WHO global coordination mechanism on the

prevention and control of noncommunicable diseases

Working Group on how to realize governments’

commitment to provide financing for NCDs

(Geneva, 23-24 February, 2015)

Policy Brief

Innovative financing for NCDs

by

Craig Courtney

This document was prepared by Mr Craig Courtney. The author is responsible for the views expressed in this publication. This document does not represent an official position of the World Health Organization. It is a tool to explore the views of interested parties on the subject matter.

1

This policy brief is one of three relating to the commitment by Heads of State and

Government at the High Level Meeting of the UN General Assembly on the

Prevention and Control of Noncommunicable Diseases in September 2011 to explore

the provision of adequate, predictable and sustained resources, through domestic,

bilateral, regional and multilateral channels, including traditional and voluntary

innovative financing mechanisms. A separate discussion paper summarises lessons

learnt to date and possible approaches to support Member States to realize this

commitment. All papers are available on the website of the WHO global

coordination mechanism on the prevention and control of noncommunicable

diseases (GCM/NCD) http://www.who.int/nmh/ncd-coordination-mechanism/en/.

This policy brief on innovative financing for Noncommunicable Diseases (NCDs)

provides a situation analysis of innovative financing, current modalities, innovative

financing landscape and NCDs, and opportunity (innovative finance models for NCDs).

It is important to note that, for purposes of this paper, we make simplifying

assumptions to more easily isolate the revenue potential of the innovative finance

mechanisms considered here. In particular, these are that (a) all the money would

be earmarked for NCDs, and moreover, (b) all of this would be additional money (i.e.

there would be no “normal” response of budgetary authorities to reallocate existing

spending away from NCDs, or the health authorities shifting priorities away from

NCDs in response to these new funding mechanisms). In reality, of course, these

assumptions are not likely to hold in their entirety, and hence that the real revenue

potential would be somewhat less than described herein.

Summary

Collectively, since 2000, innovative finance mechanisms generated US$ 94

billion, US$ 7 billion of which has been mobilized in support of global health

issues.

Within the NCD space, voluntary contribution models exist supported by

individuals and corporations like the Pink Ribbon campaign to raise

awareness and funds for breast cancer and the Go Red for Women Group

aimed at reducing heart disease in women through awareness raising

campaigns.

A proposed Solidarity Tobacco Contribution “micro levy” to skim small

percentages off the top of tobacco product purchases and redirect these

monies towards international health efforts has also been considered

(Continues over page)

2

1. Situation analysis

While there has been an overall increase in development assistance for

Noncommunicable Diseases (NCDs), a significant funding gap exists. Considering the

gap between resources available and resources needed to prevent and treat NCDs,

plus the general concern about the availability and sustainability of global health

financing, innovative financing structures are emerging as potential solutions to

provide more stability. While not expected to serve as a replacement for traditional

health financing, such structures may help to supplement existing funding, increase

its effectiveness, and incentivize innovation in targeted areas.

The opportunity set out below is designed to generate additional finances for

deployment by WHO Members States. Hopefully, their use would not offset any

current funding but instead increase monies available to nongovernmental bodies,

including civil society organizations and private enterprises, thereby further

supporting the lessening of the financing gap. This is in direct correlation to the

developments in the innovative financing sector, in which there is a move to

continue using mechanisms to raise additional funding, but also an increased push to

use innovative finance structures to share risk and provide incentives to different

actors.

2. Current modalities

1) Innovative financing overview

Innovative finance has been gaining momentum continuously for more than a

decade. In 2002, the Monterrey Consensus recognized “the value of exploring

innovative sources of finance”, stimulating a wide range of efforts to build and

Summary (Continued)

Very few financial mechanisms exist focused specifically on NCDs. Of those

mechanisms designed to address NCDs, most are funds aimed at raising

additional financing (e.g. Battle Against Cancer Investment Trust – donates

a portion of its fund management fees to cancer charities).

Innovative finance is expected to reach US$ 24 billion per year in 2020

across all sectors, so there is opportunity to tap into these mechanisms as

an additional support of NCDs as a further US$ 18 billion is also expected for

global health.

