The future of humanitarian funding – can the private sector make a real impact in conflict-hit countries?

By Guy Smith, Partner at Newgate Communications

Hardly a day goes by without a headline about armed conflict and violence somewhere in the world.

Civilians rather than soldiers are, all too often, the main victims. They are killed, maimed, suffer abuse or other violations. Their homes and schools are destroyed. And, forced to flee, many end up in displacement camps – the average time spent before they can return home is more than 20 years.

The names are familiar – South Sudan, Yemen, Syria, Afghanistan, Mali, Venezuela. Right now, 200 million people from these countries and elsewhere are affected by ongoing crises.

Interestingly, the cost of all this is estimated at more than 10% of total global gross domestic product.

This morning Peter Maurer, President of the International Committee of the Red Cross (ICRC), was in conversation with Lauren Taylor, Senior News Presenter at Al Jazeera English, at Newgate Communications’ UK headquarters in the City of London.

‘Why the City?’, you may ask. Well, the question being posed was how humanitarian aid should be funded in the future. Protecting the lives and dignity of victims of war and providing them with assistance doesn’t come cheap. And the funding gap for humanitarian work is growing.

Usually the taxpayer or generous benefactors have picked up the bill. For over 155 years, the ICRC has funded itself with philanthropic donations and grants from governments and multilateral institutions. But it is increasingly difficult to secure donor and/or political support over the long-term.

Now the non-profit organisation is looking to the private sector to get more involved, to invest, secure a financial return and have a real positive social impact. Those attending this morning’s breakfast seminar included some of the biggest names in Financial Services.

Appeals by the United Nations amounts to around USD$25 billion a year. By contrast, there is almost $300 trillion sloshing around global capital markets, a tenth of which is in sustainable investment strategies. According to the ICRC, the issue is not a lack of investors for these strategies but a dearth of such projects to invest in.

In 2017, we supported the International Committee of the Red Cross. Our team helped promote the launch of the world’s first ever Humanitarian Impact Bond (HIB). It was created to provide vital services for people with disabilities in conflict-hit countries.

The capital raised for the bond – 26 million Swiss Francs – is being used to build and run three physical rehabilitation centres in Africa (Nigeria, Mali and Democratic Republic of Congo). The payment for results programme is the ICRC showing that you can move from solely donations or grants to partnering with the private sector to support people in desperate need.

Peter Maurer said they’re looking for more investors like Bank Lombard Odier and Munich Re who invested in the HIB – the kind of investors that still want to make a profit while doing good.

Naturally the words “high risk” were raised. Mr Maurer added that the ICRC had a long history of delivering impact even in the most challenging of places. For the HIB, the risk was shared between private investors, donors and the ICRC. For example, the ICRC puts up 10% first loss capital. The private investor is taking the performance risk on whether the ICRC can build and then deliver results.

He stressed rigorous measurement of the results (for example, how many people receive wheelchairs, artificial limbs and braces) was key to ensuring confidence.

The ICRC has ambitious targets – by 2025 it hopes to raise 200 million Swiss Francs from private investment – nearly a tenth of its current annual budget.

The vision is ultimately to secure private capital to assist and protect millions in conflict zones around the world. Could innovation and new funding models be the way to bridge the gap between humanitarian needs and the capacity to meet them?