1. business and industrial
2. agriculture and forestry
3. agriculture

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Fund%Council%
13th%Meeting%(FC13)—Bogor,%Indonesia%
April%28?29,%2015%
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WORKING(DOCUMENT(
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Innovative!Finance!!
Options!Analysis!
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Submitted!by:!!
Fund!Office(!
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Innovative)Finance)!
Options(Analysis!
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March&2015"
!
1"
CGIAR
"INNOVATIVE"FINANCE:"IN0DEPTH"OPTIONS"ANALYSIS"
"
MARCH"2015"
Executive)Summary)
"
Innovative"finance"mechanisms"are"potentially"a"key"component"of"CGIAR’s"broader"Resource"
Mobilization"Strategy"for"the"coming"5010"years"and"beyond.""
Innovative"finance"mechanisms"create"channels"to"improve"the"overall"funding"available"to"the"
CGIAR"by:"
1) Accessing"additional"funds"from"existing"and"new"funders."
2) Improving"the"efficiency"of"how"funds"are"used"–"helping"existing"funding"flows"go"further"
and"enhancing"the"case"for"future"commitments."
Initial"Fund"Office"estimates"aim"to"leverage"up"to"20%"of"the"estimated"budget"required"to"achieve"
the"second"round"of"CRPs"by"testing"and"using"innovative"finance.""
The"CGIAR"is"in"a"strong"position"to"use"innovative"finance"strategies."This"is"rooted"in"CGIAR’s:"
0
0
0
0
0
0
0
Impact"across"a"range"of"high"priority"issues,"not"least:"
o Climate!change"–"both"mitigation"and"adaptation"–"through"its"active"role"in"
changing"behaviours"to"land,"water"and"other"input"resource"management,"and"
improving"resilience"to"climate"and"environmental"disasters;"
o Food!security!and!nutrition"(and"thereby"global"health)"through"improving"the"
quantity"and"quality"of"food"crops"available"in"developing"markets;"
o Economic!development"through"improving"the"productivity"of"smallholder"
farmers,"creating"stronger"links"to"local"and"international"markets"and"supporting"
robust"market"ecosystems"that"foster"small"and"medium"intermediary"businesses."
Clearly"defined"role"in"developing,"promoting"and"deploying"technologies;"
Commitment"to"maximising"the"public"benefit"of"innovations"in"agriculture;"
Global"capacity"for"research"and"relationships"with"governments"and"farmers;"
System0level"breadth"across"agriculture"sub0sectors;"
Transparent,"efficient"and"independent"governance;"
Track"record"of"success"with"high"profile"products"and"programs."
This"report"analyses"the"implementation"feasibility"for"three"of"the"six"shortlisted"innovative"finance"
mechanisms"proposed"at"FC12."The"purpose"of"the"report"is"to:"
1) To"describe"options"for"implementing"a"public/private"partnership"model"akin"to"the"
Product"Development"Partnerships"and"recommend"a"preferred"option;"and"
2) To"prioritise"which"of"the"Impact"Bond"and"Debt"Leverage"mechanisms"the"CGIAR"could"
develop"and"pilot"in"the"medium"term"as"an"additional"innovative"finance"mechanism."
Developing!a!CGIAR!Public!Private!Partnership!model!
Public"Private"Partnership"(PPP)"models"entail"creating"structures"and"platforms"to"actively"engage"
with"private"sector"partners"and"catalyse"market0based"solutions"for"development"issues."PPPs"have"
been"widely"deployed"over"the"last"15"years"across"a"range"of"sectors"and"countries"to"increase"the"
funding"and"efficiency"of"creating"some"public"benefit."For"Research"and"Development"(R&D)"
organisations"like"the"CGIAR,"PPPs"typically"target"the"following"key"activities:""
1) Research;"
2) Regulatory"Systems;"
2"
CGIAR
"INNOVATIVE"FINANCE:"IN0DEPTH"OPTIONS"ANALYSIS"
"
3)
4)
5)
6)
MARCH"2015"
International"Support;"
Country0level"Support;"
Manufacture"of"Products;"and"
IP"Management."
The"CGIAR"has"implemented"a"range"of"PPPs"over"time"in"each"of"these"activity"areas."These"PPPs"
have"been"developed"and"executed"at"a"Centre"level"with"(recently)"input"from"the"Consortium"
Office"on"overarching"principles"for"engagement."Each"PPP"has"been"executed"on"an"ad"hoc"basis,"
and"with"varying"degrees"of"scale,"scope,"types"of"partner.""While"the"partnerships"have"been"
generally"successful,"CGIAR"stakeholders"identified"possibilities"to"take"a"more"strategic"and"
structured"approach"that"could"help"mitigate"specific"issues"highlighted"during"the"execution"of"the"
these"PPPs:"
1) Administrative"and"management"support"for"new"PPP"projects;"
2) Access"to"private"sector"partnership"expertise"relating"to"the"legal"and"implementation"
options"available"to"centres;"
3) Support"for"existing"private"sector"relationships"and"building"new"relationships;"specific"
input"related"to:"
a. Improving"market"dynamics,"linking"activities"to"commodity"supply"chains;"
b. Increasing"value"for"money"by"negotiating"bulk"procurement"contracts"for"
purchasing"inputs"and"selling"products;"
c. Increasing"funds"available"for"private"sector0oriented"activities;"
4) Simplified"access"to"CGIAR"system"for"private"sector"partners;"
5) Support"and"management"to"align"CGIAR"and"private"partner"interests;"and"
6) Lower"transaction"costs"for"executing"PPPs."
There"are"four"basic"implementation"models"that"have"been"executed"in"the"innovative"finance"
landscape."These"are:"
1)
2)
3)
4)
Product"Development"Partnerships;"
GALVmed;"
AgResults;"and"
Tech"Transfer"Teams."
Each"model"has"some"applicability"to"the"aims"and"operating"model"of"the"CGIAR."To"distil"this"
applicability"down"in"order"to"assess"which"approach"is"optimal"for"CGIAR"as"a"pilot,"examples"were"
analysed"across"a"range"of"characteristics."The"key"characteristics"highlighted"in"this"report"are:"
1)
2)
3)
4)
Development"timing"and"cost;"
Sources"and"volumes"of"funding"flows;"
Governance"and"management"structure;"and"
Operational"activities."
The"table"overleaf"describes"our"findings."
"
3"
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Operations!
Independent!legal!structure!
and!oversight!analogous!to!
centres.!Small!management!
teams!with!access!to!public,!
private!research!teams!
Upstream!R&D!focused!on!
specific!issues!with!some!
policy!and!global!market!
input!across!17!different!
disease/product!lines.!
Description!
PDPs!
Developed!to!better!
engage!private!pharma!in! 2!years!
developing!products!for!
USD1/2m!
neglected!diseases!
USD10/80m!each!year.!
Donor!and!Foundation!
funding,!with!10/20%!in/
kind!private!sector!input!
GALVmed!
Later!stage!product!
development!across!9!
animal!disease!areas.!!
2/3!years!
GBP2.9m!!
Nine!products!in!
USD!15m!pa!(GBP50m!over! UK/Kenyan!entities!with!
development!Late!stage!R&D!
5!yrs)!from!donors;!access! independent!board!and!30+!
but!less!private!sector!
to!private!sector!IP!!
person!management!team!
contribution!than!expected!
AgResults!
Challenge!fund!for!
agriculture!PPPs!
18!months!
USD1.5m!
4!operating!projects,!circa!15!
USD100m!funds!to!disperse! Donor!oversight!committee! projects!in!pipeline!working!
from!donors!
and!7!person!Secretariat!
with!NGO/publicly!funded!
partners!
!
Tech!Transfer:!
!
University*
4!
Development! Funding!
Governance!and!
Management!
Model!
In/house!team!to!manage!
Organic!
private!sector!engagement!
development!
on!IP!and!partnership!
over!time!
options!
USD3/10m!operating!costs!
funded!by!university!
budget,!grants,!cash!flows!
from!operations.!Often!
linked!to!later!stage!
investment!funds.!!
Technical!and!legal!input!to!
researchers!on:!
Subsidiary!of!university!
Research!agreements!
30/80!person!management!
50/100!licenses!pa!
team!
200+!patents!pa!
10/15!SME!dev’t/spinouts!
AATF*
International!organisation!
2!years!
developing!products!for!
USD1.5m!
African!agriculture!
USD20m!budget!across!
range!of!products,!funded!
by!donors!
10!person!advisory!board,!
independent!of!donors.!!
37!person!management!
team!
Eight!core!product!lines!;IP!
licensed!from!private!sector!
and!developed!by!public!
sector!for!African!markets!
Global*Good*
Department!in!Intellectual!
Ventures!(IP!company)!
N/A!
developing!health!and!ag!
IP!for!emerging!markets!
N/A!amount!funded!from!
parent!company!revenues!
Governed!by!parent!co!
30+!person!management!
team!
5!products!in!development;!
more!focus!on!R&D!than!
commercialisation!and!
deployment!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
To!review!which!model!is!most!promising!in!the!immediate!term!for!CGIAR,!each!was!then!assessed!
against!three!key!criteria:!
1) Applicability!to!gaps!in!CGIAR!operations;!
2) Value!across!all!consortium!members;!and!
3) Feasibility!in!terms!of!governance!and!management.!
Model!
Gap!Analysis!
Value!across!centres! Governance!and!Management!
PDPs!
Partial!fit;!tends!to!be!R&D!
Limited!fit;!product!
focused,!i.e.!risks!duplicating!
focused!
existing!capacity!
New!structures!duplicating!
existing!centre!–!risks!adding!
complexity!
GALVmed!
Partial!fit,!but!noted!gap!in!
private!sector!engagement!
at!scale!beyond!IP!
contribution!
Limited!fit;!product!
focused!
New!legal!structure,!governance!
and!management.!Large!team!
relative!to!existing!system!level!
management.!
AgResults!
Partial!fit!but!noted!gap!in!
private!sector!engagement!
at!scale.!
Proposal!from!all!
centres;!ultimately!
product!focused!
New!legal!structure,!governance!
and!management!but!light!
oversight!and!small!team.!
Good!fit;!team!can!be!
developed!to!meet!range!of!
Tech!Transfer!
Good!fit!
operational!inputs!for!
centres!
In!house!team!can!be!within!
existing!governance!and!
management.!Third!party!team!
leverages!existing!capacity.!
Scalable!management!team!
!
On!this!basis,!we!recommend!developing!the!Tech!Transfer!team!model,!which!has!the!best!fit!
across!all!three!parameters.!As!noted!in!the!analysis,!we!reviewed!three!different!examples!of!how!
tech!transfer!teams!can!be!implemented.!Ultimately,!we!recommend!proceeding!with!an!in/house!
team!which!offers:!!
/
/
/
/
/
/
Low!development!costs!and!time!to!implement!–!organic!development!over!time;!
Greatest!“ownership”!and!most!direct!link!to!the!CGIAR;!
Incorporation!into!existing!governance!structures;!
Low!operating!costs;!
Broad!applicability!and!flexibility!across!geographies,!centres,!types!of!service!provided;!
and!
High!impact!and!value!for!money.!
The!strawman!proposal!for!what!a!CGIAR!tech!transfer!team!could!look!like!is!described!in!the!table!
overleaf.!
!
5!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Term!
Description!
Name!
Strategic!Implementation!Unit!
Time!to!structure!
6/12!months!for!initial!analysis;!24!months!for!full!operations!
Cost!to!structure!
USD!1.5m!
Operational!Costs!
USD!1.5m!per!annum!
Product!Dev’t!
Funding!
USD!1m!per!annum!
Sources!of!Funding!
Donor!and!Foundation!input.!Possible!corporate!co/funding,!but!more!likely!in/kind!
support!for!specific!partnerships!
Governance!
Joint!Sub/Committee!with!Donor!and!Consortium!Board!representation!
Management!
In/house!within!Consortium!Office!
Management!Team!
15!IP/tech!transfer!professionals!
Centre!Relationships!
All!centres!–!demand!driven!
Activities!
/
/
/
/
/
/
/
/
Consolidate!and!coordinate!global!private!sector!relationships!
Act!as!“one/stop!shop”!for!new!potential!partners!
Consolidate!IP!catalogue!across!CGIAR!
Develop!global!distribution!and!offtaker!arrangements!for!key!CGIAR!commodities!
Conduct!local!level!market!analysis!exercises!to!support!CGIAR!stakeholder!programs!
Develop!local!input,!production!and!offtake!partnerships!and!licensing!arrangements!
Support!Centre!SME!incubators!with!business!expertise!&!investor!outreach!
[Coordinate!private!sector!R&D!agreements]!
Key!Performance!
Indicators!
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/
/
/
/
/
/
/
Number!of!CGIAR!centres/CRPs!receiving!support!
Number!of!new!technology!registrations!
Number!of!licenses/equivalent!issued!
[Number!of!private/sector!sponsored!R&D!agreements]!
Number!of!PPPs!brokered!
Private!Sector!funding!leveraged!
CGIAR!SMEs!supported/capital!raised/spinouts!
Impact!of!operations!on!smallholders/communities!
!
Prioritising!a!third!innovative!finance!mechanism!
The!second!half!of!this!report!analyses!two!medium!term!options!for!a!CGIAR!innovative!finance!
pilot:!an!Impact!Bond!and!a!Debt!Leverage!mechanism.!Both!mechanisms!are!being!actively!used!in!
other!sectors!to!promote!development!finance.!!
The!impact!bond!model:!
1) shifts!the!risk!allocation!for!delivering!public!goods!away!from!governments;!
2) makes!funding!commitments!more!predictable;!
3) incentivizes! strategies! that! improve! the! delivery! of! those! goods! and! improve! overall!
performance!management;!and!
4) creates!additional!capital!flows!from!new!funders.!
The!basic!mechanics!of!an!impact!bond!entails!raising!capital!for!organisations!like!CGIAR!from!third!
parties,!which!is!then!repaid!by!donors!once!predetermined!results!have!been!achieved.!
The!impact!bond!model!has!been!deployed!20+!times!across!a!range!of!sectors!and!geographies.!
Notable!findings!from!analysing!these!examples!are!that:!
1) Impact!bonds!raise!only!modest!amounts!of!investment!(USD!5/20m);!
6!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
2)
3)
4)
5)
6)
7)
MARCH!2015!
Funds!are!applied!over!2/5!years;!
Return!profiles!for!investors!are!variable!and!complex!to!negotiate;!
The!total!amount!of!upfront!funding!available!is!less!than!the!donor!payout;!
Impact!and!operations!are!applied!to!a!small!population!of!beneficiaries!(<10,000);!
Operations!are!focused!on!very!narrowly!defined!geographic!areas;!and!
Each!transaction!has!high!costs!to!structure!and!implement.!
Debt!leverage!mechanisms!channel!existing!sovereign!and!multilateral!debt!flows!to!finance!
development!activities!in!a!given!country.!There!are!two!basic!models:!i)!existing!lenders!swap!(i.e.!
cancel)!outstanding!debt!for!a!commitment!to!fund!a!development!activity,!or!ii)!third!parties!cancel!
or!reduce!the!cost!of!the!debt!if!given!criteria!are!met.!
A!large!number!of!transactions!that!could!be!categorised!as!instances!of!this!mechanism!have!been!
executed!over!the!last!30!years.!Analysing!these!transactions,!we!found!that!debt!leverage!
mechanisms:!
1) have!large!transaction!sizes!(USD100m+);!
2) have!high!leverage!and!value!for!money!–!funds!deployed!by!donors/third!parties!typically!
unlock!more!than!2x!as!much!funding!for!development;!
3) have!been!used!to!support!a!range!of!activities!–!from!downstream!implementation!of!
specific!program!activities!to!high!level!policy!development!
4) generally!finance!activities!undertaken!by!the!borrower!government!–!but!can!also!fund!
implementing!partners!
5) operate!at!a!national!level!(since!the!borrower!is!a!sovereign);!and!
6) have!low!transaction!costs.!
Both!options!have!scope!for!implementation!by!the!CGIAR.!On!this!basis,!we!determined!that!the!
debt!leverage!mechanism!has!the!greatest!scope!for:!