3

implement a variety of new mechanisms, mobilizing countries on a number of levels,

with the aim to meet the agreed upon Millennium Development Goals1 . In 2004, the

Landau report2 identified the feasibility of new financial sources such as solidarity

levies and market-based mechanisms that could be coordinated internationally but

implemented at a national level and in 2005 the Declaration on Innovative Sources of

Financing for Development was endorsed by 79 Heads of State at the United

Nations3. This high-level declaration has been regularly readdressed, at the call of

the Leading Group on Solidarity Levies to Fund Development, which was renamed in

May 2009 as the Leading Group on Innovative Financing for Development4. With the

pilot phase complete, several structures are in place and new ones are being

planned beyond the initial activities in the health sector. Although the initiatives in

health, including The Global Fund to Fight Aids, Malaria and Tuberculosis (Global

Fund), Global Alliance for Vaccines and Immunisations Alliance (GAVI) and UNITAID

remain the “success stories” of the formative years of the innovative finance world.

Today, innovative sources to fund development include a wide range of different

structures. They are not limited to Taxes and Levies, but include voluntary

contributions and market-based financial mechanisms. They are characterized by

being stable, long-term and complementary to official public aid and are oriented

toward widening the shared benefits of globalisation. New actors have also

emerged. The topic of innovative financing has received considerable international

attention, in particular through the work conducted by the High-Level Task Force on

Innovative International Financing for Health Systems, as well as the Leading Group5.

The concept of innovative finance now extends to many diverse forms of funds,

guarantees, insurance mechanisms and loans. Collectively, since 2000, these

mechanisms have generated US$ 94 billion according to a September 2014 study by

Dalberg Global Development Advisors, US$ 7 billion of which have been mobilized in

support of global health issues6.

Moreover, financial mechanisms (e.g. guarantees, funds, loans) represent a large

portion of innovative finance models that already exist. Furthermore, innovative

finance as a sector is expected to reach US$ 24 billion per year in 2020 across all

sectors. So consequently there is more opportunity to tap into these mechanisms in

the support of NCDs as an additional US$ 18 billion is also expected for global

health7. In addition to the previously tested models (e.g. GAVI), several additional

areas are ripe for innovative financing, examples of which include mHealth (mobile

platforms for collecting data, technology platforms for education and diagnostics),

new diagnostic tools, nutrition (micronutrients and biofortification), and

reproductive health (e.g. long-term birth control solutions).

4

2) Sustainable investment

Alongside innovative finance is the emergence of sustainable investing whereby

investors take environmental, social and governance factors into consideration when

making investment decisions. This growing opportunity suggests that there will be

more capital flowing to structures that explicitly account for the

social/environmental/governance/ethical (ESG) profile of companies. The most

recent bi-annual survey of ESG investment structures in the US published in 2010,

identified US$ 3.1 trillion in investment funds while in Europe over US$ 5.0 trillion

has been reported. The growing movement towards sustainable investment is

another opportunity to increase funding to companies that prioritize activities to

treat or prevent NCDs8.

3) Impact investment

Impact investing, which is a smaller theme under the umbrella of sustainable

investment, is yet another area of opportunity to direct funding to NCDs. Impact

investors are proactively investing their capital into entrepreneurs and social

entrepreneurship business models designed to generate a positive environmental

and/or social impact, with the opportunity for some financial return. Microfinance is

the most mature and well known of the impact investing sectors. Both the Bill and

Melinda Gates Foundation and the Kellogg Foundation have recently dedicated

hundreds of millions of dollars to social and ‘mission driven’ investments along with

smaller investments from the likes of the Rockefeller Foundation, Soros Economic

Development Network, Omidyar Network, Skoll Foundation, Ford Foundation, and

the Children’s Investment Fund Foundation among the most prominent players9.

While the size of the market is difficult to establish, it is growing and this growth only

stands to accelerate in the coming years. In a recent J.P. Morgan report, the interest

of large investors in impact investing is highlighted and estimated to be upwards of

US$ 1.0 trillion 10.

3. Innovative financing landscape and NCDs

Innovative financing approaches can address several key areas surrounding NCDs.

