All Hail Vaccine Bonds

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    The sun is shining, our annual Midsummer bacchanalia is right around the corner, and local health authorities give at least the impression that they are no longer just fumbling in the Corona dark. There is a sweet promise of normalcy in the air. Even the annoying delays of lockdown easing and vaccine passports can’t spoil the mood at this point. It takes some willpower to resist joining in the inebriated celebration of life that high-school graduates exhibit amply this time of the year.

    It is easy to forget just how lucky and privileged we are in our moment of joy. Trust the Economist to spoil the party by reminding us earlier this week. “Today, the world’s economic prospects […] depend on another all-important input, vaccines, which are also narrowly produced, delicately political – and unevenly distributed.” While we are celebrating, of course, more severe delays in buying, making, and deploying shots have left many parts of the world vulnerable to new virus outbreaks and economic setbacks.

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    I refuse to succumb to guilt-induced gloominess, however, and choose instead to celebrate those offering solutions. Remember how we used to clap our hands in sync and shout enthusiastically in support of the many tireless health workers at the beginning of the pandemics? Today I want to clap my hands and give a shout for vaccine bonds and for the tireless financial workers and investors stepping up and making it possible to act quickly to secure vaccine doses to the world.

    We all know, of course, that the sums needed to roll out vaccination programs in lower-income countries are enormous[1]. And while there is no lack of pledges from wealthy countries and generous philanthropists, the reality is that it takes time for the money actually to start showing up. Enter our financial heroes, like The International Finance Facility for Immunisation (IFFIm). Built upon partnerships between donor countries, private investors, the World Bank and Gavi (the Global Alliance for Vaccines and Immunisation), the single purpose of this admirable facility is to turn promises into cash on hand, quickly.

    IFFIm knows what they are doing, too. Ever since issuing the world’s first social bond in 2006, they have been doing precisely the same thing: turning pledges into vaccine bonds, harnessing the power of capital markets, and putting those pledged contributions to work immediately.

    And IFFIm is not alone either. Last year, the World Bank issued the largest ever supranational US dollar-denominated sustainable bond, aimed at helping countries with their pandemic recovery, including vaccination efforts in developing countries.

    Then there are the investors. Of course, you could argue that they are in it for the money. After a few years, as donors make good on their promises, investors in vaccine bonds can look forward to receiving a return on their capital. Maybe the summer mood is making me more gullible, but it does seem to me that most investors in these particular instruments are motivated rather by the desire to make a positive impact. After all, the urgency of the task at hand has been in plain sight for anyone this time around.

    So, here’s to those financial heroes! Thanks for reminding me, and the rest of the world, that “the purpose of finance is to connect those that have to those that need,” to quote Jingdong Hua, World Bank vice-president and treasurer.


    Image by Guillermo Latorre on Unsplash




    [1] International organisations estimated that vaccinating a fifth of Latin America and the Caribbean could cost more than $2 billion while rolling this out to priority populations in Africa would come to nearly $6 billion.

    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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