UBS Says Sets Precedent With Impact Bond

Tom Burroughes Group Editor 5 December 2017

UBS Says Sets Precedent With Impact Bond

The trend of impact investing takes another turn with a bond that targets deaths in India of newborn babies and mothers in childbirth.

UBS says that it has launched the world’s first healthcare development impact bond aimed at reducing the number of maternal and newborn deaths in Rajasthan, India.

Interventions will be delivered by NGOs Population Services International (PSI) and HLFPPT and will reach up to 600,000 pregnant women with improved care during delivery and could lead to up to 10,000 maternal and newborn lives being saved over a five year period. The impact bond was designed by Palladium, who will manage implementation throughout the three-year term. The Swiss bank’s UBS Optimus Foundation will provide up to $3.5 million of initial working capital so service providers can begin their work with private facilities in Rajasthan.

The area has one of the highest maternal and new-born mortality rates in India, with 244 maternal deaths per 100,000 births and 47 infant deaths per 1000 live births. The Maternal and Newborn Health DIB – known as the “Utkrisht bond”, taken from the Hindi for “Excellence” – will support government efforts to reduce maternal and new-born deaths by improving access to, and the quality of care in, up to 440 private healthcare facilities in Rajasthan, UBS said in a statement late last week.

All implementation partners co-invest in the programme, contributing more than 20 per cent of the capital required. USAID and MSD for Mothers have committed a total of up to $8 million in outcome funding, provided a set of independently evaluated targets are met.

The success of the Utkrisht bond will be judged on whether healthcare facilities are able to achieve the new certification standard developed by the National Accreditation Board of Hospitals and Healthcare Providers and the Federation of Obstetric and Gynaecological Societies of India. This means that, for the first time, quality maternal care will be certified and fully transparent in private health facilities, UBS said.

MSD for Mothers is MSD’s 10-year $500 million initiative to help create world where no woman dies in childbirth. MSD for Mothers is an initiative of Merck & Co, Kenilworth, New Jersey, US.

Impact investing is a term applied to when money is put to work to bring about certain outcomes - such as cuts in criminal re-offending rates, illiteracy or pollution - in addition to generating a financial return. There is debate on whether impact investing can match, or even beat, traditional approaches to money management; as the approach is put to work over time, it is hoped that more data will emerge to allow investors to compile benchmarks of performance. Impact investing is a relatively young field and not yet tested by a major recession.

According to a recent survey of US asset managers by Cerulli Associates, the analytics firm, a rising percentage of asset managers look at environmental, social and governance factors alongside more traditional financial tests to identify opportunities and risks. And a recent report by Boston Consulting Group and MITSloan Management Review found that investments that deliver financial results are closely correlated with those that are deemed sustainable (Investing For A Sustainable Future, 11 May 2016).

Separately, a study by Barclays found that investment-grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015 (source: MSCI). Impact investing has a way to go in terms of size, but the amounts are already large. There are $60 billion of impact investing assets under management, and $12.2 billion of fresh investment was expected to be put in place last year, according to the Global Impact Investing Network, a forum for the sector. One forecast has impact investing AuM topping $3 trillion over the next decade.

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