As the number of COVID-19 cases surge globally, a special fund designed to support pandemic relief in the world's poorest countries has still not disbursed any money from investors.
In a journal commentary in The Lancet Infectious Diseases, University of Oregon geographer Leigh Johnson and her colleague Susan Erikson, a medical anthropologist at Simon Fraser University, explain why a World Bank fund meant to mobilize private investors' money for pandemic preparedness and prevention has repeatedly failed to disburse money - first for the Ebola outbreak in the Democratic Republic of Congo in 2019 and now for COVID-19.
They call for oversight and public scrutiny of a new class of financial tools that use proprietary models to determine whether - and when - funds for humanitarian relief are released.
The World Bank's Pandemic Emergency Financing Facility was set up after the 2014 Ebola epidemic in West Africa to aid rapid response and prevent future outbreaks from escalating. Despite more than 2,400 deaths since 2018 in the active Ebola outbreak in the Congo, no funds from the facility's catastrophe bond have been disbursed.
"The Congo Ebola outbreak and COVID-19 both demonstrate the risks of relying on new financial innovations for humanitarian relief," said Johnson, an assistant professor in the Department of Geography. "This misfire shows how important it is for public health and humanitarian professionals to be involved in designing these tools, for the contractual criteria to be subject to public scrutiny and to place the needs of the sick before the demands of investors."
Based on current criteria, a release of funds for a COVID-19 response, if approved, cannot be made until early April. Predetermined criteria include such factors as numbers of confirmed deaths, cross-border spread and modeled disease growth rate over fixed time periods.
When the World Bank established its pandemic catastrophe bond in 2017, private investors purchased bonds for a three-year period. In exchange for taking on the risk, some investors earn more than 10 percent interest annually. If funds are not disbursed within three years, investors get their money back. A third-party calculation agent makes decisions about whether the bond will make payouts to countries for outbreaks. These private catastrophe modeling firms maintain proprietary rights over their data analysis and models.
As the World Bank develops the next version of the bond, it should move toward a decision-making process open to public scrutiny and led by public health and humanitarian professionals, Johnson and Erikson suggested in their commentary, which published online March 31 ahead of print in the journal's May issue.
"Our piece explains why the bond has not paid out," Johnson said. "Regardless of the severity of an epidemic, the release of funds is based on legally binding contractual criteria that cannot be annulled. In the case of Ebola, the outbreak did not meet the criteria for numbers of deaths in a second country."
How the facility has operated so far, she said, offers an opportunity to understand what needs to be done better if this increasingly popular model of humanitarian relief is to continue.
Johnson, who studies the development of catastrophe bonds for climate and disaster risks, joined the the UO geography department in 2016 after serving as a lecturer in economic geography at the University of Zurich in Switzerland. She also is a 2019-20 resident scholar in the UO's Wayne Morse Center for Law and Politics. She holds a doctorate from the University of California, Berkeley.
Erikson studies the effect of new financial instruments on public health. She has worked extensively in Sierra Leone and has written on the 2014-15 Ebola outbreak.
