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?
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.
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.
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).
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:
- Famine Bonds
- Draught Bonds
- Conflict Rehabilitation Bonds
- Migration Bonds
- Education Bonds
- Green Bonds
- Forest Fire bonds
- Health Bonds
- Deforestation Bonds
- Water Bonds
- Natural Disaster Response Bonds
- 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.
- “World Bank launches ‘pandemic bond’ to tackle major outbreaks,” by Reuters (6/28/2017).
- “Pandemic bonds, a new idea: The World Bank creates a new form of finance,” in The Economist (7/27/2017).
- “Saving the World One Bond at a Time,” by M. Baker in Euromoney (8/12/2017).
- “Clock ticking on Superbugs” in Discover Magazine (January/February 2018, p. 24).
Notes & Image Sources
1 See, for example:
- US SIF: The Forum for Sustainable and Responsible Investment.
- “Quaker Investment Criteria,” by Robert Howell, Northern Monthly Meeting, Te Haahi Tuhauwiri*, Aotearoa New Zealand, on Quaker Earthcare Witness.
- Friends Fiduciary.
Image: “2014 Ebola Outbreak in West Africa: Outbreak Distribution Map,” Centers for Disease Control and Prevention (CDC).