/
/
/
/
generating!large!volumes!of!funding;!
generating!impact!at!scale;!
accessing!funds!from!non/traditional!governments!and!partners;!and!
leveraging!CGIAR!NARI!engagement!and!borrower!government!relationships.!
The!steps!to!further!develop!a!debt!leverage!strategy!and!scenarios!for!what!a!transaction!may!look!
like!are!outlined!overleaf.!
7!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
!
!
!
! Immediate(Next(Steps((6m)(
1. Appoint!design!advisory!working!group!
at!Fund!Office!
2. Canvas!Centres!for!borrower!long!list!
3. Appoint!advisor!to:!
a. Prepare!lender!long!list!
b. Draft!country!shortlist!
c. Contact!shortlisted!countries!
d. Prepare!feasibility!report!
4. Iterate!shortlist!and!analysis!with!
stakeholders!at!FC14!
Grant*funding*for*CGIAR*and*external*
advisors*to*conduct*outreach*and*prepare*
feasibility*report:*
Estimated*cost*USD*250,000*
8!
Design(Phase((12818m)(
5. Select!borrower!from!shortlist!
6. Coordinate!centres!and!borrower!to!
develop!proposal!for!uses!of!funding!
7. Agree!performance!targets!and!payment!
triggers/!thresholds!between!lender,!
borrower!and!3rd!parties!
8. Appoint!legal!advisors!and!draft!
transaction!documentation!
Funding/structuring*input*from*donors*willing*
to*participate*in*the*transaction;*process*led*
by*external*legal*and*financial*advisors.*
Estimated*cost*USD1m*
Scenario(1:(
Loan(Buy8
Down(
Scenario(2:(
Debt(Swap(
Transaction*Size:!USD500m!
Borrower:!Indonesia!
Lender:!IBRD!
Funders:!Germany,!Norway,!UK!
Centres:!ICRAF,!IITA,!IRRI!
Terms:!No!interest!on!loan!
Trigger:!Landscapes!approach!to!
climate!smart!agriculture!
Transaction*Size:*USD100m*
Borrower:*Congo!
Lender:*France*
Funders:*France!
Centres:*CIAT,!IFPRI,!ICRAF!
Terms:*Cancellation!of!Debt*
Trigger:*Gov’t!expenditure!for!
improved!nutrition!&!
agriculture!dev’t!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Contents'
!
1!
Introduction!.................................................................................................................................!10!
2!
Public!Private!Partnership!Implementation!Options!Introduction!..............................................!14!
3!
Analysis!of!applicability!to!CGIAR!................................................................................................!15!
4!
Examples!of!PPP!Structures!.........................................................................................................!19!
5!
Analysis!of!options!for!a!new!PPP!model!for!CGIAR!....................................................................!30!
6!
Tech!Transfer!Strawman!..............................................................................................................!33!
7!
Introduction!to!Options!Analysis!for!a!Third!Innovative!Finance!Mechanism!.............................!40!
8!
Theoretical!Impact!Bond!Model!..................................................................................................!40!
9!
Empirical!Impact!Bond!Findings!...................................................................................................!42!
10! Implications!for!CGIAR!.................................................................................................................!43!
11! Theoretical!Debt!Leverage!Mechanisms!......................................................................................!44!
12! Empirical!Debt!Leverage!Mechanism!Findings!............................................................................!47!
13! Implications!for!CGIAR!.................................................................................................................!48!
14! Recommendation!for!developing!a!3rd!innovative!finance!mechanism!for!CGIAR!......................!49!
15! Annex!1:!Implemented!Impact!Bonds!.........................................................................................!53!
16! Annex!2:!Implemented!Debt!Swaps!(10!Examples)!.....................................................................!55!
17! Annex!3:!Loan!Buy!Downs!...........................................................................................................!56!
!
!
9!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Introduction!
1
Introduction+
1.1
The! CGIAR! is! currently! developing! two! new! overarching! policy! documents.! The! Strategic!
Results! Framework! sets! the! direction! of! the! CGIAR’s! operational! activities! from! 2015.! The!
Resource! Mobilization! Strategy! describes! the! strategies! for! raising! funds! to! support! those!
operational! activities.! As! part! of! the! wider! Resource! Mobilization! Strategy,! the! CGIAR! Fund!
donors!have!asked!Lion’s!Head!to!evaluate!options!for!using!innovative!finance!mechanisms.!!
1.2
This! focus! on! innovative! finance! recognises! three! trends! in! how! funds! are! allocated! for!
development.! The! first! is! that! traditional! grant! ODA! budgets! are! under! pressure! to!
demonstrate! that! recipients! maximise! impact! and! value! for! money.! ! The! second! is! that! the!
donor! landscape! is! more! diverse! and! fragmented:! there! are! a! growing! number! of! non/
traditional! donors! –! governments! across! the! globe! (and! especially! outside! the! OECD),!
foundations! and! other! philanthropic! organisations! have! a! growing! capacity! and! appetite! to!
fund! global! development.! The! third! is! that! the! private! sector! is! increasingly! recognised! as! a!
partner!–!rather!than!a!competitor!or!barrier!–!to!delivering!developmental!results.!!
1.3
Innovative!finance!mechanisms!can!create!channels!to!access:!
/
/
/
/
/
/
/
1.4
CGIAR!is!in!a!strong!position!to!create!innovative!finance!mechanisms!that!can!catalyse!new!
funding!flows!for!smallholder!at!scale.!The!Consortium’s!appeal!lies!in!its:!
/
10!
Additional! contributions! from! sovereign! funders! that! are! already! CGIAR! donor,! from!
allocations! outside! core! research/agriculture! budgets,! through! tapping! funds! for! e.g.!
climate! finance! (UK! Government’s! GBP3.9bn! International! Climate! Fund),! private! sector!
development,!or!Paris!Club!Debt!(USD373bn!Dec!2013);!
Contributions! from! parallel! multilateral! international! organisations! and! funds! e.g.! the!
USD1.4bn!GAFSP;!and!the!USD10bn!Green!Climate!Fund!and!smaller!organisations!such!as!
GAIN! USD50m! (annual! budget),! and! the! World! Bank’s! USD191m! Global! Partnership! on!
Output/Based!Aid!(GPOBA)!facility;!
Working! with! sovereign! wealth! funds! seeking! to! make! investments! that! generate!
economic! social! and! environmental! returns! for! their! citizens! in! a! low! return! investment!
climate;!
Accessing!funding!flows!from!CGIAR!donor!foundations!via!departments!not!engaged!with!
the! CGIAR! (Innovative! Finance,! PRI),! and! less! (currently)! active! foundation! and!
philanthropy!partners!such!as!The!Nature!Conservancy,!WWF,!Gatsby!Foundation!etc;!
Leveraging!in!kind!support!and!funding!from!multinational!agriculture!input!providers!who!
invest!USD20bn+!in!R&D!and!3/5!times!as!much!in!getting!products!to!market;!
Leveraging! in/kind! support! and! funding! from! consumer! goods! companies! purchasing!
commodities!in!developing!markets,!and!industry!organisations!e.g.!the!Consumer!Goods!
Forum,!Tropical!Forest!Alliance;!and!
Working! more! actively! with! local! SMEs! playing! a! role! in! smallholder! agriculture! value!
chains.!
!Impact!across!a!range!of!high!priority!issues,!not!least:!
o Climate!change!–!both!mitigation!and!adaptation!–!through!its!active!role!in!
changing!behaviours!to!land,!water!and!other!input!resource!management,!and!
improving!resilience!to!climate!and!environmental!disasters;!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Food!security!and!nutrition!(and!thereby!global!health)!through!improving!the!
quantity!and!quality!of!food!crops!available!in!developing!markets;!
o Economic!development!through!improving!the!productivity!of!smallholder!
farmers,!creating!stronger!links!to!local!and!international!markets!and!supporting!
robust!market!ecosystems!that!foster!small!and!medium!intermediary!businesses.!
Clearly!defined!role!in!developing,!promoting!and!deploying!technologies;!
Commitment!to!maximising!the!public!benefit!of!innovations!in!agriculture;!
System/level!breadth!across!geographies!and!agriculture!sub/sectors;!
Global!capacity!for!research!and!relationships!with!governments!and!farmers;!
Transparent,!efficient!and!independent!governance;!and!
Track!record!of!success!with!high!profile!products!and!programs.!
o
/
/
/
/
/
/
1.5
For! FC12,! Lion’s! Head! Global! Partners! reviewed! the! innovative! finance! landscape! and!
recommended!six!innovative!finance!mechanisms!that!CGIAR!could!develop!further.!These!are!!
/
/
/
/
/
/
1.6
A!Returnable!Capital!Fund!housed!at!the!World!Bank!to!provide!a!balance!sheet/neutral!
way!for!donors!to!contribute!funds!to!the!CGIAR;!
A!Public!Private!Partnership!model!akin!to!the!Product!Development!Partnerships!
One!or!multiple!Development!Impact!Bonds!
One!or!multiple!transactions!leveraging!multilateral!and!bilateral!debt!
An!Advanced!Market!Commitment!model!
An!Impact!Investment!Vehicle!to!finance!downstream!SMEs!
This!follow!up!report!has!two!objectives:!
3) To!describe!options!for!implementing!a!public/private!partnership!model!akin!to!the!
Product!Development!Partnerships!and!recommend!a!preferred!option;!and!
4) To!prioritise!which!of!the!Impact!Bond!and!Debt!Leverage!mechanisms!the!CGIAR!could!
develop!and!pilot!in!the!medium!term!as!an!additional!innovative!finance!mechanism.!
1.7
Analysis!is!based!on!two!sources!of!information:!desk!research!into!existing!literature!about!
PPPs! (especially! PDPs),! Impact! Bonds! and! Debt! Leverage! Mechanisms! and! interviews! with!
stakeholders!from!two!sources:!stakeholders!from!operational!examples!of!each!mechanism,!
and!stakeholders!from!within!the!CGIAR!system!
1.8
The!report!has!two!sections!–!one!for!each!objective.!Each!section!is!structured!as!follows:!
Section!1:!Public/Private!Partnership!Implementation!Options!Analysis!
1.
2.
3.
4.
5.
Introduction!to!public/private!partnership!(PPP)!models!and!activities;!
Summary!of!CGIAR!PPP!activities;!
Case!Studies!of!operating!models!for!catalysing!and!supporting!PPPs;!
Analysis!of!options!for!new!CGIAR!PPP!operating!model;!and!
Strawman!Proposal!to!frame!possible!implementation!scenario.!
Section!2:!Prioritizing!Additional!Innovative!Finance!Mechanisms!
1.
2.
3.
4.
5.
6.
11!
Introduction;!
Theoretical!Impact!Bond!Model;!
Empirical!Analysis!of!Impact!Bond!Model;!
Implications!for!CGIAR;!
Theoretical!Debt!Leverage!Models;!
Empirical!Analysis!of!Debt!Leverage!Models;!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
7. Implications!for!CGIAR;!and!
8. Recommendations!and!Next!Steps.!
12!
MARCH!2015!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
!
!
!
!
!
!
!
!
Section!1:!Public/Private!Partnership!Implementation!Options!Analysis!
!
13!
+
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
2
MARCH!2015!
Public+Private+Partnership+Implementation+Options+Introduction+
2.1
Public! Private! Partnership! (PPP)! models! have! been! a! key! driver! of! innovative! finance!
strategies,! particularly! over! the! last! 15! years.! While! public! sector! aid! commitments! have!
increased! thanks! to! a! recognition! of! the! scale! and! complexity! of! development! issues,! that!
process!has!been!accompanied!by!an!increased!awareness!of!the!contribution!that!the!private!
sector! can! make! to! achieving! development! impact.! In! particular,! there! is! general! agreement!
from! donor! organisations! that! strategies! to! remedy! market! failures! benefit! from! leveraging!
and! incentivising! market! participants! and! adopting! market/based! strategies.! The! private!
sector! can! contribute! to! partnerships! in! a! range! of! ways,! but! especially! through! funding,!
expertise,!and!shared!infrastructure.!
2.2
For! public! sector! organisations,! such! partnership! models! provide! additional! benefits! beyond!
the!direct!benefits!of!private!sector!engagement.!These!benefits!include:!!
a. Global!reach:!PPP!programs!offer!a!structured!way!to!fund!international!activities!–!
away!from!domestic!or!national!level!programs,!and!comparable!to!multilaterals;!
b. Value! for! money:! PPP! programs! allow! donors! to! leverage! peer! and! private! sector!
funding!efficiently!and!under!pre/defined!terms;!and!
c. Scalability:!PPPs!often!create!financially!self/sustaining!models!that!can!continue!and!
grow!beyond!the!life!of!a!specific!project.!
2.3
The!private!sector!also!has!an!interest!in!successfully!implementing!partnerships!–!in!terms!of!
accessing! new! markets,! promoting! long! term! sustainability,! improving! relationships! with!
governments! and! international! organisations,! earning! a! social! license! to! operate! in! a! given!
market!and!reducing!exposure!to!political,!social!and!environmental!risks.!!
2.4
For! research! and! development! organisations,! private! sector! partnerships! have! helped! to!
tackle! a! number! of! key! barriers! relating! to! discovering,! developing! and! delivering! new!
technologies.!The!areas!identified!for!R&D!PPPs!span:!!
Activity!
Research!
Description!
Public!and!private!organisations!pool!funding,!expertise,!
research!infrastructure!(materials,!labs,!equipment!etc)!
on!a!specific!research!topic!
Regulatory2Systems2
Partnerships!to!support!analysis!of!regulatory!systems!at!
an!international!and!national!level!for!the!testing,!
registration!and!deployment!of!new!technologies!
Pooled!funding!and!expertise!channelled!to!analysis!and!
planning!for!the!procurement!and!supply!of!new!
technologies!by!the!global!development!community!
International2Support2
!
14!
Country7level2Support2
Pooled!funding!and!expertise!channelled!to!analysis!and!
planning!for!the!marketing!and!distribution!of!new!
technologies!in!individual!developing!countries.!
Manufacture2of2Products2
Partnerships!with!the!private!sector!for!funding!and/or!
manufacturing!capacity!and!expertise!to!allow!for!the!
production!of!new!technologies!at!scale!
IP2Management2
Partnerships!that!entail!the!contractual!licensing!of!
intellectual!properties!generated!by!public!sector!
organisations!to!third!parties,!most!often!from!the!
private!sector,!to!commercialise!products!in!specific!
markets!and!over!specific!time!periods!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
3
MARCH!2015!
Analysis+of+applicability+to+CGIAR+
3.1
CGIAR’s! member! centres! have! successfully! implemented! a! range! of! private! sector!
partnerships!in!line!with!these!different!activities!that!have!helped!to!accelerate!and!increase!
the!impact!of!its!R&D!programs.+
3.2
The! CGIAR! is! an! attractive! partner! for! many! organisations! due! to! a! number! of! factors,!
principally:+
Factor!
Expertise!
Infrastructure2
Materials2
Relationships2
Example!
CGIAR!is!home!to!just!under!10,000!researchers!and!practitioners;!private!
sector!partners!value!the!opportunity!to!work!with!world!experts!in!specific!
fields!to!address!issues!of!mutual!interest!
CGIAR!has!a!global!network!of!brick/and/mortar!research!labs!in!emerging!
markets!with!direct!access!to!target!stakeholders!
CGIAR!controls!invaluable!genebanks!and!seed!collections!and!has!
generated!vast!quantities!of!scientific!data!and!new!technologies!from!its!
R&D!activities!!
CGIAR!has!robust!relationships!with!networks!of!farmers,!governments!and!
other!organisations!critical!to!successful!operations!in!emerging!markets!
!
3.3
Recognising!(and!carefully!defining)!the!aligned!interest,!individual!member!centres!have!built!
key!partnerships!with!private!sector!partners.!These!partnerships!tend!to!be!characterised!in!
two! ways.! In! many! instances,! the! partnerships! are! at! the!international! level,! entailing! cross/
border! activities! with! multinational! corporations! for! research! and! distribution.! In! other!
instances,! they! are! narrowly! defined! partnerships! in! a! specific! centre’s! geographies,! either!
with!international!companies!active!in!that!market!or!with!local!businesses.!!