For instance, new structures can be created similar to those already existing within

the health sector landscape (e.g. UNITAID11 , International Finance facility for

Immunisation 12 ) to channel additional public funds, increase private capital

(philanthropic and investment) for scaling up interventions, encourage cost

reduction in new product and service delivery systems, and address constraints for

delivering products. The structures should not be considered as a substitute for a

country’s financing authority to allocate away resources from health or NCDs but as

5

a means to increase overall funding into NCDs and should not lead the health

authorities to reallocate some existing revenues to other purposes.

The existing landscape for all innovative finance modalities fall into one of three

categories: voluntary contributions, taxes/levies/lotteries and financial mechanisms.

The following provides insight into these three types of models and describes

whether or not there are NCD specific modalities in today’s innovative finance

landscape.13

1) Voluntary contributions

Typical modalities of voluntary contributions have included credit card rounding

plans, lotteries and cause-related marketing schemes (i.e. type of marketing

involving the cooperative efforts of a for profit business and a non-profit

organization for mutual benefit). For these to be successful a strong brand is critical

to raise the contribution levels and the link between the contribution and the cause

to be funded needs to be clear. Without a clear link the contribution will not be

sustainable, and it will be eroded by competition. Examples include Product (RED)

for HIV/AIDS and within the NCD space, the ‘Pink Ribbon’ campaign to raise

awareness for breast cancer and raise funds for the Susan G Komen Foundation14.

Additionally, within the NCD area there is the ‘Go Red for Women Group’ that aims

to reduce heart disease in women through raising awareness campaigns supported

by individuals and corporations15. These mechanisms are designed to bring in

additional financial resources and have the additional benefit of raising awareness of

the issues amongst consumers and employees. This mechanism could be compelling

to increase the visibility of NCD issues on the global agenda and could draw in

additional financing from more traditional sources. However, it would be

presumptuous to expect a voluntary contribution scheme to draw significant

additional capital as a stand-alone initiative. Furthermore, while it is possible that

momentum could be significant early on, using this mechanism to generate funds in

the long-term is probably only supplementary and positive in terms of advocacy.

2) Taxes and levies

Innovative structures in this category aim to provide additional funding through the

creation of an additional tax or levy structure or national/regional/local lotteries

allocating portion of monies earned to specific causes. Examples in this category

include: UNITAID and the Belgian Fund for Food Security and Lottery Mechanism. In

the NCD space, taxes and levies have been under serious consideration both at the

national level as set out in Policy Brief on Domestic Financing with the introduction

of earmarked excise taxes to curb consumption and also at the international level

6

with initiatives that would expand on the idea of the UNITAID airline tax scheme. A

proposed Solidarity Tobacco Contribution “micro levy” would skim very small

percentages off the top of tobacco product purchases and redirect these monies

towards international efforts, namely health related16. There is strong support for

such initiatives but one of the challenges that remains is the ability of developing

countries to ensure adequate collection and effective redistribution of such a tax for

which there is learning to be garnered from several Scandinavian countries. An

additional consideration is that lotteries tend to be a regressive instrument for

raising revenues, with the poor contributing more as a share of their income than

the rich. Moreover, the potential of new earmarked mechanisms such as lottery

revenue have the possibility to be offset by declines in discretionary allocations.

3) Financing mechanisms and facilities

Financial mechanisms and facilities is a broad category that covers all models

including funds, guarantees and loans from both the sustainable and impact

investing sector. From the existing research, there is not one type that emerges as a

more popular mechanism than another in addressing health and specifically NCDs,

although many of the most successful innovative financing mechanisms globally, are

examples from the health sector, namely Global Fund and GAVI17. Furthermore,

there are very few focused specifically on NCDs. The vast majority of the

mechanisms designed to address NCDs are funds that are expected to identify

additional financing like the Battle Against Cancer Investment Trust – which donates

a portion of its fees to cancer charities18. Another example of a fund supporting a

specific NCD is the Livestrong Foundation that collaborates with an investment fund

and channels money into the foundation to support its activities in cancer

prevention and treatment and patient support 19 . There are few funds that

encourage a more sophisticated role for innovative financing that might include the

development of a mechanism via which the private sector can share risks and

rewards or via results-based financing. For example, there are a few investment

funds investing in clean cook stove technologies to alleviate respiratory diseases

