Vaccine bond sales to rise amid mass vaccinations in developing countries
Socially Responsible Bond Investors Are Targeting The Coming Wave of So-Called Vaccine Bond Deals That Will Raise Billions of Dollars to Spur COVID-19 Vaccine Expansion in Developing Countries.
Special bonds of this type have been used before, but urgent funding needs to combat COVID-19 should lead to large volumes of new issues in 2021.
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Cash received as a result of the issue «vaccine bonds», are sent to the underdeveloped countries of the world to vaccinate the population and strengthen its immunity.
«There is no doubt that investors value the social orientation of public sector debt issuance, and vaccination is a social project of the highest degree.», – said Philip Brown (Philip Brown), Citi’s head of resilient debt capital markets, which helped sell vaccine bonds (Vaccine Bonds) in October.
«This will be an important topic in 2021 … Now we need a more serious effort that involves huge costs», – he added.
The total cost of immunization in the developing world is difficult to estimate but is expected to be in the tens of billions of dollars.
Global Alliance for Vaccines and Immunization (GAVI) said last week that its joint venture with the World Health Organization (WTO) to procure and distribute COVID-19 vaccines in 92 poor countries will need about $ 5 billion next year to deliver 1.3 billion doses. This amount, in addition to the already secured $ 2.1 billion, may be underestimated if the cost of one dose turns out to be higher than the forecast..
Cyrus Ardalan (Cyrus Ardalan), Chairman of the Board of the International Funding Mechanism immunization (International Finance Facility for Immunization, IFFIm), which is raising funding for GAVI, estimates that a quarter to half of GAVI’s COVID-19 funding needs will be met by IFFIm bonds..
He told Reuters that «very sure» in at least one or two new bond issues in 2021.
«The main thing, in my opinion, is to see how well GAVI can mobilize resources and secure vaccines so that we have an equitable distribution across countries around the world, he said. – Emerging market economies are extremely vulnerable».
IFFIm rated «AA» is intended to convert future donor contributions into cash to support the vaccination program. In October, the company raised $ 500 million with its first bond in three years for the delivery of control samples of vaccine in a deal that exceeded supply by more than three times..
Geneva-based GAVI, which has provided hundreds of millions of doses of candidate AstraZeneca vaccine, aims to fund at least the first billion doses of approved vaccines and aims to reach 20% of the population in poor countries.
International organizations estimate that vaccination of one fifth of the population of Latin America and the Caribbean could cost more than $ 2 billion, while vaccination among priority populations in Africa would cost almost $ 6 billion..
«We do not know how much it will cost – the reason is that we do not know what the complete set of vaccines is, what the scale of production of these vaccines is, whether they will be two-dose, single injections, etc..», – GAVI CEO told reporters last week Seth Berkeley (Seth Berkley).
The African Development Bank (AfDB), the World Bank’s International Finance Corporation and nations such as Indonesia and Peru have issued bonds in 2020 with revenues tied to the fight against COVID-19 and cushioning the economic downturn, although not specifically intended to pay for the vaccine.
Social bond issuance skyrocketed in 2020 thanks to a growing interest in ethical investment and more governments and agencies willing to use it to fund socially beneficial projects. Sales of such bonds have reached $ 163.7 billion since the beginning of the year, which is almost 12 times more than in 2019, according to Refinitiv..
«We expect a large volume of social bonds to be issued in 2021. We expect the market to become more organized and more investor-oriented», – told the head of sustainable banking at Credit Agricole Tangai Klakuin (Tanguy Claquin) working with October IFFIm bonds.
Given the cost of vaccinating 3.5 billion people living in low- and lower-middle-income countries, bankers familiar with the sector said development banks like AfDB could start raising finance through deployment-related bonds. vaccinations.
Citi’s Brown says it will take too long to launch entirely new financial institutions.
«It makes sense to use already existing market structures», – he thinks.