3.4
Examples!of!these!partnerships!cover!each!of!the!different!activities!described!above:!!
Activity!
Research!
Period!
Centre! Private!Partner! Description!
2008/2013! CIMMYT! Monsanto!
Monsanto! supported! CIMMYT! and! NARIs! in! 4! countries! on! the!
Water! Efficient! Maize! for! Africa! project! by! sharing! germplasm! and!
technical! expertise,! ultimately! generating! a! new! drought/tolerant!
maize!hybrid!and!locally!adapted!variants!
Regulatory2
2007/2015! ICRISAT! Local!Seed!Cos! Under!the!Tropical!Legumes!II!project!/!Grain!Legumes!CRP,!CGIAR!
Systems2
Centres! are! providing! input! on! harmonizing! seed! regulation! in!
COMESA!countries!to!reduce!varietal!testing!time!from!3!years!to!2!
seasons!if!varieties!are!tested/released!elsewhere!in!COMESA!
International2
2009/2015! CIAT!
AkzoNobel!/!
Partnership! to! increase! offtake! demand! for! cassava! in! order! to!
Support2
National!Starch! increase!the!financial!viability!of!smallholder!farming!!
Country7level2
2012/2014! ICRAF!
Mars!Inc!
Mars!and!ICRAF!partnered!to!develop!a!comprehensive!agroforestry!
Support2
program! for! Cote! d’Ivoire,! incorporating! improved! inputs,! farmer!
training!and!linking!local!supply!chains!to!international!markets.!!
Product2
2009/2015! IITA!
Dupont!/!
The!West!African!Seed!Alliance!program!brings!together!local!seed!
Manufacturing2
Pioneer!
companies,! international! seed! producers,! government! institutions!
Monsanto!
and! CSOs! in! W! Africa.! A! key! activity! is! building! a! robust! and!
Local!Seed!Cos! sustainable!seed!supply!chain.!Improved!seed!production!has!been!
spearheaded!by!PPPs!in!Nigeria,!Benin!
IP2Management2 2012/2015! CIP!
Seeds2B,!
Seeds2B,!a!Tanzanian!social!enterprise!with!international!investors,!
Syngenta,!
licensed! two! seed! varieties! in! Tanzania,! and! then! executed! the!
Voxtra!
process!to!register!them!locally!and!develop!a!nursery!business!for!
local!smallholder!farmers!!
15!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
3.5
Beyond! these! more! traditional! PPP! models,! and! as! noted! in! the! original! Innovative! Finance!
section!of!the!RMS!documented!submitted!in!2014,!PPPs!are!now!extending!to!include!more!
direct! business! development! support! to! SMEs! and! corporates! –! i.e.! on! a! more! collaborative!
and!hands/on!basis!than!an!IP!Management!program.!!A!number!of!centres!are!now!working!
closely! with! SMEs! to! help! build! robust! market/based! solutions! to! get! technologies! used! by!
farmers!and!intermediaries!on!the!ground.!!Examples!of!this!type!of!work!include:!
Centre!
IITA!
Project!
Business!Incubation!
Platform!
WorldFish! Worldfish!Incubator!
!
3.6
MARCH!2015!
IWMI!
Research!Into!
Action!
ICRISAT!
ABI/ICRISAT!
WAARI!
ICRAF!
L3F!
Description!
Product/business! development! support! activities! for! private! sector!
spinout!(Aflasafe,!Nodumax)!!
$10m! partnership! with! Aquaspark! to! support! c15! new! SMEs! in!
sustainable!aquaculture!
The! RIA! program! packages! selected! research! recommendations! as!
actionable!investment!plans!and!business!models;!and!adapts!selected!
IWMI!research!products!into!meaningful!decision/making!tools!
From! 2003,! ICRISAT! has! been! supporting! over! 200! SMEs! in! India,!
training! entrepreneurs,! linking! businesses! to! technology! and!!
mobilizing!$18m+.!Since!2014,!the!program!is!being!replicated!in!West!
Africa!
$40m!invested!by!10!companies!with!scope!to!grow,!supporting!SMEs,!
NGOs! and! other! local! businesses! developing! sustainable! family!
farming!practices!
These! partnerships! are! executed! on! an! ad! hoc! basis! by! individual! centres! and! (to! a! certain!
extent)!CRPs.!Each!centre!has!its!own!strategy!in!terms!of!allocating!resources!to!these!types!
of!partnerships!and!setting!overarching!policies!and!objectives!for!private!sector!relationships.!
Some! centres! are! building! on! longstanding! relationships,! and! have! structured! private! sector!
partnership! strategies! and! policies.! Others! do! not! have! strong! ties! to! the! private! sector! and!
have! less! of! a! sense! of! the! value/add! of! private! sector! engagement! –! and/or! experience! of!
constructing!and!executing!PPPs.!!
3.7
As!of!2012,!7!centres!had!in/house!IP!management!expertise,!amounting!to!13!FTE/equivalent!
legal!and!IP!professionals.!These!are!complemented!in!some!cases!by!business!development!
and!partnership!liaison!staff.!Centres!can!and!do!bring!in!third!party!consultants!to!advise!on!
technical! components! of! specific! private! sector! transactions:! 8! centres! relied! on! shared!
services!or!external!expertise,!and!of!these,!4!were!actively!recruiting!for!additional!in/house!
support.!
3.8
As! of! 2012,! 8! centres! had! 25! active! private! sector! agreements! –! 11! restricted! use! and! 14!
limited!exclusivity/!and!2!pending!patents!lapsed.!For!2014,!5!agreements!were!reported!and!
6!provisional!patents!lapsed.!
3.9
System/level!support!is!provided!by!the!Consortium!Office.!Resources!are!allocated!from!the!
Partnerships!team!(<1.5!FTE!equivalent!in!the!Partnerships!team!and!<1!FTE!equivalent!in!the!
General! Counsel’s! office).! These! staff! members! coordinate! the! CGIAR! system/level! IP!
management!by:!
o
o
o
16!
drafting! and! setting! the! CGIAR! Principles! on! the! Management! of! Intellectual!
Property;!
gathering!centre/level!IP!focal!points!for!annual!review!of!the!procedural!elements!
of!implementing!PPPs;!
holding!monthly!webinars!on!IP!issues;!and!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
reporting!on!the!status!of!CGIAR’s!intellectual!asset!utilization.!
!
3.10 Further! work! that! has! been! identified! by! the! Consortium! Office! but! has! not! been! executed!
due!to!resource!constraints!includes:!
o
o
o
o
o
Preparing!a!full!catalogue!of!CGIAR’s!intellectual!assets;!
Evaluating!the!drivers,!opportunities,!barriers!for!improved!centre!tech!transfer;!
Conducting!cost/benefit!analyses!of!IP!management!strategy!and!potential;!and!
Providing!technical!advice!to!support!specific!transactions!and!relationships;!!
3.11 Within!this!vibrant!and!varied!CGIAR!PPP!ecosystem,!stakeholders!recognise!scope!to!expand!
and! improve! how! partnerships! with! the! private! sector! are! structured! and! executed.! Specific!
areas! of! intervention! were! highlighted! by! CGIAR! member! centres! and! private! sector!
counterparts.!
o
o
o
o
o
o
Administrative+ and+ Management+ support:! CGIAR! members! and! private! sector!
stakeholders!emphasised!the!substantial!–!and!often!limiting/prohibitive!–!resource!
commitment! for! project! design! and! implementation! in! terms! of! time! and!
manpower.!
Access+ to+ Expertise:! Stakeholders! also! referred! to! options! to! access! dedicated!
specialist! expertise! that! sits! outside! the! CGIAR’s! core! R&D! mandate,! principally! in!
legal!advice!and!business!development!services.!In!some!instances,!centres!leverage!
resources!at!peer!organisations!–!e.g.!ICRISAT!gets!input!from!CIMMYT’s!legal!team!
on! contracting.! The! Consortium! office! was! also! recognised! as! providing! high! level!
input!on!partnership!structuring.!!
Relationship+ Management:! Stakeholders! noted! the! potential! added! value! of!
resources! to! coordinate! relationships! with! private! sector! entities! across! the! CGIAR!
system,!particularly!related!to:!
! Improving!market!dynamics,!linking!activities!to!commodity!supply!chains;!
! Increasing! value! for! money! by! negotiating! bulk! procurement! contracts! for!
purchasing!inputs!and!selling!products;!and!
! Fundraising!for!private!sector/oriented!activities.!
Simplified+ Entry+ Point:! Partner! organisations! from! the! private! sector! as! well! as!
international!NGOs!noted!the!challenge!of!making!contact!with!centres!outside!their!
existing! bilateral! relationships.! This! was! caveated! with! the! note! that! they!
appreciated! the! ability! to! “cherry! pick”! activities! with! specific! centres! and! were!
concerned! that! working! at! a! system! level! might! be! time! consuming! and!
unproductive.!
Aligning+ Interests:+ stakeholders! noted! the! challenge! of! aligning! the! public! good!
objectives! of! the! CGIAR! with! the! need! to! satisfy! minimum! strategic! and! financial!
benefit!to!private!sector!partners.!This!challenge!is!reportedly!managed!by!working!
with! small! partners! that! had! an! additional! economic! development! contribution,! or!
contractual!limitations!on!how!private!partners!can!use!CGIAR!IP!and!resources.!
Lower+ Transaction+ Costs:! Related! to! these! issues,! parties! inside! and! outside! the!
CGIAR! recognised! the! potential! reduction! in! transaction! costs! to! system/level!
resources!for!partnerships!and!thereby!improve!value!for!money.!
3.12 On! this! basis,! we! see! scope! for! a! high! level! public/private! partnership! support! structure! at!
CGIAR!that!can!help!address!some!of!these!issues!and!add!value!to!the!work!being!completed!
across!the!CGIAR!system.!
17!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
3.13 This! is! in! line! with! broader! CGIAR! strategies,! first! in! terms! of! providing! an! IP! management! /!
private! sector! relationship! framework,! and! second! in! the! incorporation! of! tech! transfer! and!
private!sector!partnership!strategies!into!the!second!call!for!CRPs.!!!
18!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
4
4.1
MARCH!2015!
Examples+of+PPP+Structures+
In!considering!structuring!options!for!a!new!model!for!supporting!public!private!partnerships,!
there!are!a!number!of!reference!points.!In!particular,!we!have!looked!at!four!different!models!
that! make! links! between! public! sector! research! and! innovation! and! private! sector! partners!
and!market/oriented!strategies.!These!four!models!are:!
o
o
o
o
Health!Sector!Product!Development!Partnerships;!
GALVmed;!
AgResults;!and!
Tech!Transfer!Teams.!
!
4.1.1 Health'Sector'PDPs'
Product! Development! Partnerships! (PDPs)! evolved! in! the! health! sector! in! response! to! a!
growing!understanding!of!the!relationship!between!disease!and!global!poverty!and!a!failure!
on! the! part! of! the! markets! to! address! it.! This! failure! was! fundamentally! driven! by! the! fact!
that!the!private!sector’s!R&D!resources!were!not!being!applied!to!diseases!prevalent!in!the!
developing! world.! ! PDPs! were! developed! to! provide! broad! R&D! and! product! development!
support!by!bringing!together!public!and!private!sector!stakeholders.!
4.1.1.1
Development2
The! first! nominal! PDPs! were! established! in! 1996! (IAVI! and! MMV),! noting! that! it! took!
approximately! 24! months! to! develop! and! refine! the! operating! model.! Since! then! over! 15!
PDPs!have!been!created.!
4.1.1.2
Funding2
Each! PDP! is! individually! funded! and! focuses! on! a! medical! strategy! (e.g.! diagnosis,!
vaccination)!for!combating!a!disease!(e.g.!TB,!Malaria).!Central!to!the!design!of!the!PDPs!is!
an! effort! to! incorporate! private! sector! best! practice! and! resources! in! to! developing! and!
deploying!new!technologies.!As!such,!they!are!much!more!successful!than!peer!health!R&D!
organisations!in!terms!of!leveraging!donor!funds!with!foundation!and!private!sector!support.!
The!annual!operating!budgets!vary!from!PDP!to!PDP!but!typically!fall!in!the!range!of!
USD10m/80m.!The!operating!budgets!for!each!PDP!from!2007!to!2013!are!listed!below.!!
Founded!
PDP!
1977!
PATH!
1996!
MMV!
1996!
IAVI!
2000!
TB!Alliance!
1997!
Aeras!
2003!
DNDi!
2002!
IPM!
1986!
CONRAD!
2003!
FIND!
2005!
IVCC!
1996!
IVI!
1998!
EVI!
2000!
Sabin!
19!
2007!
43!
84!
89!
44!
45!
31!
51!
17!
26!
/!
15!
8.5!
8.6!
2008!
125!
51!
95!
38!
72!
24!
67!
16!
34!
11!
2.4!
4.8!
16!
2009!
139!
46!
78!
39!
59!
35!
38!
23!
22!
15!
13!
4.3!
9.9!
2010!
75!
74!
71!
52!
43!
36!
33!
18!
27!
16!
9.5!
5.7!
4.2!
2011!
98!
76!
65!
38!
43!
39!
15!
25!
23!
0.1!
5.7!
8.4!
8.9!
2012!
83!
52!
63!
45!
39!
34!
24!
31!
24!
10!
8!
2.4!
6.3!
2013!
81!
68!
60!
52!
40!
37!
31!
26!
24!
22!
9.4!
7.2!
6.7!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
Total!
644!
451!
521!
308!
341!
236!
259!
156!
180!
74.1!
63!
41.3!
60.6!
Average!
92!
64!
74!
44!
49!
34!
37!
22!
26!
12!
9!
6!
9!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
Founded!
2004!
1993!
2011!
!
PDP!
TBVI!
IDRI!
FHI360!
OWH!
!Total2
2
2007!
/!
9.1!
14!
31!
2008!
/!
16!
19!
32!
2009!
0.1!
19!
18!
17!
2010!
4.5!
13!
19!
23!
2011!
4.2!
23!
12!
11!
2012!
5.5!
11!
5.8!
7.1!
2013!
6.1!
5.8!
4.4!
/!
516.22
623.22
575.32
523.92
495.32
451.12
480.62
MARCH!2015!
!
!
!
!
Total!
20.4!
96.9!
92.2!
121.1!
Average!
4!
14!
13!
20!
2
!
These! figures! capture! donor! government! and! philanthropic! financial! support,! with! BMGF!
being!the!largest!overall!funder!of!PDPs.!PDPs!have!struggled!to!date!to!quantify!the!private!
sector! input! that! they! have! been! able! to! leverage,! since! that! support! is! predominantly!
provided!in/kind!rather!than!as!a!financial!contribution.!FIND!and!DNDi!have!both!now!made!
estimates! of! the! contribution! they! receive! from! the! private! sector.! For! DNDi,! in/kind!
contributions,!predominantly!by!private!pharmaceutical!companies,!amounted!to!USD8m!in!
2012! and! USD10m! in! 2013! –! i.e.! 20/30%! additional! leverage.! For! FIND,! private! sector!
contributions!in!2013!amounted!to!USD4m!–!10%!additional!leverage.!
4.1.1.3
Management2and2Governance2
PDPs! are! structured! as! international! non/profit! organisations! akin! to,! though! less! legally!
robust!than!the!CGIAR!centres.!As!such,!they!are!governed!by!independent!boards!but!with!
donor! and! other! stakeholder! input! on! strategic! direction.! They! are! managed! by! dedicated!
administrative! teams,! but! fundamentally! operate! as! “virtual”! organisations.! Oversight! and!
management! teams! mirror! comparative! human! resources! at! CGIAR! member! centres,! but!
focus! on! approving! and! overseeing! product! development,! coordinating! partnerships! and!
managing! relationships! with! public! and! private! sector! partners! –! while! the! majority! of! the!
R&D! program! activity! and! decision/making! is! undertaken! by! dedicated! project! teams! of!
researchers!affiliated!with!centre!(but!not!necessarily!“in/house”).!!
