The bankers trying to crack humanitarian financing

A new kid on the block is trying to tackle an old problem. “The humanitarian funding gap: needs are growing, funding isn't, yada yada,” former banker and co-founder of the Humanitarian Finance Forum, Simon Meldrum, told Devex in a recent interview. “Everybody writes about it. Everybody knows it needs to be solved, right? But … no one has any kind of credible answers.” Enter the HFF. Conceived in 2019, the forum grew from conversations between Meldrum, who works in the private sector and innovative finance unit at the International Federation of Red Cross and Red Crescent Societies, and Cyrus Ardalan, then board chair of the International Finance Facility for Immunisation, or IFFIm, which supports Gavi, the Vaccine Alliance. Meldrum had taken inspiration from IFFIm’s model — using bonds to front-load long-term government donor pledges into immediately available funding — for the One WASH Fund, developed by IFRC and the Islamic Development Bank. That prompted both men to wonder why there were not more similar initiatives underway. HFF focused initially on hosting a series of invite-only discussions that bring private sector financial experts together with technical specialists and humanitarian institutions to address challenges such as noncommunicable diseases, nutrition, and landmines. The aim, Meldrum said, is to complement existing work by the likes of the Humanitarian and Resilience Investing initiative and Global Steering Group for Impact Investment. “We're trying to make quite a narrow and specific addition about how [to] use financial markets and operate at scale,” he said. The forum is free for NGOs and charities, while philanthropic, private sector and humanitarian partners contribute a mixture of financial and nonfinancial support. A more detailed strategic plan will be developed with incoming advisory board members this fall. “The jury's not out on scaling social bonds. The jury is in. And the jury has said it's not going to scale.” --— Simon Meldrum, co-founder, Humanitarian Finance Forum Meldrum, who previously worked at the likes of Royal Bank of Scotland and Merrill Lynch, says one challenge the forum is trying to address is a lack of financial expertise in the aid sector. “I’m not going to be a good WASH person, I'm not going to be a good emergency response person. So why do we think that somebody without finance experience is going to be good at delivering finance solutions?” Recalling one forum meeting, Meldrum said that Citigroup Vice Chairman Jay Collins mentioned at one point that his bank had 47 managing directors working on the COVAX facility on COVID-19 vaccines. “That blew my mind. But this is the kind of scale of commitment, right?” Meldrum said. “This is hard, complicated stuff and takes professional organization. You're not going to workshop it in an afternoon, and hey, presto, solved.” He said the aim of the forum, which is set up as a not-for-profit entity in the U.K., is to stay small and avoid becoming a financial advisory service itself, with all the regulatory requirements that entails. Rather, he sees the forum’s added value in offering humanitarian organizations access to financial experts who know what it takes to issue a bond, for instance. “The forum being successful is 80% of what comes through our door is a ‘no,’” Meldrum said. “Or giving people the advice of ‘look, here's the things that you need to put in place before you start down this road.’ And saving them money, [saying] ‘don't waste your time until you're here.’” The word Meldrum keeps coming back to is “scale.” The best inspiration is green bonds, he said, citing progress from the first issue 15 years ago to today’s multibillion-dollar market. However, while acknowledging their role as an important innovative finance tool, he’s less admiring of social impact bonds. “Why do people talk about … scaling social impact bonds, when we know there's only been [$460 million] of social impact bonds over 10 years, right?” he asked, referring to Brookings research. “The jury's not out on scaling social bonds. The jury is in. And the jury has said it's not going to scale.” Meldrum said the forum’s work role is to help create large-scale investments. “It's not worth anybody's time spending $5 or 10 million and having lots of lawyers or consultants or people like me working on little small deals. You don't see that in the commercial markets, because it's not viable, and it makes no sense.” Serious private investors were only interested in bonds of $500 million and above, Meldrum said. “That's when the BlackRock and people want to play or be interested in this, anything below that, they’re not interested.”