On October 4th and 5th, leaders convened in Copenhagen for the GIIN Impact Forum, a platform dedicated to exploring impactful investments. While discussions mostly revolved around themes like climate, the blue economy, and agriculture, there is a critical area that deserves more of our attention: health. Astonishingly, only 7% of global impact investments are directed towards health, according to the Global Impact Investment Network’s 2020 Investor Survey. However, the health sector offers lucrative investment opportunities with substantial social impact and financial returns. For this reason, Cities Changing Diabetes hosted a roundtable for people interested in how to create an enabling environment for investments in prevention and care. The roundtable gathered experts from organizations such as Raven Indigenous Impact Foundation, The Social Investment Fund Denmark, BRAC, Novo Nordisk Foundation, World Diabetes Foundation, GSG, The Global Alliance for Improved Nutrition (GAIN), Fred Hollows Foundation, Boann Social Impact LP, Metafund, and Steno Diabetes Center Denmark.
Seizing Health Investment Opportunities
The global burden of serious chronic diseases is escalating rapidly. Worldwide, more than 540 million adults live with diabetes, and over 90% have type 2 diabetes. Some regions, particularly low- and middle-income countries, face an urgent challenge, with approximately 80% of individuals with diabetes residing there. Asif Saleh, Executive Director at BRAC Bangladesh, spoke about how non-communicable diseases are responsible for 70% of all deaths in Bangladesh and that an aging population and climate change are only going to make the problem worse. The recommended WHO target for health-related spending in Bangladesh is 7.5% of GDP but is currently only receiving 2.63%. On the African continent, diabetes-related health expenditures are set to soar from $13 billion in 2021 to $43 billion in 2023. These numbers show that there is a great investment gap that needs to be addressed.
Investing in Prevention and Care: High Returns
We understand the root causes that contribute to the surge of chronic diseases: unhealthy diets, physical inactivity, and limited healthcare access. Implementing recommended strategies that combat non-communicable diseases (NCDs) yields an impressive average return of €7 for every €1 invested, according to the WHO. Preventing minor diabetes-related complications can save approximately €7,000 per person annually, while averting major complications costs about €15,000 per year. While these facts were widely known to the roundtable participants, the question of why health resources are still predominately spent on treatment still stands. So, what's preventing us from taking the leap?
Unlocking Health Investments through Outcome-Based Financing
As we confront the challenge of addressing non-communicable diseases, unlocking investments in health becomes paramount. Innovative financing mechanisms, with outcome-based financing (OBF) at the forefront, hold the potential to both attract further investments in health and deploy current invested resources more efficiently. Outcome-based financing is a broader term, encompassing financial instruments such as impact bonds and results-based contracts, and hinges on multi-sector partnerships between governments, service providers, and investors to achieve predefined outcomes. During the roundtable conversation, Jeff Cyr, CEO of Raven Capital Partners, also noted the strategic role of the intermediary in bridging pathways between communities in need, outcome purchasers, and impact investors.
While introducing and deploying new finance models can be tricky, all participants agreed that outcome-based financing mechanisms hold real potential for reducing the health burden.
Based on a lively discussion on the opportunities and challenges of outcome-based financing at the roundtable discussions, the moderator distilled the following key messages and a clear call to action:
- 1. Share Success Stories: Let's increase the sharing of success stories and learnings related to outcome-based financing to inspire and inform.
- 2. Reduce Frictions in Current Environments: Creating a conducive environment for outcome-based financing is crucial. Let's identify and help eliminate obstacles to maximize its potential.
- 3. Provide Capital for Scaling: Capital is essential to scale existing and future outcome-based financing initiatives and make a more significant impact in the health sector.
Investing in health isn't just a moral imperative; it's a financially sound decision. We have the knowledge and tools to address the global rise in chronic diseases. By embracing outcome-based financing and creating enabling environments, we can accelerate progress toward a healthier and more equitable world.
We look forward to collaboratively building on the insights that resulted from this very important conversation.
Interested in learning more about why investing in health makes sense? Read the article by Jo Jewell, Director of Cities Changing Diabetes and Jeff Cyr, CEO of Raven Capital partners here .