In! recognition! of! the! economies! of! scale! available! to! PDPs! through! coordinated! efforts,! a!
number!have!been!consolidated!under!the!oversight!of!the!PATH!organisation!(itself!a!key!
PDP!management!organisation).!In!part!this!was!driven!by!the!higher!management!efficiency!
that! PATH! had!already!achieved:!PATH’s!corporate!services!functions!represented!only!11/
13%!of!total!expenditure!in!2008/2009!versus!an!average!PDP!expenditure!of!25%.!
4.1.1.4
Operations2
While!nominally!created!to!target!product!development!across!the!value!chain,!global!health!
PDPs! have! typically! gravitated! towards! upstream! R&D.! Policy! and! advocacy! work! remain!
important,!but!deploying!technologies!has!taken!a!lesser!role.!Within!this!R&D!focus,!PDPs!
have!consistently!demonstrated!strong!performance!and!clear!reporting!in!terms!of!getting!
new!products!through!clinical!trials!/!with!in!many!instances!a!rigorous!feedback!loop!that!
channels!resources!to!products!that!are!making!headway!away!from!less!viable!options.!This!
feedback! loop! benefits! greatly! from! private! sector! input! –! by! successfully! replicating! and!
learning! from! the! pharmaceutical! industry’s! approach! to! getting! new! technologies! to!
market.!!
Each!PDP!manages!its!partnership!operations!independently,!but!there!are!also!a!wide!range!
of! mechanisms! to! coordinate! across! PDPs,! through! periodical! events,! donor! coordination!
20!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
and!evaluation!and!a!robust!community!of!practice!–!again!reminiscent!of!many!attributes!of!
the!CGIAR!system.!!!
The! success! of! the! global! health! PDP! model! is! corroborated! by! how! they! are! viewed! by!
donors.!They!have!been!consistently!able!to!generate!high!levels!of!donor!support,!driven!by!
strong! governance! architecture,! transparent! reporting! on! expenditures! and! impact,! and!
private!sector!engagement.!Total!funding!has!marginally!decreased!over!the!last!six!years!–!
but! recent! innovative! finance! mechanisms! have! focused! on! funding! mechanisms! for!
deploying!PDP!technologies!(e.g.!the!Global!Fund,!the!Global!Health!Investment!Fund).!!
4.1.2 GALVmed'
GALVmed!has!adapted!the!Product!Development!Partnership!(PDP)!from!the!Global!Health!
sector! and! applied! it! to! animal! health.! GALVmed! explores! and! improves! demand/based!
partnerships! to! accelerate! the! development! and! delivery! of! vaccines! against! prominent!
animal!diseases.!GALVmed!achieves!this!goal!by!financing!late!stage!field!trials!and!funding!
training,! distribution! and! other! market/barriers! to! maximise! efforts! to! reduce! these!
diseases.!
!
GALVmed!has!an!impressive!number!of!partnerships!–!over!200!different!relationships.!The!
principal!partners!are!five!Founding!Members!–!FARM!Africa!and!ILRI!on!the!non/profit!side!
and!three!animal!pharmaceutical!businesses!(Merial,!MSD!Animal!Health!and!Zoetis).!There!
are! also! seven! Ordinary! Members,! again! comprising! non/profits! (BSAS,! IFAH,! Vetaid,! the!
Network!for!Smallholder!Poultry!Development!at!Copenhagen!University!and!the!Moredun!
Group)!and!corporates!(CEVA,!IDEXX).!
4.1.2.1
Development2
The! concept! first! developed! in! the! early! 2000s! on! the! basis! of! conversations! between!
various!current!management/board!members.!This!concept!was!refined!and!then!proposed!
to! DfID,! which! provided! a! grant! of! GBP! 2.9m! in! 2005! to! establish! GALVmed! and! begin! the!
first!program!activities.!!
4.1.2.2
Funding2
Typically,! contributions! are! channelled! to! specific! products! in! development.! ! From! 2008/
2011,!GALVmed!secured!core!commitments!from!DfID!(USD!6mm)!and!BMGF!(USD!22mm)!
to! scale! up! activities! across! a! wider! range! of! diseases! and! strategies.! In! parallel,! GALVmed!
raised!EUR!9m!from!the!EU!to!fund!the!VACNADA!program!and!a!further!GBP!9m!from!DfID!
to! fund! Trypanosomosis! vaccine! development.! Most! recently,! GALVmed! has! secured! a!
further!USD!10m!from!DfID!and!USD!41m!from!BMGF!–!approximately!USD!51m!from!2012!
to!2017.!
4.1.2.3
Management2and2Governance2
GALVmed! is! a! non/profit! organisation,! with! its! strategy! and! performance! ultimately!
governed!by!a!Board!of!Trustees.!There!are!currently!8!Board!Directors!(though!there!have!
been! 9! in! the! past),!of! which! 5! are! elected! from! the! 5! founding! members! and! 7! members!
listed! in! the! partnership! section! above.! Board! members! are! allocated! to! a! number! of! sub/
committees! to! govern! specific! activities! e.g.! Finance! and! Audit,! Policy! and! External! Affairs.!
The!Board!of!Trustees!meets!4!times!each!year.!
21!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
!
GALVmed! is! managed! on! a! day! to! day! basis! by! a! full! time! Directorate! headed! up! by! Peter!
Jefferies! as! CEO.! Peter! is! supported! by! around! 30! staff! divided! evenly! across! Operations,!
Finance,! Administrative,! R&D! and! External! Affairs! departments! from! offices! in! Edinburgh,!
Nairobi!and!Delhi.!
4.1.2.4
Operations2
Where!the!PDPs!have!been!skewed!to!upstream!R&D,!GALVmed!has!almost!exclusively!been!
able! to! focus! on! late! stage! product! development! and! deployment.! Late! stage! R&D!
represents! around! 60%! of! annual! expenditure,! while! efforts! to! develop! downstream!
markets!account!for!the!remaining!40%!of!program!expenditure.!!
!
GALVmed!had!four!initial!priority!diseases!and!activities:!
o East% Coast% Fever:! register! ILRI/produced! vaccine! in! target! countries! and!
pilot/develop!market/based!distribution!channels;!
o Rift%Valley%Fever:!combine!the!vaccine!with!Sheep!and!Goat!Pox/Lumpy!Skin!Disease!
vaccines!to!improve!value!for!money!for!farmers;!
o Newcastle% Disease:! fund! improvements! in! retail/appropriate! packaging,! expansion!
of!refrigerated!supply!chain!and!consumer!training;!and!
o Porcine%Cycsticercosis:!pilot!and!develop!market/based!distribution!channels.!
!
GALVmed! has! also! begun! to! address! the! development! and! delivery! challenges! of! products!
for! other! diseases,! including! the! Peste! des! Petits! Ruminants,! Classical! Swine! Fever,!
Contagious! Caprine! Pleuropneumonia,! Contagious! Bovine! Pleuropneumonia! and!
Hemorrhagic!Septicaemia.!Futhermore,!GALVmed!has!expanded!into!financing!the!research,!
development!and!commercialisation!of!a!vaccine!against!Trypanosomosis.!!
!
On! a! broader! level,! GALVmed! has! funded! the! creation! of! social! enterprises! and! other!
market/based!initiatives!to!improve!the!availability!of!animal!health!products!in!Africa!and!
Asia,!through!FARM!Africa’s!Sidai!animal!health!franchises!in!Kenya,!the!VACNADA!program!
to! improve! the! quality! of! vaccines! produced! in! Africa,! and! the! VetVac! database! of! animal!
vaccinations.!
!
GALVmed,! at! the! prompting! of! DfID,! has! improved! its! impact! monitoring! and! reporting! to!
capture!not!only!households/animals!affected,!but!also!the!economic!impact!of!intervening!
early!to!vaccinate!animals!(as!with!the!GAVI!vaccination!program!in!humans).!GALVmed!also!
performs!well!relative!to!private!sector!R&D.!Its!target!of!five!new!products!over!five!years!
for!GBP!33m!(GBP!6.6m!each)!compares!favourably!with!market!estimates!of!GBP!13.3m!per!
new!product!over!the!same!time!period!in!private!R&D!organisations.!!
!
GALVmed’s! success! has! not! come! without! substantial! challenges.! Management! note! that!
the! focus! on! downstream! health! product! development! has! led! to! repeated! efforts! to!
register! new! products,! which! is! currently! a! tortuous! and! unpredictable! process,! such! that!
“so!much!of!what!happens!is!outside![GALVmed’s]!control.”!As!a!result,!key!milestones!tend!
to!be!overly!optimistic!on!timing!and!scale!–!but!these!are!critical!to!attracting!donors!and!
ensuring!more!continuous!funding!streams.!!
!
22!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
4.1.3 AgResults'
AgResults! is! a! second! iteration! of! efforts! to! increase! private! sector! engagement! with!
agricultural! development.! The! program! developed! out! of! the! G/20! Summit! meetings! in!
Toronto!in!2010,!which!identified!the!opportunity!to!create!a!pull!mechanism!for!agricultural!
products,! similar! to! the! Advanced! Market! Commitment! model! in! the! global! health! space.!
AgResults! was! championed! by! the! Canadian! Government,! with! additional! support! from!
BMGF,!as!well!as!UK,!US!and!Australia.!!
4.1.3.1
Development2
The! design! of! AgResults! took! approximately! 12! months,! with! USD! 1.5m! advisory! support!
from!Dalberg!Global!Development!Advisors.!!
4.1.3.2
Funding2
AgResults! has! received! USD118m! for! five! years! of! programming.! This! funding! is! provided!
entirely!by!the!donors!including!commitments!of!USD40m!from!Canada,!GBP21m!from!DfID,!
AUD20m! from! Australia.! Funds! are! transferred! by! donors! each! year! against! allocations! to!
prize!winners.!!
4.1.3.3
Management2and2Governance2
AgResults!sits!at!the!World!Bank!as!a!Financial!Intermediary!Trust!Fund,!with!the!World!Bank!
acting! as! Trustee.! The! program! is! overseen! by! a! Steering! Committee! and! executed! by! a!
standalone! Secretariat.! The! Steering! Committee! includes! representatives! from! each! of! the!
four! donor! countries,! BMGF! and! the! World! Bank.! This! committee! oversees! the! pipeline! of!
pilot!projects!and!funding!authorisations.!
The! Secretariat! comprises! seven! full! time! project! managers! responsible! for! generating! a!
pipeline!of!projects,!executing!funding!approvals!and!overseeing!the!use!of!funds!and!impact!
of!the!program.!This!Secretariat!has!an!annual!operating!budget!of!approximately!USD2.5m!
(11%! of! funds! allocated! in! a! given! period).! The! program! as! a! whole! is! also! overseen! by! an!
independent! external! impact! evaluator! (Abt! Associates)! over! the! course! of! the! project,!
funded!entirely!by!DfID.!
4.1.3.4
Operations2
AgResults!has!a!challenge!fund!model!–!the!Secretariat!curates!a!pipeline!of!projects,!invites!
proposals! for! a! given! application! cycle! and! awards! grant! funds! to! successful! proposals.! In!
preparation! for! the! launch! of! the! program,! three! pilot! programs! were! identified! and!
evaluated,!namely:!
o
o
23!
Nigeria! Aflasafe! Pilot:! building! on! the! BIP! preparation! by! IITA! mentioned! above,!
AgResults!is!helping!to!fund!the!commercialisation!of!improved!maize!by!paying!out!
USD9m! via! a! per/unit! premium! to! farmers! with! high! aflasafe! content! in! harvested!
crops.!
Kenya! On/Farm! Storage! Pilot:! this! pilot! is! a! results/based! payment! for! innovative!
storage! system! development! and! distribution! in! East! Africa;! stakeholders! are! paid!
out!a!total!of!USD7.75m!against!installed!capacity!of!new!storage!systems!that!meet!
defined!specifications.!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
o
MARCH!2015!
Zambia!Vitamin!A!Biofortification:!Agresults!is!using!USD5.5m!to!create!a!long!term!
offtake! market! for! biofortified! maize! by! incentivizing! minimum! purchases! of! SME!
and!smallholder!produced!maize!from!improved!seed!varieties!–!in!conjunction!with!
HarvestPlus.!
For! the! second! round! of! pilots,! 15! initial! project! proposals! were! compiled! in! 2013! to! take!
forward,! with! the! expectation! that! ultimately! 3/4! pilots! would! be! implemented.! The! first!
project!of!this!second!round!has!begun!operations!in!Uganda.!
Fundamentally,!the!AgResults!program!provides!grant!funding!against!results!to!third!party!
PPPs!–!and!therefore!requires!less!active!coordination!and!management!over!time.!That!at!
least!two!of!the!first!three!pilots!included!input!from!CGIAR!demonstrates!the!overlap!of!this!
type! of! funding! and! private! sector! strategy! with! what! the! centres! are! doing.! However,! as!
with! GALVmed,! these! proposals! have! not! necessarily! actively! engaged! private! sector!
participation! from! existing! companies! –! rather! creating! new! companies! that! use! market/
based!approaches!to!deploy!technologies.!
4.1.4 Technology'Transfer'Teams'
The! last! two! decades! have! seen! the! proliferation! of! the! technology! transfer! industry! –!
whose! goal! is! to! increase! market! applications! of! R&D! from! a! variety! of! sources.! The! tech!
transfer!model!developed!from!private!sector!management!of!intellectual!property!hand!in!
hand!with!the!growth!of!the!US!venture!capital!investment!market.!!
Typically,!tech!transfer!strategies!are!implemented!in!two!models:!in!house!and!standalone.!
Organisations!with!in!house!teams!are!dedicated!to!developing!and!promoting!partnerships!
that! leverage! technologies! developed! by! researchers! within! that! organisation,! while!
standalone! models! purchase! (or! otherwise! get! rights! to)! portfolios! of! technologies! from! a!
variety!of!organisations.!!
The! dominant! growth! area! for! tech/transfer! has! been! the! intersection! of! government! or!
university! research! and! markets.! ! Given! the! overlapping! R&D! focus! of! universities! vis/à/vis!
CGIAR,!these!organisations!present!interesting!case!studies!for!how!to!manage!this!kind!of!
public/private!partnership.!The!bulk!of!university!tech!transfer!activity!is!in/house.!As!might!
be! expected,! some! of! the! most! prominent! tech! transfer! teams! are! located! in! elite!
universities,!particularly!those!with!strong!STEM!programs!i.e.!Cambridge,!Imperial,!MIT!and!
Harvard.!
Examples! of! standalone! tech! transfer! organisations! include! the! African! Agriculture!
Technology!Foundation!(AATF)!and!Global!Good,!an!organisation!that!grew!from!efforts!to!
expand!the!IP!management!capacity!in!the!global!health!sector,!backed!by!BMGF.!!
4.1.4.1
Development2
Tech! transfer! teams! typically! grow! organically! over! time! from! a! small! staff! of! 1/3! people!
appointed! by! the! university! or! organisation! to! develop! the! strategy! and! implement! it.! In!
many! instances,! new! teams! are! created! that! pool! existing! staff! and! expertise! from! e.g.!
finance!and!legal!functions.!The!time!and!funding!required!to!operationalise!a!tech!transfer!
team!in!this!way!is!minimal.!
Standalone! teams! can! either! mirror! this! organic! development! process! or! go! through! a!
formal!design!and!implementation!program.!Global!Good!developed!as!a!unit!within!the!for/
24!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
profit! Intellectual! Ventures! through! partnership! with! BMGF.! Intellectual! Ventures! was!
founded!by!five!Seattle/based!technology!entrepreneurs!(notably!two!prominent!Microsoft!
alumni)! and! has! one! of! the! largest! patent! portfolios! in! the! US! –! peaking! at! 40,000! plus!
patents.!The!company!raising!capital!to!invest!over!$1bn!per!annum!in!purchasing!patents!
which! are! subsequently! monetized.! ! Global! Good! grew! out! of! a! desire! to! leverage! that!
expertise!in!developing!and!transferring!IP!for!developing!countries.!!
The!AATF!was!developed!over!a!two!year!period!from!2002/2003,!with!a!20+!person!design!
committee!overseeing!structuring!and!design!led!by!the!Rockefeller!Foundation!and!the!
