Drug-resistant Superbug Outbreak Bonds

These anticipatory bond financing opportunities for small investors would create a whole new dynamic market in international management of crises. Quaker investors will matter. We will all benefit.

This is a big opportunity for Quakers to take a lead in advocacy, access, and support now for pandemic and similar anticipatory bond programs for the benefit of future generations.

Ask your financial advisor to research Pandemic Bonds of the World Bank and advocate for their availability for small investors. Don’t take NO for an answer.


Resources

Notes & Image Sources

1 See, for example:

Image: “2014 Ebola Outbreak in West Africa: Outbreak Distribution Map,” Centers for Disease Control and Prevention (CDC).

2 Pandemic Emergency Financing Facility: Frequently Asked Questions.

Image: “World in Hands,” from World in Hands Clipart.

Comments

Thank you kindly for sharing this—we read it with great interest and you certainly captured very well the spirit and intention of the bonds!

Kind regards and best wishes for 2018,

A

Editor's Note: Several readers in the financial world sent us comments and asked that we publish them anonymously.

Comment No. 1

I do not know much about these kinds of bonds except that, if you are interested from a purely financial point of view, I would stay away from them at least for now.

As you will note, for the time being they are directed mainly toward large institutional investors and, crucially, without specific repayment support from the key entity of the World Bank. The key intent, to provide up-front funds early on or even prior to an evolving pandemic actually hits, is certainly a worthy intent. We constantly see that international institutions and key countries are slow in “after the fact” action as they are in funding for actual on the ground operations.

Comment No. 2

If you are interested from an ethical/social/humanitarian point of view, as I suspect, then it appears as a truly worthwhile experiment in trying to evolve better, more efficient, more effective ways to support through financial investment funding the slow moving, bureaucratic movements of international and governmental entities which usually do come through, but often in slow moving, after the fact action.

Comment No. 3

Unless one is at the super rich .0001% level, then one should certainly shy away from any individual, direct investment in these kinds of bond.

But if, as the title “Quaker Bonds” suggests, a Quaker organization is responsibly participating in some way, then investing like this as part of a larger, and fully controlled, funded, and financially backed entity could be a good way to get involved on a personal level in a socially responsible effort to provide sustainable funding for the bond financing ideas indicated.

The larger the organization used to channel funds along with intelligent integrity, financial acumen, and major international backing (World Bank), the more potential for your intended success with your investment in these types of bonds. You would be using a “vehicle” to channel your “investing” in these socially responsible intentions.

Make sure you are satisfied that this “vehicle” is socially and financially honest; meaning that it knows what it is doing in involving itself in this type of financial instrument. One shouldn’t be interested in throwing away one’s financial resources in quixotic efforts whatever level they are at.

The idea is great but the responsibly effective execution is what counts in the end.