(e.g. Global Alliace for Clean Cookstoves Spark Fund)20. NCDs are also often included

in funds that seek to invest in healthcare, hospitals or childcare themes, and/or that

have a focus on primary health or services. There are few select investment funds

with an approach to seek different healthcare models for investment globally – for

example in primary health and clinics in developing countries. There also exist a few

investment funds for the health sector but these are in early days of development

and investing. According to JP Morgan estimates, of impact investments totaling

over US$46 billion, only US$2.76 billion have been invested in the health sector in

recent years. Nevertheless, estimates indicate a growing market and based on their

7

review of existing and forecast market demand they also estimate that the total

market for investment in health is growing and could be as large as US$ 18 billion –

US$ 123 billion21. In fact, healthcare is behind only food and agriculture as the

category that will see the biggest increase in investments in the coming years. Many

innovative finance mechanisms involve the private sector as a key partner and as

such it is important to recognize the potential conflicts of interest that may warrant

further consideration.

4. Opportunity – Innovative finance models for NCDs

For NCDs it will be important to determine what strategy to adopt going forward for

innovative finance, namely, i) getting existing innovative finance mechanisms to

embrace NCDs (i.e. get the leading group on innovative financing for development to

focus also on NCDs, how do we collaborate with the existing organisations in this

field (GAVI, UNITAID, GFATM) to include NCDs linked to the post 2015 agenda) or ii)

developing new innovative finance mechanisms for NCDs. No matter which strategy

is chosen it will be important that the innovative finance models set out below

should promote integration of the overall health system, particularly interventions

delivered at the primary health care level and the provision of a comprehensive

package of care which includes NCD related interventions.

Building upon the review of the landscape of existing innovative finance models a

few innovative finance model ideas are described below which would be new for

NCDs. The models are a starting point for GCM/NCD consideration and are based on

the voluntary contribution, taxes/levies and financial mechanisms precedents set

out above. They would attract new additional fund flows or investors’ interest in

areas relevant to NCDs and cover different types of investment opportunities, with

different roles for Member States, and different levels of design and implementation

complexity. Set out in the diagram below is an overall view of the various models

available to support addressing NCDs:

8

Figure 1 Overview of innovative financing modalities for NCDs

There are many models to explore, and this paper offers just three to test different

parameters of how to build and what architecture to test which will best fit the

demand from donors/investors, the need for different types of capital (investment,

public and philanthropic), industry players and how Member States could be active

in this space. The three models are not exhaustive, and many more models and

variations of these may be explored. Three models are presented here to generate

creative debate, namely: NCD Financing Trust Fund, NCD Global Solidarity Levy and

the NCD National Bond:

1) NCD financing trust fund (a financial mechanism and voluntary contribution model) A NCD Financing Trust Fund (FTF) could be a mechanism financed by a

government/foundation and administered by a group of Member States with

another multi-lateral agency (e.g. World Bank) as the trustee. Select partners of the

WHO (International Finance Institutions or Development Finance Institutions) could

be authorized to issue debt instruments with sovereign entities in high burden

countries, and other institutions (i.e. NCD sector experts/implementing agencies) be

integrated to accept resources from donors. The FTF could be developed in close

collaboration with a broad range of stakeholders, including WHO, Member States,

the World Bank Group, civil society organizations; bilateral and multilateral

development partners; foundations; private sector and others working in the areas

relevant to NCDs. The FTF resources could be provided to countries in conjunction

with low-interest loans and grants from the International Development Association

Expandingsolidaritylevies

EncouragingVoluntary

Contribu ons

CatalyzingPrivateFinancialInvestment

NCD Funding Platform

Raisingnewtaxes(e.g.tobacco,alcohol,fats)

Raisingtaxes/levies

Interna onalFinanceFacili es

Financialriskmi ga onmodali es

Resultsbasedfinancing

S mula ngnon-taxflows

GenerateResources

Redu

cerisk/Add

resscon

straints

Resultsfocused Morepredictable Flexiblestructures Mi gaterisks

9

(IDA), the World Bank Group’s fund for the poorest countries. In addition, the FTF

could align the International Finance Corporation or other relevant regional

Development Finance Institutions to create a private sector financing facility to be

available in select countries. The FTF will support countries in their efforts to

mobilize additional domestic and international resources required to scale up and

sustain essential services for vulnerable populations and has been pursued in other

sectors (e.g. as is planned with the new Global Financing Facility for Reproductive,

Maternal, Neonatal, Child and Adolescent Health)22.