Meridian!Institute.!The!development!cost!for!structuring!and!establishing!AATF!was!USD!1/
1.5m.!
4.1.4.2
Funding2
Universities!fund!tech!transfer!teams!in!three!ways.!First,!funds!can!be!allocated!from!within!
the!overarching!university!budget.!Second,!funds!can!be!allocated!from!specific!national!and!
international! policy! programmes! –! e.g.! HEFCE! in! the! UK! or! the! European! Innovation! Fund.!
The! third! source! of! funding! is! income! from! the! commercialisation! of! the! university’s! IP! –!
either!through!consulting!fees,!licencing!fees,!royalties!or!dividend!income!and!capital!from!
selling! stakes! to! other! investors,! for! business! models! developed! independently! where! the!
university! retains! an! ownership! stake,.! The! proportions! of! each! funding! source! vary!
enormously!across!universities,!but!the!teams!tend!not!to!be!financially!sustainable!on!the!
basis! of! cashflows! from! commercialisation! (one! stakeholder! stated! that! 88%! were!
unsustainable)!–!hence!the!value!of!internal!budget!allocations!and!grant/based!government!
funding.!!
As! an! example! of! an! in! house! team! funding! model,! Cambridge! University! Enterprise!
generates! over! £5m! funding! each! year.! This! is! partially! provided! by! the! university,! but!
significantly,! the! tech! transfer! group! receives! £2.9m! support! from! HEFCE! for! knowledge!
transfer!(a!UK!government!program!which!allocates!£150m!to!UK!universities!each!year)!and!
receives! 14%! of! the! income! generated! by! commercialisation! of! its! IP! portfolio! –! roughly!
£1.8m!in!2013.!This!income!is!principally!consumed!by!operating!expenses!–!GBP3.1m!–!and!
investment!in!patented!assets!as!part!of!business!development.!!
In! terms! of! standalone! options,! AATF! is! funded! through! grants! from! seven! core! donors! –!
comprising! two! sovereigns! (USAID! and! DfID),! one! multilateral! (AGRA),! two! foundations!
(BMGF! and! Howard! Buffet! Foundation)! and! two! private! sector! oriented! entities! (PepsiCo!
and!the!Syngenta!Foundation!for!Sustainable!Agriculture).!Additional!project!specific!support!
was! provided! by! CIMMYT! and! IITA.! Total! annual! grant! funding! amounted! to! just! under!
USD19m! in! 2013,! with! an! additional! USD1m! income! from! commercialisation! and! licensing!
activities.!!
Finally,!Global!Good!is!funded!through!revenues!from!Intellectual!Ventures!and!grants!from!
partner!organisations.!
Product/specific! funding! allocations! can! support! tech! transfer! teams! focused! on! providing!
technical! expertise! on! business! development,! legal! structuring! and! relationships.! For! early!
stage! projects,! this! can! look! like! PDP! funding! models! –! i.e.! targeted! grants! to! support! a!
specific!product!line.!
25!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
However!additional!funding!can!be!generated!for!later/stage!products!and!business!models!
through! impact! investment/commercialisation! funds! (as! per! recommendation! 6! in! the!
original! IF! proposal).! Many! university! tech! transfer! teams! have! affiliated! venture/impact!
investment! vehicles! to! play! this! role! –! where! returns! can! be! recycled! into! tech! transfer!
activities! (e.g.! Cambridge)! and! used! in! conjunction! with! third! party! investors.! In! mature!
markets,!this!can!even!extend!to!publicly!listed!platforms!raising!institutional!investment,!as!
with!Imperial!Innovations.!
4.1.4.3
Governance2and2Management2
University! tech! transfer! teams! typically! sit! within! the! legal! and! administrative! structure! of!
the!parent!high!education!organisation!–!operating!as!a!distinct!department!or!unit,!or!more!
frequently! as! a! wholly! owned! subsidiary! company! (especially! where! investments! require!
fiduciary! responsibility).! ! As! such,! the! parent! university! retains! control! over! how! tech!
transfer!resources!(funding!and!expertise)!are!managed,!but!can!leverage!additional!board!
expertise.!!
AATF! has! three! legal! entities! –! a! UK! registered! limited! company! which! is! registered! as! a!
foreign!private!company!limited!by!guarantee!in!Kenya,!a!charity!registered!in!England!and!
Wales!and!another!charity!in!Kenya!–!which!has!granted!host/country!status.!AATF!initially!
had! a! standalone! 10! person! Board! Advisory! Committee! to! oversee! strategy! and! annual!
performance! drawn! from! donors! and! local! stakeholders,! and! subsequently! expanded! to! a!
Board!of!Trustees!with!12!members!drawn!from!academia,!policy!and!the!private!sector.!
Global! Good! is! a! department! within! Intellectual! Ventures! and! is! therefore! governed! by!
corporate!oversight!bodies.!!
Management!teams!comprise!a!number!of!tech!transfer!professionals!with!legal,!consulting!
and!finance!expertise.!!
For!in/house!tech!transfer!models,!these!teams!support!academics!and!administrators!–!the!
size! of! the! team! is! dictated! by! the! scope! of! that! support.! Smaller! management! teams! can!
manage! a! large! number! of! transactions! if! they! are! predominantly! focused! on! one! activity!
(licencing!for!MIT);!larger!management!teams!can!execute!a!smaller!volume!of!more!varied!
transactions.! The! universities! analysed! typically! had! teams! of! 40/60! people,! with! annual!
operating!expenses!of!USD5/10m.!!
Parent!University!
Harvard!
Oxford!
Cambridge!
MIT!
1
Imperial!Innovations !
Management!Team!
40!
79!
58!
40!
64!
Operating!Budget!
N/A!
USD!16m!
USD!5m!
N/A!
USD!16m!
!
AATF!has!a!similar!team!of!37!management,!administrative!and!program!staff.!Management!
overheads!accounted!for!USD1.7m!in!2013,!though!some!headquarters!staff!can!be!funded!
through!program!budgets!(USD18m).!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
!Imperial!Innovations!is!a!publicly!listed!vehicle!providing!early!stage!tech!transfer!to!Imperial!College,!London!
and!financial!support!to!ventures!using!IP!from!Oxford!and!Cambridge!Universities,!Imperial,!UCL,!KCL!
26!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
Global! Good! has! a! team! of! 27! focused! on! managing! product! development! and!
commercialisation,! with! a! similar! balance! of! legal,! scientific! and! business! development!
expertise.!!
4.1.4.4
Operations2
Broadly!speaking,!there!are!three!areas!of!activity!on!which!most!technology!transfer!teams!
focus.! The! core! activity! is! typically! patenting! and! licencing! intellectual! property! that! is!
generated! by! research! conducted! at! the! university.! The! skill! sets! for! this! sort! of! IP!
management! are! well/defined,! with! a! focus! on! contract! preparation! and! management.!
Major! universities! typically! manage! 100! new! licences! in! a! year,! and! will! be! responsible! for!
portfolios! of! 2/4,000! licences! in! total.! The! break! down! by! across! the! four! universities!
reviewed:!!
!
27!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
2013/14
Invention'Disclosures'
MARCH!2015!
Harvard!
MIT!
Oxford!
Cambridge!
414!
698!
/!
124!
New'Patent'Applications'Filed'
231!
387!
200!
239!
Licenses'(including'options)'
34!
104!
105!
130!
2
12.4!
9.0!
Total'Licensing'Revenue'(USD'm)'
15.2!
66.1 !
!
The! second! business! line! for! tech! transfer! teams! is! to! develop! proprietary! businesses! that!
use!the!university’s!intellectual!property.!This!new!VC!funding!has!become!more!attractive!
as! universities! have! wanted! to! capture! recoup! more! of! the! financial! benefit! from!
commercialisation!efforts.!For!the!universities!surveyed,!the!typical!annual!rate!of!creating!
and!spinning!out!new!businesses!was!10/15!each!year.!!
2013/14!
Start'Up'Companies'!
Harvard!
9!
MIT!
16!
Oxford!
8!
Cambridge!
11!
!
The!third!business!model!–!more!prevalent!in!the!US!but!growing!in!popularity!elsewhere!–!
is! for! paid! collaboration! contracts! between! universities! and! private! sector! partners.! These!
can!be!quite!formal!and!structured!industry/sponsored!research!agreements,!or!more!ad!hoc!
consulting!contracts.!Tech!transfer!teams!have!been!able!to!reduce!the!transaction!costs!of!
executing! these! sorts! of! contracting! arrangements.! The! contribution! that! this! business! line!
plays! varies! from! university! to! university! –! but! at! Harvard,! total! revenues! generated! from!
industry/sponsored!research!agreement!grew!from!USD20m!in!2009!to!USD48.6!m!in!2014.!!
Given!the!highly!contractual!(and!quantifiable)!nature!of!these!activities,!it!may!appear!that!
tech! transfer! teams! operate! on! a! profit/maximization! basis.! However,! interviewees! were!
keen! to! point! out! that! universities! used! these! mechanisms! to! promote! the! overarching!
brand! of! the! organisation,! support! innovative! efforts! to! take! existing! research! further,! and!
(explicitly! in! some! cases)! targeted! wider! national! economic! development.! The! evidence!
given!to!support!this!focus!on!a!wider!public!benefit!was!that!most!offices!operate!at!a!loss!–!
so!it!makes!little!financial!sense!commercialising!technologies!as!a!standalone!activity.!!
For! standalone! teams,! projects! tend! to! be! more! explicitly! defined! as! business! lines! that!
develop!and!commercialist!specific!technologies.!AATF!has!eight!core!product!lines!around!
which! it! builds! its! IP! management! and! commercialisation! strategy.! These! cover! specific!
issues!and/or!crops,!namely:!!
•
•
•
•
•
•
•
•
Striga!control!in!maize;!
Cowpea!productivity!improvement;!
Protecting!bananas!and!plantain!from!bacterial!wilt!disease;!
Water!Efficient!Maize!for!Africa!(WEMA);!
Nitrogen/use!efficient,!water/use!efficient!and!salt/tolerant!rice!project;!
Mycotoxins!in!food!grains;!
Cassava!mechanisation!and!agro/processing!project;!and!
Hybrid!Rice:!breeding!by!design!
Performance!is!measured!against!a!range!of!deliverables,!but!notably!there!are!milestones!
for:!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2
!Not!broken!down!by!activity!–!so!this!represents!total!royalty!fees!received!by!MIT!and!may!include!non/
licencing!income!
28!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
•
•
•
•
MARCH!2015!
Negotiating!proprietary!technologies!for!application!in!Africa;!
Number!of!technologies!evaluated!and!adapted!for!use;!
Number!of!technologies!deployed;!
Knowledge! transfer! through! presenting! findings,! sharing! with! stakeholders! and!
acting!as!a!database!of!publicly!available!product!information.!
Global!Good!is!focused!on!commercialising!five!products!–!four!global!health!product!lines!
and!one!food!handling!and!storage!product!line,!namely:!!
•
•
•
•
•
Disease!modelling;!
Malaria!and!TB!diagnostics;!
Vaccine!cold!chain;!
Vector!management;!and!
Dairy!milking!and!transport!product.!
For!Global!Good,!the!drivers!of!success!are!the!ability!to!deploy!technologies!in!the!field!–!
through!licensing,!distribution!partnerships,!or!in/house!business!development!–!but!due!to!
the!private!management!structure,!quantitative!targets!and!milestones!are!not!made!public.!!
!
29!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
5
5.1
MARCH!2015!
Analysis+of+options+for+a+new+PPP+model+for+CGIAR+
For!CGIAR,!any!new!PPP!mechanism!needs!to!contribute!in!at!least!three!distinct!ways:+
o
o
o
Meet!stated!CGIAR!stakeholder!needs!
Add!value!across!the!network!of!centres!
Have!a!minimal!additional!governance!and!management!burden!
Assessing!the!models!above!against!these!parameters!helps!to!identify!which!offers!the!most!
promise!as!a!new!pilot!for!the!CGIAR.+
5.2
Addressing+gaps+identified+by+CGIAR+stakeholders+
In! terms! of! complementing,! rather! than! simply! replicating! existing! CGIAR! activities,! we!
compared! the! scope! of! activities! that! each! model! has! with! what! the! centres! identified! as!
opportunities!that!could!benefit!from!additional!support.+
PPP!Model!
Research!
Regulation!
Global!Markets!
National!Markets!
Manufacturing!
IP!Management!
SME!Development!
PDPs!
"!
"!
"!
"!
!
!
!
GALVMed!
!
"!
"!
"!
"!
!
!
AgResults!
!
!
!
"!
"!
!
"!
Tech!Transfer!
!
!
"!
"!
"!
"!
"!
CGIAR!gap!
analysis!
!
On!this!basis,!all!options!meet!some!of!the!CGIAR!needs,!but!the!tech!transfer!team!has!the!
greatest!applicability!and!value!add.!!
5.3
Applicability+to+all+CGIAR+centres+
Any!new!mechanism!will!ideally!support!all!of!the!centres.!To!achieve!this,!the!model!has!to!
have!the!scope!to!be!applied!to!a!range!of!different!issues!simultaneously.!!
Under! the! PDP! model,! each! PDP! is! itself! narrowly! focused! to! make! it! easier! to! manage! the!
product!development!process,!engage!with!funders!and!be!transparent!to!partners.!The!PDP!
ecosystem! generates! breadth! by! having! a! large! number! of! PDPs,! each! operating! in! its! own!
silo.! As! a! result,! the! PDP! approach! is! intuitively! not! appropriate! for! the! CGIAR,! given! the!
existing!fragmentation!of!component!parts!–!namely!the!centres!and!CRPs.!!
GALVmed!acts!as!an!umbrella!for!a!range!of!different!related!product!development!initiatives!
–! seeming! to! create! more! scope! for! a! system/wide! intervention.! However,! the! model! is!
fundamentally!designed!for!targeted,!defined!late/stage!R&D!and!product!deployment!efforts,!
with! funding! tied! to! specific! products! rather! than! the! bigger! picture.! Much! like! the! CGIAR’s!
W3/bilateral!resource!mobilization,!funders!with!GALVmed!can!support!products!that!target!
specific!diseases.!However,!GALVmed!lacks!a!broader!remit!to!accommodate!general!animal!
health!issues!except!on!an!ad!hoc!basis!where!resources!allow.!For!an!equivalent!in!the!CGIAR,!
centres! or! CRP! teams! could! propose! a! specific! issues! needing! dedicated! finance! for! market/
based!grant!investment!and!build!a!portfolio!of!these!under!a!management!team!in!the!same!
way!that!GALVmed!has.!
The!AgResults!model!is!much!broader!–!in!that!its!pipeline!and!pilot!projects!span!a!range!of!
geographies,! agricultural! development! activities! and! stakeholders.! Each! project! is! evaluated!
30!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
on!its!overall!merits.!Funding!is!allocated!to!the!program!as!a!whole!rather!than!to!a!narrowly!
defined! activity.! The! premise! of! the! challenge! model! –! with! proposals,! evaluations! and!
allocations!–!is!in!line!with!something!that!all!CGIAR!member!centres!could!benefit!from;!the!
bigger!issue!here!is!that!the!value!add!comes!not!from!grant!funds,!but!access!to!expertise!for!
specific!legal!and!business!development!activities.!!
The! Tech! Transfer! model! is! also! much! broader! –! since! the! examples! of! its! implementation!
entail! working! with! a! variety! of! research! teams! and! departments,! spanning! a! much! wider!
range! of! academic! disciplines! (outside! STEM,! for! instance).! For! standalone! models,! as! noted!
above,! there! is! a! more! structured! approach! to! specific! products! and! IP,! similar! to! the!
PDPs/GALVmed.!
