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Red Cross launches humanitarian impact bond

Private sector needed for alternative financing; outcome funders looking for greater efficiency.

The International Committee of the Red Cross (ICRC) launched the world’s first humanitarian impact bond in September. 


Ten investors, including New Re (part of Munich Re) and Lombard Odier through its foundation, have put forward an initial SFr26 million ($27 million) that the ICRC will use to research, build and run three new physical rehabilitation centres in Africa over the next five years. 

Of the 90 million people with physical disabilities who need a mobility device worldwide, only 10% have access to adequate rehabilitation services.

The impact bond, which took two years to develop with advice from third parties including Kois Invest, has a unique structure, and is more akin to a private placement or a loan with a variable return than to a conventional bond. 

At the end of five years, investors will be reimbursed from funds from five outcome funders (the governments of the UK, Switzerland, Belgium and Italy, and Spanish bank La Caixa’s foundation) with an additional return if the programme meets its targets. Those targets are based on efficiency, such as how well the three new centres compare with ICRC’s existing 130 facilities. 

Tobias Epprecht, who heads the project at the ICRC, says that for the first three years, funds will be invested in researching best practices, among other things, before operations can begin. 

One efficiency target to be verified by independent auditors at the end of five years will be the ratio of persons having regained their mobility per member of staff, compared with an historical average. If above target, the return payment from outcome funders will include a positive return. If the target is not met, the investor will lose a part of the investment. 

New era

The bond marks a new era of cooperation between private, public and humanitarian agencies. “We simply have to move from billions to trillions on sustainable development goals – even with every developed government contributing their 0.7% of GDP, we would not hit that target,” says Alexander De Croo, deputy prime minister of Belgium and minister of development. “So, we have to enable other financial streams.” 

He points out the importance of introducing efficiency measurements when it comes to humanitarian aid: “Not only do governments not have enough resources to meet demands, but, as a minister of development, there is a broader frustration because you are measured only on what you spend. It would be much better to be measured by the quality and impact of our actions. We’ve been trying to move towards metrics that look beyond whether your efforts are 0.7% of GDP but rather something more intelligent. This bond is certainly one of the first steps.”

De Croo admits that introducing terms whereby private investors are paid a profit by the outcome funders is a challenge. The law had to be changed in Belgium to allow for the structure. 

“That took some convincing,” he says. “Our offshore wind parks are successful and profitable. We know that investing in the field of sustainable energy works, therefore, in a for-profit environment. Now we need to convince people investing in humanitarian initiatives it is valuable. It’s a hard sell, but I’m confident in five to 10 years’ time, it may be seen as more normal.” 

We need to work through how it can be standardized and brought to scale like the climate bond market. Hopefully this transaction will inspire others so we can get this rolling - Maximilian Martin, Lombard Odier

Epprecht says that for future similar structures, it is outcome funders that will be needed: “That means providing data and baselines, and predictability, so not every scenario could be a fit. There has to be an attractive scenario where everyone gains something.” For La Caixa Foundation, the bond fits perfectly with its own new strategic plan to engage in more innovative and transformative initiatives. 

“This isn’t just about providing devices for those in physical rehabilitation, but also supporting their families, integrating them into work,” says Ariadna Bardolet, international programmes director at the foundation. “It’s about long-term impact, improving efficiency and innovation.”The benefits to investors are obviously more tangible; participants in the bond say that appetite is certainly there. But working with humanitarian agencies is a new step for private investors. 


Most investors would be expecting more than 7% over five years from an emerging market investment. “But with an organization like ICRC and the structure of receiving a liquidity feature such as a coupon of 2%, then all of a sudden that’s very incentivizing to social investors,” says Patrick Odier, senior managing partner at Lombard Odier. 

Indeed, for similar structures to take off, participants say the humanitarian organization’s strengths will be crucial. The ICRC has had a long relationship with the outcome funders and with investors in this case. 

Maximilian Martin, Lombard Odier160x186

Maximilian Martin, 
Lombard Odier

Maximilian Martin, head of global philanthropy for Lombard Odier, says it is not hard to foresee the private sector becoming a source of efficiency capital for the humanitarian world if the ICRC programme is successful. 

“There is enough money and there are ample causes,” he says. “The private sector could step in with its know-how in creating efficiency and work with experienced partners.” 

Bardolet agrees: “We can’t work in isolation, and people are beginning to realize this. There are too many needs in developing countries that only together we can solve.” 

Since 2008, the foundation has raised €4 million from its commercial clients, which it then matched to donate to the vaccine alliance Gavi, for example. La Caixa Foundation also works with Unicef, as well as the UNHCR in Ethiopia.

Ultimately the funding gap for humanitarian interventions is just too large to ignore, says De Croo: “This year there is a need for $23.5 billion. So far only $3.5 billion has been secured, so everything that helps private investors take part is positive. This deal is smaller than we would have liked, but it’s crucial that it’s now out there and not just being talked about.” 

Martin adds: “We need to work through how it can be standardized and brought to scale like the climate bond market. Hopefully this transaction will inspire others so we can get this rolling.”