2) NCD global solidarity levy (a tax/levy example) There is an established link between cigarettes, alcohol and unhealthy foods

consumption and the prevalence of NCDs. A small micro levy with proceeds

earmarked for NCDs is administratively similar to any other indirect tax.

Furthermore, it can be used to raise funds on a global or regional basis to

redistribute funds from middle income to lower income countries. The Solidarity

Tobacco Contribution (STC) concept builds on and is additional to existing national

taxes on tobacco, alcohol and fats products and broader WHO recommendations for

countries to raise their taxes for public health goals. The STC does not replace

existing national excise taxes or the need to increase them to WHO recommended

levels. For international health purposes, it represents a voluntary contribution by

participating Member States based on a solidarity principle. The STC benefits from

lessons learned from other innovative financing for health mechanisms (i.e.

UNITAID). The STC would thus achieve three simultaneous benefits for countries and

people:

Strong public health benefits and impact by reducing tobacco, alcohol and fats

consumption and saving lives.

Raising national revenue that could be used to support health, specifically NCDs.

Support for international health efforts in developing countries.

3) NCD national/regional bond (a financial mechanism model)

Bond financing is predictable and would be purchased by individuals and institutions

and the government would use the monies raised for NCD interventions. Through

purchasing these bonds, the private sector may see this as a means to improve their

Corporate Social Responsibility (CSR) (and may also benefit them in terms of gaining

employee involvement). Therefore, an NCD-specific government bond could be

issued at a lower rate of interest than other government bonds. Because NCD service

delivery frameworks, and borrowing costs, vary by country, the case for borrowing

to finance an investment approach should be examined on a country-by-country

10

basis. In addition, countries must be aware of the wider consequences of

government borrowing. For example, there can be negative macroeconomic

consequences of increasing the government deficit. An NCD bond backed by the

government with supplementary last-resort backing from international institutions,

carefully designed and issued by a specialized financial institution, to finance time-

limited cost-effective activities, seems to have all characteristics of a feasible and

potentially successful financing option and has been successful in other sectors (i.e.

education)23.

11

References

1 Financing for Development. Monterrey Consensus of the International Conference on Financing for Development. United

Nations Department of Economic and Social Affairs Monterrey Consensus. March 2002.

(http://www.un.org/en/events/pastevents/pdfs/MonterreyConsensus.pdf)

2 Groupe de Travail sur les nouvelles contributions financiers internationales. December 2004.

(http://www.diplomatie.gouv.fr/en/IMG/pdf/LandauENG1.pdf)

3 Development CO-operation directors development assistance committee. Working party on statistics: Mapping of some

important innovative finance for development mechanisms. OECD. 2011. http://www.leadinggroup.org/IMG/pdf/DCD-DAC-

STAT-RD_2011_1-RD1-ENG_IFD-3.pdf

4 Innovative Financing to Fund Development Leading Group. Peer review of existing innovative financings for development.

March 2012. (http://www.leadinggroup.org/IMG/pdf/Mapping_FIDENG-3.pdf)

5 Le Gargasson, Jean-Bernard and Bernard Salomé. The Role of Innovative Financing Mechanisms for Health. World Health

Report. 2010. (http://www.who.int/healthsystems/topics/financing/healthreport/InnovativeBP12FINAL.pdf)

6 Dalberg. Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, Environmental

Outcomes. September 2014: 5-6. 7 Dalberg Global Development Advisors. Innovative Financing for Development: Scalable Business Models that Produce

Economic, Social, Environmental Outcomes. September 2014: 21-24 http://www.citifoundation.com/citi/foundation/pdf/innovative_financing_for_development.pdf

8 Freireich, Jessica and Katherine Fulton. Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging

Industry. The Monitor Institute. 2009. http://monitorinstitute.com/downloads/what-we-think/impact-

investing/Impact_Investing.pdf

9 Investing for impact: How social entrepreneurship is redefining the meaning of return. Credit Suisse Research Institute and

Schwab Foundation for Social Entrepreneurship. January 2012.