5.4
Feasibility+in+terms+of+Governance+and+Management+
For! the! final! evaluation! criterion,! we! assessed! that! fact! that! the! CGIAR! would! ideally! deploy!
new! funds! as! soon! as! possible,! and! with! minimum! additional! cost! in! terms! of! governance!
burden!and!management!required.+
PDPs!have!historically!taken!24/36!months!to!structure!as!they!have!a!higher!upfront!funding!
commitment,!need!sufficient!human!resources!to!manage!the!product!development!process!
and! usually! have! a! champion! in! the! private! sector! with! a! specific! research! interest! that! is!
aligned! with! the! PDP’s! objective.! ! These! complications! (and! associated! costs)! have! been!
reduced! recently! by! re/structuring! non/PDP! organisations! as! PDPs.! For! CGIAR,! this! option! is!
not! available! –! without! changing! the! norms! around! centre! and! CRP! operations.! Once!
operational,! PDPs! are! independent! legal! entities! (registered! non/profits)! and! therefore! need!
their!own!boards!and!management!teams.!!
GALVmed!used!£2.5m!grant!funding!to!get!operational!over!a!20!month!period!–!though!the!
concept! had! been! refined! for! some! time! before! that! investment.! GALVmed! has! three! legal!
entities! –! a! registered! charity! in! Scotland,! another! registered! charity! in! the! UK! and! a! wholly!
owned! subsidiary! in! Kenya.! All! products! are! developed! under! the! oversight! of! a! single!
governing!board!and!managed!in!house.!
AgResults! took! only! 12/18! months! to! fully! structure! at! a! cost! of! £1.5m.! However,! the!
challenge! fund! model! does! require! a! standalone! funding! vehicle! housed! in! this! case! in! the!
World! Bank! (comparable! programs! use! other! multilaterals! as! hosts! e.g.! AGRA).! The!
governance!team!comprises!only!funders,!but!these!parties!have!a!substantial!role!to!play!in!
reviewing! and! approving! proposals.! The! Management! team! facilitate! the! development! of!
proposals,!but!is!reasonably!small,!since!the!bulk!of!the!operational!activities!are!undertaken!
by!grant!recipients.!!
The! Tech! Transfer! model! is! the! most! flexible! in! terms! of! structuring,! governance! and!
management.! While! ultimately,! many! R&D! organisations! create! wholly! owned! subsidiaries,!
initially,!the!model!can!be!executed!within!existing!CGIAR!legal!structures!(e.g.!the!Consortium!
Office),! with! funding! allocations! passing! through! existing! channels.! Management! of! a! tech!
transfer!strategy!can!be!executed!either!through!a!dedicated!full!time!team!or!be!outsourced!
to! standalone! entities! –! for! example! Global! Good,! which! plays! a! similar! role! for! products!
generated!in!the!global!health!space.!The!scope!of!the!project!can!be!scaled!over!time,!since!
the! principal! costs! are! salaries! rather! than! underlying! program! activities,! but! fundamentally!
can!begin!operations!within!6/12!months!on!a!pilot!basis.!For!more!fully!standalone!structures!
like!the!AATF,!structuring!has!taken!2!years,!with!USD1.5m+!in!establishment!costs.!!
31!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
5.5
!
32!
MARCH!2015!
On!the!basis!of!these!criteria,!the!tech!transfer!model!appears!to!offer!the!best!fit!for!CGIAR.!
As! one! stakeholder! put! it,! “CGIAR! would! substantially! benefit! from! a! high! level! Strategic!
Implementation! Unit”! to! help! centres! “broker! stronger! relationships! with! the! private! sector!
through!market!analysis”,!providing!“system/wide!support”!on!stakeholder!management!and!
coordinated,!internally/consistent!commercialisation!of!technologies.!
+
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
6
MARCH!2015!
Tech+Transfer+Strawman+
6.1
To! test! and! iterate! this! concept! with! key! stakeholders! in! the! CGIAR,! we! have! developed! a!
Strawman!Proposal!for!implementing!a!tech!transfer!model.!!
Three! basic! structuring! and! management! options! are! available.! The! first! option,! which! we!
propose! in! the! strawman,! is! to! increase! in/house! tech! transfer! capacity! within! the! current!
Fund!and/or!Consortium!Office!governance!and!management!structures.!The!second!option!is!
to!channel!funds!through!a!third!party!tech!transfer!team!–!e.g.!the!AATF.!The!third!option!is!
to!contract!a!third!party!team!to!provide!technical!expertise!for!CGIAR.!!
The!strawman!tech!transfer!team!would!operate!at!a!system!level!to:!
o
o
o
o
Allow!all!centres!to!access!services!–!rather!than!limit!support!to!a!small!number!of!
centres!–!and!therefore!foster!“ownership”!of!the!team!by!the!centres!
Create!consortium/level!private!sector!relationships!
Allow!flexible!applications!across!all!geographies!–!depending!on!the!product!
pipeline!and!demand!from!potential!partners!
Allow!the!greatest!scope!for!different!type!of!partnership!–!from!active!research!
agreements!to!passive!licensing!arrangements.!
The!broad!parameters!for!the!program!could!be!as!follows:!
Term!
Description!
Name!
Strategic!Implementation!Unit!
Time!to!structure!
6/12!months!for!initial!analysis;!24!months!for!full!operations!
Cost!to!structure!
USD!1.5m!
Operational!Costs!
USD!1.5m!per!annum!
Product!Dev’t!Costs!
USD!1m!per!annum!
Sources!of!Funding!
Donor!and!Foundation!input.!Possible!corporate!co/funding,!but!more!likely!in/kind!
support!for!specific!partnerships!
Governance!
Joint!Sub/Committee!with!Donor!and!Consortium!Board!representation!
Management!
In/house!within!Consortium!Office!
Management!Team!
15!IP/tech!transfer!professionals!
Centre!Relationships!
All!centres!–!demand!driven!
Activities!
/
/
/
/
/
/
/
/
Consolidate!and!coordinate!global!private!sector!relationships!
Act!as!“one/stop!shop”!for!new!potential!partners!
Consolidate!IP!catalogue!across!CGIAR!
Develop!global!distribution!and!offtaker!arrangements!for!key!CGIAR!commodities!
Conduct!local!level!market!analysis!exercises!to!support!CGIAR!stakeholder!programs!
Develop!local!input,!production!and!offtake!partnerships!and!licensing!arrangements!
Support!Centre!SME!incubators!with!business!expertise!&!investor!outreach!
[Coordinate!private!sector!R&D!agreements]!
Key!Performance!
Indicators!
/
/
/
/
/
/
/
/
Number!of!CGIAR!centres/CRPs!receiving!support!
Number!of!new!technology!registrations!
Number!of!licenses/equivalent!issued!
[Number!of!private/sector!sponsored!R&D!agreements]!
Number!of!PPPs!brokered!
Private!Sector!funding!leveraged!
CGIAR!SMEs!supported/capital!raised/spinouts!
Impact!of!operations!on!smallholders/communities!
33!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
6.2
MARCH!2015!
Development+
The! in/house! team! can! be! developed! over! time! with! design! input! from! external! advisors,!
potentially! overseen! by! a! Design! Advisory! Committee! (as! per! the! AATF)! drawing!
representatives!from!donors!and!centres.!The!benchmark!cost!for!development!is!USD1.5m!as!
per!AgResults,!AATF.!This!funding!can!support!one!or!two!in!house!leadership!hires!to!own!the!
design! process! and! support! existing! IP/partnership! capacity! at! the! Consortium! office.! Funds!
can!also!pay!for!external!expertise!from!a!consultant!or!tech!transfer!team!at!a!university!(that!
commonly!provide!tech!transfer!design!advice!to!institutional!clients).!The!initial!scoping!work!
should! aim! to! complete! an! IP! review! of! all! centres,! assess! the! potential! added! value! of!
partnerships!and!develop!an!operating!model!for!a!dedicated!tech!transfer!team.!!
A!second!option!is!to!channel!funds!to!an!existing!tech!transfer!team.!The!AATF!is!an!obvious!
candidate,! given! its! established! team,! strong! existing! CGIAR! relationships,! and! robust!
governance! capacity.! By! using! an! existing! organisation! like! AATF,! CGIAR! may! reduce,! if! not!
eliminate!design!and!structuring!expenses.!
The! final! option! is! to! hire! a! third! party! organisation! –! e.g.! Global! Good! /! ! to! complete! an!
analysis! of! the! CGIAR! IP! landscape! in! conjunction! with! the! Consortium! office! (as! per! option!
one!above).!!
Model!
In/House!
External!Organisation!(e.g.!AATF)!
Contract!(e.g.!Global!Good)!
Governance!
(Design)!!
Design!Advisory!Committee!
(DAC)!
Donors!and!External!Org!(with!
DAC!as!required)!
Donors!and!External!Org!(with!
DAC!as!required)!
Management!
(Design)!
1/2!in!house!hires!with!
external!advisors!
External!Organisation!with!
Contractor!with!Consortium!and!
Consortium!and!Fund!office!input! Fund!office!input!!
Design!Costs!
(approximate)!
USD!1.5m!(AgResults!
benchmark)!
0.25/0.5m!(program!design!costs!
but!not!establishment!costs)!
0.25/0.5m!(program!design!costs!
but!not!establishment!costs)!
Design!Timeline!
18/24!months!to!full!
operations!
6/12!months!
6/12!months!
!
6.3
Funding+
Typical!teams!reviewed!in!the!analysis!above!require!between!USD!60,000!and!USD!100,000!
per! head.! For! a! dedicated! in! house! team,! the! size! can! be! estimated! by! looking! at! the! ratio!
between!the!size!of!the!R&D!organisation!and!the!tech!transfer!team!required!to!support!it.!
The! universities! reviewed! are! approximately! the! same! size! as! the! CGIAR! and! have! teams!
ranging!from!30/80!people.!However,!the!ratio!of!more!standardized!activities!(e.g.!licensing)!
to! more! heterogeneous! activities! (e.g.! business! development)! also! plays! a! role.! The! wider!
scope! of! an! in/house! tech! transfer! team! corresponds! to! a! potentially! larger! team! –! and!
therefore!cost.!Likewise,!the!rate!of!marketing!new!technologies!plays!a!role;!universities!have!
a!much!higher!rate!of!generating!and!commercialising!technologies!versus!the!CGIAR.!
Given!the!potential!for!additional!support!beyond!licensing!transactions!and!anticipating!some!
expansion! in! CGIAR’s! PPP! activity,! we! estimate! a! team! of! 10/15! tech! transfer! professionals!
could!fill!the!in!house!role.!For!the!external!structuring!options,!teams!are!typically!3/6!people!
for!each!product!under!development;!we!use!a!conservative!figure!of!5!experts.!!
In/house! teams! could! provide! only! technical! support! –! leaving! the! funding! for! product!
development! to! existing! allocations.! ! The! two! external! models! require! funding! to! support!
34!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
much!more!extensive!upstream!product!development!–!since!that!role!shifts!from!the!centres!
to!the!third!party!team.!!
Stakeholder! interviews! noted! that! providing! funding! alongside! technical! support! would!
incentivise!higher!rates!of!participation!by!centres!–!as!such!we!recommend!some!allocation!
for!grant!funding!alongside!in/kind!technical!assistance.!
Model!
In/House!
External!Org.!(e.g.!AATF)!
Contract!(e.g.!Global!Good)!
Operational!Costs!
(approximate)!
USD!1.5m!for!a!10/15!
person!team!
USD!0.5m!for!a!5!person!
USD!0.5!for!a!5!person!team,!
team!leveraging!existing!
leveraging!current!overheads!(single!
overheads!(single!product)! product)!
Product!Dev’t!Costs!
Existing/future!CRP/Centre!
funding!or!e.g.!USD1m!p.a.!
2.5m!per!annum!per!
technology!
2.5m!per!annum!per!technology!(or!
IP!transferred!to!contractor,!losing!
control!of!!licensing!and!revenues)!
Follow!on!funding!from!venture!capital!vehicle!possible!
!
These!stages!of!implementation!can!be!funded!in!two!ways:!!
1) through!one/off!grants!for!the!design!of!the!new!strategy!and!
2) through!multi/year!grants!for!operating!the!program.!
!
For! the! in/house! model,! operating! funds! can! be! allocated! through! existing! WB! channels! or!
through! direct! allocations! to! the! Fund! or! Consortium! Office.! For! the! two! external! models,!
design! funds! can! be! allocated! through! the! Fund! or! Consortium! Office,! but! for! long! term!
operations,! the! most! straightforward! transaction! will! see! donors! allocate! funding! directly! to!
the! third! party.! Alternatively! funds! can! be! channelled! through! centres! (as! per! the!
arrangement! whereby! CIMMYT! and! IITA! currently! allocate! funds! to! AATF! for! product!
development).!
The!types!of!donors!that!have!supported!innovative!tech!transfer!models!like!AATF!in!the!past!
are!existing!CGIAR!contributors.!Given!the!modest!size!of!additional!commitment!required!to!
implement!any!of!the!three!basic!strategies,!CGIAR!donors!that!are!not!currently!supporting!
similar! strategies! may! be! willing! to! allocate! funds! and! champion! this! new! approach.! In!
addition,!siting!operations!in!specific!countries!(e.g.!India)!may!allow!a!tech!transfer!model!to!
leverage! policies! that! require! CSR! contributions! by! private! sector! partners,! or! that! allow!
contributions!to!count!as!capital!formation!activities.!!
6.4
Governance!and+Management!
Once! operational,! the! in/house! team! can! be! overseen! be! a! joint! sub/committee! comprising!
donor! and! Consortium! Board! representatives.! The! management! team! can! be! housed! in! the!
existing!Consortium!Office!(or!Fund!Office)!infrastructure.!This!approach!allows!the!CGIAR!to!
retain! control! over! the! design! and! operations! of! the! team! and! allow! for! buy/in! by! key!
stakeholders,!most!notably!the!centres.!!
However,! this! model! does! create! additional! issues! around! value! for! money,! in! terms! of!
benchmarking!and!incentivising!the!management!team,!and!create!an!additional!system/level!
overhead!for!the!CGIAR!away!from!R&D.!CGIAR!overheads!are!not!substantial!but!are!under!
budget!pressures,!and!expanding!capacity!may!not!be!in!line!with!parallel!strategic!objectives.!!
35!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
The! limitations! of! the! third! party! models! are! that! the! core! oversight! function! and!
management!decisions!will!be!taken!outside!the!CGIAR!architecture,!CGIAR!can!then!contract!
this! third! party! as! a! tech! transfer! advisor! to! develop! commercialisation! and! distribution!
strategies!for!selected!technologies!identified!in!the!analysis.!As!with!the!AATF!option!above,!
the!limitation!is!that!this!strategy!will!focus!in!on!a!small!number!of!technologies!and!may!not!
have! a! transformative! effect! on! the! CGIAR! system! as! a! whole.! Scaling! will! likely! require!
independent! contracting! for! each! technology/product.! Oversight! and! management! decisions!
will!again!fall!outside!the!CGIAR!architecture.!!
Model!
In/House!
External!Organisation!(e.g.!AATF)!
Governance!
(Operations)!
Joint!Committee!(Donors!&!
Consortium)!
External!Board!(with!potential!for! External!corporate!board!
input!from!CGIAR)!
Management!
(Operations)!
Additional!in/house!hires!
External!Organisation!(dedicated!
staff!plus!admin!support)!!
!
6.5
Contract!(e.g.!Global!Good)!
Contractor!
Operations+
Operationally,! the! in/house! option! offers! the! most! scope! to! provide! ongoing! support! to! all!
consortium!members!across!a!range!of!research!areas,!geographies,!and!technologies.!
For! the! option! of! an! external! organisation! like! AATF,! if! we! assume! maintaining! the! existing!
operational!model,!there!are!three!operational!characteristics:!!
1) the!AATF!is!limited!to!a!single!continent!–!while!centres!are!active!throughout!South!and!
South! East! Asia,! Latin! America! and! the! Caribbean.! ! A! pilot! here! could! be! scaled! through!
parallel! programs! in! other! geographies! either! through! partnerships! similar! organisations!
or!through!newly!created!structures,!recognising!that!the!latter!will!have!a!higher!cost!and!
complexity.!
2) the!CGIAR!should!select!a!specific!product!line!/!one!simple!approach!would!be!to!
leverage!the!second!call!for!CRPs,!and!incorporate!one!or!two!specific!proposals.!!Scaling!
could!occur!through!replicating!this!model!over!a!number!of!product!lines.!!
