The two plans, the Vaccine Investment Isa and the Vaccine Investment Plan, aim to raise money from retail investors to help to pay for the vaccination of children in the developing world. The money raised through HSBC will go to the Global Alliance for Vaccines and Immunisation to help pay for the cost of their work. Investors are offered a rate of return of 16.2 per cent plus the return of capital invested after 5 years. Withdrawing early involves penalties.
Gavi Alliance claims that for each £1,000 invested, 130 children can be vaccinated with the pentavalent or “five in one” vaccine that tackles Hib (a cause of childhood meningitis and pneumonia), hepatitis B, diphtheria, tetanus and pertussis (whooping cough).
Overall, HSBC is seeking £50m until the closure of the plans on April 24.
Gavi Alliance is a partnership between pharmaceutical companies, governments and UN organisations such as Unicef, the World Health Organisation, international philanthropic organisations such as the Gates Foundation. It is running vaccination programmes across more than 70 countries in the developing world, including many of the world’s poorest, which come low down on developmental indices including infant mortality.
Such aid programmes are usually funded either directly by charity or by sovereign government donations but the HSBC approach is to use retail investor cash to smooth the stop-start nature of government funding.
The cash will eventually be used by Gavi Alliance but the bonds are being raised by the International Finance Facility for Immunisation. IFFIM, has AAA ratings from three rating agencies, with the plans backed by sovereign debt and the World Bank providing treasury services. IFFIM is funded by the UK, France, Italy, Spain, Sweden, Norway and South Africa.
IFFIM chairman Alan Gillespie says: “This organisation is backed by governments. It represents a combination of sovereign debt and has a prudent gearing ratio of 66 per cent. In even an extreme case, there is headroom of 34 per cent. In the world today, this is as triple A as you can get. This is a rock solid investment at a market rate of return. You have peace of mind and your money is doing an extraordinary thing. The governments are locked into 20-year pledges and pegged into exact payments every year.”
The idea of using the bond markets was conceived by Gordon Brown, to raise finance on the back of government pledges of support for vaccination programmes in the developing world.
A similar retail offering has already been offered to the public in Japan while bonds have also been offered successfully to the institutional market.
But adviser opinion is mixed, with some suggesting the plans fall between the two stools of investment and charity. Some think returns from deposit accounts may improve as the economy and markets pick up and believe locking up money for five years may not be the best advice. They suggest it might be better to seek out an investment that gives better returns and then to give any resulting return to charity.
Hargreaves Lansdown investment adviser Ben Yearsley says: “I do not think this satisfies anything, either the charitable giving or the investment need. I think you would be better off being in a proper investment and giving some of the return to a charity of your choice.”
Baigrie Davies adviser Amanda Davidson says: “There is no doubt this is a very worthwhile cause and I think we may see more of these types of investment. However, I think it is important to separate out what the investment is from its charitable aims. A return of 16.2 per cent over five years is not that startling but I am an optimist and believe markets will recover and deposit rates will not always remain so pitifully low. Given that another investment may yield more, this would enable the investor to make a donation to a cause of their choice from the proceeds.
“I think an investor needs to be clear about what they are aiming to achieve – is it a return or do they want their money to benefit people? Depending on the answer, further questions need to be asked about whether this is the best vehicle to achieve those aims.
“However, good for HSBC to have put this together. Banks do not have the best reputation at the moment and innovations like this should be encouraged.”
Premier Wealth Management’s managing director Adrian Shandley says the fund may well need a new category – not ethical or green but charitable or humanist. He says returns are low, given the lock-in, and he would expect equity markets without a protected element to beat it over a much shorter period, although predictions are difficult, but he believes the investments will prove popular with HSBC customers.
He says: “Especially coming on the back of what many perceive as an orgy of greed, putting your money to good use and getting paid for it may well prove very popular.”
Shandley is also concerned about counterparty risk in any plan of this sort, given recent problems in this area. He says if such plans were available to the IFA market, he might consider recommending it as part of a portfolio if there was client demand but he would not rush into anything as experience has taught him to wait and see if innovations of this type succeed before recommending them to clients.
Saving the children of Sierra Leone
There is no doubting the dedication of Gavi Alliance, nor the health ministry and health workers of Sierra Leone, a West African country blighted by a 10-year war which only ended in 2001.
The country is one of the poorest in Africa, second from bottom on the human developmental index. It carries the title of a post-conflict state but in many ways it is optimistic. There is a sense that the government, in power for a couple of years following reasonably fair elections and a peaceful handover of power, is keen to get on with the job and it had an eagerness and earnestness to convince a group of financial journalists from the UK that not only is there a need but also an opportunity to make a vaccination programme work. There is also a willingness and determination to demonstrate that money will not go to waste.
The developmental indices make grim reading and the health department run from one floor of a 1960s tower block in the main port and capital of Freetown, has many challenges.
However, what I witnessed seems to be working. The programme is aimed at mothers and pregnant women in a bid to eradicate many endemic diseases. The clinics we visited in and around Freetown and inland were full of mothers and babies.
We were shown the huge solar-powered freezers that hold the vaccines and much was made of needle disposal.
The babies do seem to be getting their jabs. Mothers seemed to be getting the message which is being pushed through campaigns in the local media and through village and tribal structures, and the clinics are filled with charts showing how many newborn children, under fives, pregnant women and women in general have been vaccinated.
Sadly, it is all too easy to find examples of what can happen if vaccines are not administered. One mother in a line of those referred to as defaulters at a clinic on the fringes of Freetown was there to get immunised having lost two babies to tetanus contracted at birth. A third child had survived after contracting the illness. This would have been preventable with the vaccine.
Disease is not the only problem facing Sierra Leone. It needs proper running water, literacy is just 35 per cent, although the capital supports a thriving number of newspapers, and there are many amputees around the shops and restaurants on Wilberforce Road in the capital, a legacy of the war.
The diamond mines still clearly unbalance the local undeveloped economy. Health workers are often lured away not just to Europe but also to nearby states such as Gambia where pay is much more generous.
But steps are being taken. A hydro-electric power plant being built provides the hope of more reliable power, primary school attendance figures are up to nearly 70 per cent and the government is looking at boosting local health workers’ pay.
Vaccination clearly does improve the quality of life. The way that local state institutions relate to the international organisations seem to suggest that, in Sierra Leone at least, money was getting where it needed to be.
Health minister Dr Soccah Kabia admitted there is more to be done in providing clean water and in combating malaria but the priority must be for children to survive in the first place.
Sierra Leone has an infant mortality rate of 156 per 1,000 (the UK rate is 4.93 per 1,000) and the mortality rates for under fives is 280 per 1,000.
As Dr Kabia put it: “A lot of those kids would have been dead today if it was not for the work you have seen.”