http://www.weforum.org/pdf/schwabfound/Investing_for_Impact.pdf

10 JP Morgan and Global Impact Investor Network. Spotlight on the Market: Impact Investor Survey, May 2014.: 31-35 http://www.thegiin.org/binary-data/2014MarketSpotlight.PDF

11 http://www.unitaid.org/en/how/innovative-financing (accessed 4 December 2014) 12 http://www.iffim.org (accessed 21 November 2014) 13 Atun, Rifat et al. Innovative financing for health: what is truly innovative? 24 October 2012; Center for Global Development:

Development Impact Bond Working Group Report. Consultation Draft. Washington, DC, 2013; Center for Strategic &

International Studies - Innovative Financing for Global Health, 2012; Expert Working Group (WHO) Online database of

innovative financing mechanisms, 2009; Global Health Technologies Coalition - Incentives and Innovative Financing to

Accelerate Global Health Product Development, 2012; Innovative Development Finance (IDF), Reference Note for National

Committee Advocacy, Draft v11 – 3 September 2013; Joseph, J., Social Innovation in Acceleration: Building the Social Impact

Bond Ecosystem. Forbes Online, 2013; Social Impact Bonds: A new frontier of innovative financing for children? Kimberly Ochs,

2013; Taskforce on International Financial Transactions for Development – Globalizing solidarity: the Case for financial levies,

2013; U.S. Global Health Policy: Innovative Financing Mechanisms For Global Health: Overview & Considerations for U.S.

Government Participation, October 2011; World Bank – Landscape of innovative financing, 2007.

14 www.komen.org (accessed 21 November 2014)

15 www.goredforwomen.org (accessed 21 November 2014)

16 Ross, Alex and Douglas Bettcher. WHO Discussion Paper. The Solidarity Tobacco Contribution: A new international health

financing concept prepared by the World Health Organization. October 2011. (http://www.who.int/nmh/events/un_ncd_summit2011/ncds_stc.pdf)

17 Atun, Rifat, Felicia Marie Knaul, PhD, Yoko Akachi, PhD, Julio Frenk, PhD. Innovative financing for health: what is truly

innovative? Published online 24 October 2012. http://dx.doi.org/10.1016/S0140-6736(12)61460-3.

12

18 Battle Against Cancer Trust 2013.www.bacitltd.com (accessed 21 November 2014)

19 American Century Investments. https://www.americancentury.com/content/americancentury/corporate/en/press/news-

releases/2013/new-share-class-and-renamed-target-date-funds.html.

20 www.cleancookstoves.org/funding-opportunities/ (accessed 12 December 2014) 21 JP Morgan. Insight into the Impact Investment Market: An in-depth analysis of investor perspectives and over 2,200

transactions. December 2011: 31-35.

22 Global Financing Facility in Support of Every Woman, Every Child. 2014. (http://www.worldbank.org/en/news/press-

release/2014/09/25/development-partners-support-creation-global-financing-facility-women-children-health).

23 IDB launches inaugural Education, Youth, and Employment (“EYE”) Bond. September 2014.

http://www.iadb.org/en/news/news-releases/2014-09-17/idb-launches-inaugural-eye-bond,10914.html. This policy brief does not represent an official position of the World Health Organization. It is a tool to explore the views of interested parties on the subject matter. References to international partners are suggestions only and do not constitute or imply any endorsement whatsoever of this policy brief. The World Health Organization does not warrant that the information contained in this policy brief is complete and correct and shall not be liable for any damages incurred as a result of its use. The designations employed and the presentation of the material in this discussion paper do not imply the expression of any opinion whatsoever on the part of the World Health Organization concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement. The mention of specific companies or of certain manufacturers' products does not imply that they are endorsed or recommended by the World Health Organization in preference to others of a similar nature that are not mentioned. Errors and omissions excepted, the names of proprietary products are distinguished by initial capital letters. All reasonable precautions have been taken by the World Health Organization to verify the information contained in this policy brief. However, this policy brief is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretation and use of the presentation lies with the reader. In no event shall the World Health Organization be liable for damages arising from its use. © World Health Organization, 2014. All rights reserved. The following copy right notice applies: www.who.int/about/copyright