3) the! AATF! model! focuses! more! on! licensing! technologies! from! other! parties! and! then!
developing!deployment!models!in!house.!This!model!could!be!adapted!to!limit!the!AATF!
to!use!CGIAR!technologies!under!a!pilot!scheme.!!
The!contractor!tech!transfer!model!used!by!Global!Goods!balances!the!limitations!of!the!AATF!
model!by!allow!for!a!global!review!of!IP!and!possible!partnerships!before!zeroing!in!on!a!small!
number!of!products.!As!such,!the!model!can!take!a!global!view!–!i.e.!the!pipeline!of!products!
can! be! generated! from! all! centres.! However,! the! operating! model! will! have! a! narrow! scope!
once! specific! products! are! selected.! The! scope! of! the! contract! model! services! is! also! quite!
broad.!Global!Good!has!balanced!developing!business!models!for!technologies!that!can!then!
be!licensed!to!private!partners!with!growing!proprietary!businesses!to!monetise!and!distribute!
tech!to!the!base!of!the!pyramid.!!
Description!
Activities!
/ Consolidate!&!coordinate!global!private!sector!relationships!
"!
!
!
/ Act!as!“one/stop!shop”!for!new!potential!partners!
"!
!
"!
/ Consolidate!IP!catalogue!across!CGIAR!
"!
!
"!
36!
In/House!
External!Org.! Contract!
(e.g.!AATF)!
(e.g.!Global!Good)!
Term!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
Term!
Description!
MARCH!2015!
External!Org.! Contract!
(e.g.!AATF)!
(e.g.!Global!Good)!
In/House!
/ Develop!global!distribution!and!offtaker!arrangements!for!
key!CGIAR!commodities!
"!
"!
!
/ Conduct!local!level!market!analysis!exercises!to!support!
CGIAR!stakeholder!programs!
"!
"!
!
/ Develop!local!input,!production!and!offtake!partnerships!and!
licensing!arrangements!
"!
"!
"!
/ Support!Centre!SME!incubators!with!business!expertise!&!
investor!outreach!
"!
!
!
/ [Coordinate!private!sector!R&D!agreements!
"!
"!
"!
"!
!
!
"!
"!
"!
Key!
/ Number!of!CGIAR!centres/CRPs!receiving!support!
Performance! / Number!of!new!technology!registrations!
Indicators!
/ Number!of!licenses/equivalent!issued!
"!
!
"!
/ Number!of!PPPs!brokered!
"!
"!
!
/ Private!Sector!funding!leveraged!
"!
"!
"!
/ CGIAR!SMEs!supported/capital!raised/spinouts!
"!
!
"!
/ Impact!of!operations!on!smallholders/communities!
"!
"!
!
[Number!of!private/sector!sponsored!R&D!agreements!
"!
!
!
!
In!terms!of!how!partnerships!are!developed!around!technologies,!the!starting!point!for!an!in/
house!team!will!be!to!canvas!centres!for!existing!relationships!and!reach!out!to!private!sector!
partners!with!whom!the!CGIAR!has!worked!in!the!past.!Organisations!like!AATF!replicate!many!
of! the! relationships! that! CGIAR! already! have! in! place! –! with! a! focus! on! NARIs,! state/owned!
enterprises!and!academic!institutions.!Central!to!successful!implementation!will!be!the!ability!
to! actively! engage! private! sector! –! an! area! that! standalone! organisations! such! as! AATF,!
GALVmed,!and!AgResults!have!not!yet!been!able!to!optimise.!Contractors!will!typically!have!
existing!relationships!with!private!sector!partners!through!previous!R&D!partnerships,!but!can!
also!leverage!CGIAR!relationships.!
In! terms! of! CGIAR! relationships,! where! the! in/house! team! can! be! structured! to! serve! all!
member! centres,! the! external! options! will! only! collaborate! with! the! centres! involved! in! the!
technology(ies)! they! are! developing.! The! centres! with! the! most! active! tech! transfer! and!
private!partnership!activities!as!of!2012!are:!!
IP!Staff!
Limited!Use!
Agreement!
Bioversity!
2!
!
!
!
CIAT!
1!
1!
!
!
CIFOR!
/!
!
2!
!
CIMMYT!
5!
4!
!
Yes!
CIP!
/!
!
2!
!
ICRAF!
/!
!
!
Yes!
ICRISAT!
2!
7!
!
Yes!
IFPRI!
/!
!
!
Yes!
IITA!
/!
1!
!
!
ILRI!
2!
1!
!
!
IRRI!
2!
!
!
!
!Centre/!
37!
Restricted!Use! Strong!Private!Sector!
Agreement!
Relationships!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
IWMI!
1!
!
!
MARCH!2015!
!
!
On!the!basis!of!this!data!and!conversations!with!stakeholders,!the!prominent!centres!in!terms!
of! building! private! sector! relationships! are! ICRAF,! CIMMYT,! IRRI! and! ICRISAT.! For! external!
support!from!a!standalone!organisation,!likely!candidates!for!pilot!operations!will!therefore!be!
these! centres.! For! a! contract! tech! transfer! team,! the! driver! will! be! the! viability! of! the!
underlying! technologies! –! and! so! could! be! any! one! centre.! It! is! worth! noting! that! those!
centres!not!currently!executing!PPPs!may!require!the!most!support!from!an!in/house!team!–!
so!this!analysis!may!not!be!applicable!to!that!operating!model.!!
Model!
In/House!
External!Organisation!(e.g.!AATF)!
Contract!(e.g.!Global!Good)!
Centre!
Relationships!
All!–!building!on!successes!at!
e.g.!ICRAF!and!supporting!
centres!without!historic!
capacity!to!pursue!PPPs!
Work!with!1/4!centres!with!
African!operations:!for!pilot,!
nd
target!low!hanging!fruit!from!2 !
call!for!CRPs!
1/3!for!each!technology;!
selection!on!the!basis!of!
contractor!IP!analysis!
!
6.6
Impact+
The! in/house! tech! transfer! team! model! allows! for! a! range! of! different! types! of! partnership,!
each! with! its! own! set! of! impacts! that! ultimately! help! get! technologies! to! market.!
Fundamentally,! however,! the! impact!generated!by!this!strategy!is! extremely!high!relative! to!
the!cost.!
The!scale!of!impact!can!vary!depending!on!the!stakeholders!and!scope!of!the!partnership!/!i.e.!
the!investment!leverage!and!number!of!smallholder!farmers!benefiting!could!dramatically!
increase!under!an!arrangement!with!a!multinational!player!in!multiple!jurisdictions.!
Of! the! CGIAR’s! existing! licensing! arrangements,! one! with! a! local! SME/venture/stage! private!
partner!generated!these!approximate!outputs!and!outcomes:!
o
o
o
o
o
o
1!regionally!limited!licence!agreement!signed!
6!seed!products!registered!in!a!new!country!by!contract!counterparty!
USD15m!third!party!funding!raised!from!impact!investors,!foundations,!parallel!
donor!programs!(AECF)!and!development!finance!institutions!(OPIC)!
significant!yield!increase!and!improved!nutritional!value!of!crops!
20,000!smallholder!farmers!impacted!over!5!years!
Planned!expansion!of!project!to!2!further!countries!under!regional!with!additional!
private!sector!input.!
!
We!believe!that!a!dedicated!team!could!double!the!existing!number!of!partnerships!across!the!
CGIAR!–!an!extremely!conservative!estimate!–!which!results!10/15!new!partnerships!As!such,!
an! outlay! of! e.g.! USD1.5m! to! develop! and! a! contribution! of! USD3/5m! over! 5! years! (scaling!
costs!with!organic!growth)!could!easily!yield:!
Assumption!
Impact!
2/3!stakeholders!in!each!agreement!–!a!contract!
counterparty!and!at!least!one!funder!
20/30!new!relationships!
USD!10m!investment!per!project!from!parallel!
development!finance!and!private!sector!contributions!
38!
USD100/150m!raised!!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
An!average!of!5!technologies!per!agreement!–!depending!
on!the!type!(e.g.!seeds!may!be!higher,!but!climate!analysis!
tools!may!be!a!single!product!agreement)!
5!small!projects:!20,000!farmers!
5!large!projects:!200,000+!farmers!
MARCH!2015!
50+!products!taken!to!
new!markets!
1!million!farmers!
impacted!
!
!
!
!
!
!
!
!
!
Section!2:!Prioritizing!additional!innovative!finance!mechanisms!
!
39!
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
7
MARCH!2015!
Introduction+to+Options+Analysis+for+a+Third+Innovative+Finance+Mechanism++
7.1
The!development!finance!community!has!used!a!number!of!innovative!finance!mechanisms!to!
incentivize!stakeholders!to!achieve!transparent!and!pre/determined!operational!outcomes.!!
7.2
Of! these! mechanisms,! two! have! been! highlighted! as! possible! medium! term! options! for! the!
CGIAR,!namely!impact!bonds!and!mechanisms!that!leverage!sovereign!lending!(“debt!leverage!
mechanisms”).! Both! of! these! mechanisms! create! opportunities! to! engage! new! funders! and!
link!funding!to!results.!
7.3
In!this!section,!we!provide!a!high!level!analysis!to!prioritise!which!of!the!two!options!merits!
further! development.! Initially,! we! review! the! underlying! mechanics! of! each! model! and!
describe! how! these! mechanisms! have! been! deployed! in! practice.! Next,! we! analyse! the!
applicability! of! each! option! to! the! CGIAR,! and,! finally,! we! describe! the! next! steps! and!
implementation!timeline!for!the!preferred!option.!!
8
8.1
Theoretical+Impact+Bond+Model+
Impact!bonds!are!a!very!recent!innovation!in!development!finance;!the!concept!was!refined!in!
the! latter! half! of! the! last! decade! and! first! implemented! in! 2010.! Impact! bonds! grew! from! a!
desire!to!improve!how!funding!and!outcomes!are!delivered!for!activities!that!generate!public!
goods.!!There!are!four!main!objectives!behind!the!impact!bond!model:!
1) to!shift!the!risk!allocation!for!delivering!public!goods!away!from!governments;!
2) to!make!funding!commitments!more!predictable;!
3) to! incentivize! strategies! that! improve! the! delivery! of! those! goods! and! improve!
overall!performance!management;!and!
4) to!create!additional!capital!flows!from!new!funders.!
8.2
It!is!important!to!note!that!there!are!limitations!on!types!of!activity!that!are!best!funded!using!
this!mechanism.!The!criteria!that!can!be!used!to!identify!viable!activities!include:!!
1) the!activity!generates!predictable,!quantifiable!and!measurable!outcomes;!
2) the! activity! is! responsible! for! those! outcomes! –! external! factors! are! isolated! and!
discounted!as!much!as!possible!to!ensure!that!funded!activities!generate!the!impact!
;!
3) the! cost! of! raising! funds! to! cover! the! upfront! and! ongoing! expenditure! associated!
with!the!activity!is!offset!by!resulting!improvements!in!efficiency!(i.e.!there!is!a!net!
economic!benefit!for!the!donor);!and!
4) the!activity!must!be!in!line!with!what!social/impact!investors!are!willing!to!fund.!
8.3
The!historic!model!for!delivering!goods!sees!a!public!body!contract!a!third!party!to!undertake!
a!particular!social!or!developmental!activity.!The!government!pays!the!partner!over!the!life!of!
the! contract.! In! some! instances! that! partner! is! another! public! body,! but! over! the! last! two!
decades,! third! party! organisations,! typically! non/profits,! have! taken! on! the! role! of!
implementing!partner.!!
Grant
Donors
Implementing*
Partner
Resources
Figure21:2Traditional2Public2Sector2Funding2Model2
40!
Development*
Programs
!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
8.4
MARCH!2015!
An!impact!bond!makes!two!changes!that!improve!the!efficiency!of!the!traditional!model.!First,!
it!introduces!a!third!party!to!the!transaction!–!the!investor.!!
Investors
Grant
Or*Loan
Grant
Donors
Implementing*
Partner
Resources
Development*
Programs
!
Figure22:2Shifting2the2source2of2upfront2and2ongoing2funding2for2an2activity2from2the2public2sector2to2a23rd2party2
8.5
The! goal! in! introducing! investors! is! to! cover! the! upfront! costs! of! implementation! without!
public! sector! funding.! ! As! such,! the! investor! is! taking! a! financial! risk! that! the! project! will!
succeed.!!
8.6
The!type!of!investor!targeted!by!the!proponents!of!impact!bonds!allocate!funds!on!the!basis!
of! non/financial! impact.! As! such,! investors! include! foundations! with! endowments,! high! net!
worth!individuals!and!family!offices!with!a!social/philanthropic!investment!policy,!companies!
with! the! ability! to! invest! their! corporate! social! responsibility! (or! equivalent)! budgets,! and!
development!finance!institutions!(DFIs).!The!theoretical!investor!base!can!extend!much!wider!
–! incorporating! public! sector! pension! funds,! university! endowments! and! the! like.! Given! this!
investor!pool,!a!secondary!goal!behind!developing!impact!bonds!is!a!general!expectation!that!
the!funds!come!from!impact/oriented!investors!that!will!recycle!any!returns!into!future!social!
or!developmental!projects.!
8.7
Second,! the! impact! bond! model! delays! the! donor! payment! until! the! outcome! has! been!
achieved.!!
Investors
Returns
Donors
Grant
Or*Loan
Implementing*
Partner
Resources
Development*
Programs
Results
!
Figure23:2Donor2payments2are2made2only2when2the2desired2outcomes2are2achieved2
8.8
41!
The!public!sector!body!takes!on!the!role!sometimes!termed!“outcome!payor.”!Theoretically,!
this!role!is!not!limited!to!the!public!sector.!However,!in!practice,!the!public!sector!is!the!party!
most! interested! in! achieving! the! social! or! developmental! outcome,! and! as! government!
budgets!have!come!under!increased!scrutiny!and!pressure!since!2007,!public!sector!bodies!are!
also!the!most!motivated!to!find!new!funding!models!that!optimise!their!value!for!money.!!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
8.9
MARCH!2015!
In!recognition!of!the!risk!transfer,!the!investor!is!paid!back!the!capital!invested!plus!a!return!
on!that!investment!–!typically!below!the!market!rate,!but!sufficiently!high!to!raise!the!funds!
required.! This! creates! complexity! in! the! design! process,! since! there! are! no! benchmarks! for!
what!a!fair!level!of!return!could!be!to!reflect!the!risk!that!the!investor!is!taking.!Consequently,!
in! practical! terms,! the! title! “investor”! is! not! quite! accurate.! One! of! the! key! challenges! has!
been!to!strike!a!balance!between!contracted!payments!by!the!governments!and!flexibility!in!
the! case! the! outcome! is! not! achieved.! Impact! bond! models! have! struggled! to! create!
sufficiently!strong!legal!frameworks!that!can!be!defined!as!investments!by!third!parties;!many!
contributions!from!these!third!parties!in!impact!bonds!have!in!fact!taken!the!form!of!grants,!
and!payouts!against!results!are!treated!in!accounting!terms!on!an!ad!hoc!basis.!Newer!impact!
models!are!finding!ways!to!overcome!this!limitation!by!using!more!narrowly!defined!contract!
terms! for! outcome! payments! –! however,! the! legal! and! accounting! frameworks! for! the!
treatment!of!investments!are!still!very!much!works!in!progress.!!
8.10 The!implementing!partner!for!an!impact!bond!is!an!organisation!that!has!sufficient!expertise!
and!resources!required!to!execute!the!activity.!Impact!bonds!help!broaden!the!scope!of!what!
types! of! organisation! can! fill! this! role.! Public! sector! procurement! processes! usually! favour!
larger! non/profits! and! development! organisations,! but! impact! bonds! can! help! smaller! teams!
with!demonstrated!results!compete!(if!they!can!find!investors!to!support!them).!In!fact,!larger!
organisations! may! not! need! an! outside! investor! to! cover! the! upfront! costs!–! they! can! cover!
this! outlay! from! their! own! reserves! and! are! best! placed! to! manage! performance! risk.!
Consequently,! investors! may! be! less! attracted! to! funding! larger! projects! (which! would! likely!
involve! implementation! partners! with! more! resources),! since! their! contribution! is! not!
sufficiently!additive!or!catalytic.!!
9
Empirical+Impact+Bond+Findings+
9.1
In!our!research!and!interviews,!we!identified!25!active!impact!bonds!across!seven!countries.!
9.2
The!UK!–!home!to!the!first!SIB!in!2010!–!leads!the!market!with!15!impact!bonds.!The!next!two!
prominent! markets,! Australia! and! the! US,! have! launched! a! handful! of! impact! bonds! each.!
Beyond!this,!there!has!been!a!large!interest!at!the!design!and!pilot!stage!across!a!number!of!
states!in!the!US!as!well!as!elsewhere!in!Israel,!Canada!and!Australia.!!
9.3
Existing! bonds! in! developing! markets! are! limited! –! India! and! Nigeria! are! the! only! countries!
with!active!programs!(or!imminent,!with!committed!funding),!but!DIBs!are!in!development!in!
Mozambique,! Pakistan,! Uganda,! Colombia,! Mexico.! ! Common! themes! that! arise! from! an!
analysis!of!these!active!impact!bonds!imply!that:!
1) Impact+ bonds+ raise+ modest+ amounts+ of+ investment:! ! The! average! transaction! size!
across! the! portfolio! is! just! over! USD4m,! and! most! transactions! involve! multiple!
investors,!each!contributing!a!fraction!of!that!amount.!The!impact!bond!investors!that!
have! taken! larger! positions! include:! Goldman! Sachs,! Bridges! Ventures! and! Big! Society!
Capital!(both!partially!funded!by!UK!Gov’t).!
2) Bond+ tenors+ are+ quite+ flexible:! there! is! a! large! range! of! different! program! lengths,!
pivoting! around! an! average! of! approximately! 5! years.! Unusually! for! capital! markets!
transactions!in!development,!there!is!less!need!for!long!investment!periods!to!recoup!
costs! –! as! the! majority! of! capital! is! consumed! as! operating! costs! versus! upfront!
investment.!
42!
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!
MARCH!2015!
3) Returns+ vary+ substantially:! most! of! the! impact! bonds! reviewed! took! 4%! returns! as! a!
reasonable!basic!rate!of!return,!in!some!instances!supplemented!by!a!final!payout!that!
generated!an!8/13%!IRR!for!investors.!
4) Narrowly+defined+activities+and+beneficiaries:!impact!bonds!tended!to!involve!working!
with!people:!a!pre/selected! target!“cohort”!of!individuals!that!would!benefit!from!the!
activities!funded!by!the!bond.!The!beneficiaries!ranged!from!<50!(EGADZ/Canada)!up!to!
multiple! thousands! –! but! in! every! instance! the! number! of! participants! was! defined!
upfront.!In!many!instances,!the!investors!–!especially!the!foundations!–!worked!with!the!
broader! population! of! potential! recipients! beforehand;! switching! to! an! investment!
rather! than! grant! role! limited! the! scope! of! their! support! to! a! smaller! population,! but!
was! an! opportunity! to! be! part! of! something! innovative! and! possible! recycle! funds! to!
increase!future!expenditure.!!
5) Small+ geographic+ scope:! related! to! the! defined! target! population! that! would! be!
impacted!by!the!bond/funded!activity,!the!geographic!scope!of!impact!bonds!tends!to!
be!at!a!very!local!level!–!i.e.!city,!county,!and!state!rather!than!national!interventions.!
Outcome!payors!and!investors!reflect!this!trend!–with!predominantly!local!public!sector!
entities!making!payments!to!investors!corralled!from!local!individuals!and!businesses.!!
6) High+ transaction+ costs:+ anecdotal! evidence! from! stakeholders! and! recorded! funding!
allocated!to!designing!and!implementing!impact!bonds!is!that!the!transaction!costs!are!
high! –! and! are! not! falling! as! the! market! matures.! The! bespoke! nature! and! potentially!
large! number! of! different! participants! of! each! individual! bond! mean! that! the!
development! phase! typically! requires! 18/24! months! from! concept! to! implementation.!
The! costs! of! developing! each! bond! range! from! USD! 0.2m! (Educate! Girls! DIB)! /2.5m!
(DfID’s! Uganda! Sleeping! Sickness! DIB)! –! and! can! represent! over! 50%! of! the! total!
investment! generated.! ! It! is! implied! that! these! design! costs! would! remain! constant!
regardless! of! the! scale! of! the! bond,! so! larger! bonds! (which! have! been! rare! to! date)!
would! offer! better! value! for! money! on! this! front.! ! Once! operational,! where! the! bond!
incorporates!managers,!10/20%!of!the!total!financing!can!be!consumed!in!management!
and!impact!evaluation.!+
10 Implications+for+CGIAR+
10.1 The!small!amount!of!total!funding!and!narrow!scope!of!the!impact!bond!model!suggest!that!
this! mechanism! is! a! better! fit! for! individual! centres! /! CRPs! to! support! specific! program!
activities!rather!than!system/level!resource!mobilization.!!
10.2 The!overarching!theme!of!supporting!specific!groups!of!people!and!isolating!external!factors!
suggests!that!an!impact!bond!model!is!best!suited!to!downstream!deployment!of!technologies!
rather!than!R&D!activities.!This!correlates!with!CGIAR!stakeholder!input!that!it!is!challenging!
to!set!predictable!R&D!outcome!targets!(noting!also!that!estimates!of!the!ultimate!impact!of!
CGIAR!interventions!were!also!reported!to!be!“quite!optimistic”).!!
10.3 Specialist! (and! costly)! expertise! is! required! to! develop! a! coherent! impact! bond! concept,!
coordinate! with! investors! and! link! all! parties! together! in! a! reasonably! robust! legal! and!
financial!structure.!CGIAR!would!have!to!source!this!expertise!externally.!
43!
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!
MARCH!2015!
10.4 The! small! financial! value! of! impact! bonds! may! be! a! mismatch! with! the! high! level! resource!
mobilization!objectives!across!the!CGIAR!–!it!would!require!a!large!number!of!transactions!to!
move!the!needle!on!a!target!additional!annual!funding!commitment!of!USD1bn.!!
10.5 The! impetus! to! develop! an! impact! bond! tends! to! be! driven! by! the! outcome! payor! or! the!
investor! rather! than! the! implementing! partner.! CGIAR! stakeholders! would! most! naturally! fit!
this!latter!role,!so!would!likely!benefit!from!partners!would!could!act!as!investors!or!outcome!
payors!to!champion!the!design!and!implementation!process.!!
11 Theoretical+Debt+Leverage+Mechanisms+
11.1 Where!impact!bonds!create!a!new,!more!efficient!type!of!transaction!away!from!a!grant,!debt!
leverage! mechanisms! start! at! the! other! end! –! with! a! loan! transaction! –! to! focus! it! on!
generating!results.!
11.2 The!fundamental!transaction!is!a!loan!made!by!a!donor!government!to!a!developing!country.!!
Debt
Recipient%
Gov’t
Donor%
Gov’t
Development%
Programs
Repayments
!
Figure24:2International2Debt272Bilateral2Loan2
11.3 The! developmental! component! of! the! loan! is! that! the! repayment! terms! are! usually! cheaper!
than! the! equivalent! that! the! borrower! would! get! from! the! international! capital! markets! –! if!
indeed! the! country! was! in! a! position! to! do! so! (only! a! dozen! or! so! sub/Saharan! African!
countries! have! issued! international! bonds! e.g.! Nigeria,! Kenya,! Ghana! –! and! even! then,! only!
recently).!!
11.4 In! order! to! increase! the! flow! of! funds! to! developing! countries,! multilateral! lenders! were!
created!–!that!could!leverage!private!investment!independently!of!the!shareholder!countries!
and!thereby!multiply!the!impact!of!the!what!donors!where!able!to!achieve.!!
Capital
Markets
Interest0+0
Principal
Donors
Equity
Promissory0
Note
Ownership
Loans
Equity/Debt
MDB
Governments
Repayment
!
Figure25:2International2Debt272Multilateral2Loan2
11.5 This! was! in! many! ways! the! original! innovative! finance! model,! leading! to! the! creation! of! the!
World! Bank! and! the! various! regional! development! banks.! Their! success! in! promoting!
44!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
investment!in!infrastructure!and!development!is!evidenced!by!the!fact!that!new!development!
banks! are! still! being! created! today! –! e.g.! the! BRICs! bank! and! the! Asian! Infrastructure!
Investment!Bank!in!the!last!18!months.!!
11.6 The!development!component!of!the!transaction!is!again!in!terms!of!potentially!concessional!
interest! rates! –! but! also! through! a! focus! on! specific! types! of! project.! While! the! majority! of!
these!loans!in!terms!of!total!capital!support!large!infrastructure!investment,!multilateral!and!
bilateral!they!can!also!be!targeted!to!purely!policy/oriented!activities:!hence!
11.7 Debt!leverage!mechanisms!fall!into!two!categories:!!
1) Some! mechanisms! catalyse2 transactions,! through! e.g.! guarantees! or! loss! protection.!
The! goal! here! is! to! balance! the! risk/return! profile! such! that! other! parties! –!
governments,!MDBs!or!the!private!sector!–!are!willing!to!invest!in!the!bond!issuance.!!
2) Other! mechanisms! focus! on! changing2 how2 the2 funds2 are2 used.! They! take!
existing/planned! transactions! and! introduce! some! additional! incentive! to! put! the!
funds!towards!generating!a!high!level!policy!outcome.!
11.8 For!CGIAR,!we!will!focus!on!the!second!type!of!transaction!–!since!the!overarching!investment!
is! to! unlock! additional! funding! for! agriculture! specifically! rather! than! emerging! markets! in!
general.!!The!principal!mechanisms!to!achieve!this!are!Debt!Swaps!and!Loan!Buy!Downs.!
11.9 The! basic! debt! swap! transaction! has! a! payment! to! retire! the! debt!–! made! by! an! investor! or!
similar.!This!purchase!is!discounted!relative!to!the!face!value!of!the!loan!–!and!often!reduces!
the!principal!outstanding!for!the!borrower.!This!transaction!was!taken!up!by!a!large!range!of!
stakeholders! in! the! 1980s! –! ultimately! peaking! at! USD27bn! per! year! in! swaps! in! 1990! as!
countries!reviewed!and!updated!their!debt!strategies.!
11.10 Debt!Swaps!for!development!basically!function!where!a!bilateral!lender!forgives!outstanding!
debt! if! a! development! outcome! is! achieved! and/or! the! future! savings! are! invested! in! a!
developmental!activity.!
Debt
Recipient
Donor
Development.
Programs
Repayments
Results
!
Figure26:2Debt2Swap2Model%
11.11 A!common,!slightly!different!version!of!the!debt!swap!model!is!not!to!retire!the!debt!outright,!
but!to!change!the!currency!terms!from!hard!currency!to!local!currency;!again,!on!the!provision!
that!the!savings!generated!by!making!this!change!are!applied!to!development!activities.!
11.12 A! more! nuanced! version! of! this! currency! trade! allows! the! borrower! to! buy! back! the! debt! in!
local! currency,! at! a! discount! –! again! with! conditions! on! the! uses! of! funds! freed! up! by! this!
transaction.!
45!
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!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
11.13 Loan!Buy/downs!are!a!more!recent!innovation!–!having!really!only!come!to!fore!over!the!last!
15!years!or!so.!Buy/downs!allow!a!third!party!to!play!the!role!of!the!creditor!for!them!–!either!
paying!back!the!lender!on!behalf!of!the!borrowing!government!either!in!full!or!in!part!(e.g.!the!
interest! component).! These! payments! are! conditional! on! a! specific! development! outcome.!
The!lender!for!the!transaction!can!be!a!single!donor!or!an!MDB!(or,!theoretically!at!least,!any!
creditor).!
Debt
Donor%or%
MDB
Development%
Programs
Recipient
Repayments
The%borrower%does%not%have%to%
repay%the%full%loan%value
Pays%lender,%purchasing%
the%debt%and%retiring%it%or%
contributing%to%the%
repayment%schedule
Outcomes
Third%Party
!
Figure27:2Loan2buy7Down2Model2
11.14 In!both!instances!there!is!an!internal!leverage!effect!that!results!from!how!debt!to!developing!
countries! is! treated! on! a! financial! accounting! basis.! Bilateral! and! multilateral! loans! are! not!
listed!on!lenders’!balance!sheets!at!face!value!–!they!are!marked!down!to!reflect!the!risk!that!
the!borrower!will!not!pay.!Given!the!development!focus!of!the!loans,!this!mark!down!can!be!
substantial.!As!a!result,!when!the!borrower!retires!the!debt,!or!a!third!party!purchases!it!from!
them!to!do!the!same,!the!cost!is!not!the!full!value!of!the!loan.!However,!for!the!borrower,!the!
change!is!the!full!value!of!the!loan!–!so!that!much!more!funding!is!unlocked!by!the!transaction!
than!it!costs!to!execute!it.!
11.15 !The! second! leverage! angle! is! where! a! third! party! contributes! part! of! the! repayment,! rather!
than!retiring!some!of!the!outstanding!loan.!In!these!instances,!a!small!amount!of!third!party!
funds!can!make!a!loan!affordable!for!the!borrower!–!so!making!the!transaction!viable.!Given!
the! interest! rates! available! in! development! finance,! this! small! amount! can! leverage! 10/100x!
funding!from!a!lender.!
11.16 The! second! leverage! component! is! where! a! third! party! contributes! part! of! the! repayment,!
rather!than!retiring!some!of!the!outstanding!loan.!In!these!instances,!a!small!amount!of!third!
party!funds!can!make!a!loan!affordable!for!the!borrower!–!so!making!the!transaction!viable.!
Given!the!interest!rates!available!in!development!finance,!this!small!amount!can!leverage!10/
100x!funding!from!a!lender.!
11.17 One! challenge! is! that! donors! interested! in! funding! a! loan! buy! down! model! may! also! be!
shareholders! in! the! lender! –! so! by! retiring! the! debt! or! paying! the! interest! rate! they! are!
repaying!themselves!for!funds!already!allocated!to!development!activities.!This!creates!double!
counting!issues!from!an!ODA!perspective!and!general!strategic!alignment!concerns!–!despite!
the!leverage!benefits!described!above.!
11.18 The! transaction! structure! often! includes! another! participant! –! an! organisation! that! can!
catalyse!the!transaction!and!help!the!government!achieve!the!proposed!outcomes.!Typically,!
46!
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!
MARCH!2015!
this! organisation! is! an! international! non/profit! entity! with! a! specific! policy! expertise! –!
education,!economic!development,!financial!regulation,!health!or!agriculture.!This!is!the!role!
we!envision!for!CGIAR.!
11.19 Some! part! of! the! loan! transaction! compensates! this! organisation! for! their! support! –!
essentially!being!consumed!in!consulting!resources!to!develop!policies!and!build!institutional!
capacity,!and!resources!that!can!then!help!translate!that!policy!from!concept!to!reality.!!
11.20 To! a! greater! extent! than! is! the! case! with! impact! bonds! (where! this! is! a! key! issue),! the! legal!
structuring!is!a!core!component!of!a!successful!transaction.!!The!lender!will!not!want!to!be!left!
exposed! in! a! transaction! with! a! buy! down! if! the! conditions! for! third! party! payment! are! not!
met.! Furthermore,! the! lender! will! want! oversight! on! how! the! funds! are! planned! to! be! used!
over! the! life! of! the! loan,! and! possibly! some! recourse! in! the! event! that! these! plans! are! not!
fulfilled.!
12 Empirical+Debt+Leverage+Mechanism+Findings+
12.1 Debt/swaps! were! first! strategically! executed! in! the! 1980s! in! response! to! the! growing!
international! credit! crisis! –! developing! countries! were! burdened! by! high! levels! of! debt! to!
developed!countries!and!were!struggling!to!make!repayments.!Transactions!began!with!debt/
for/equity!swaps!–!whereby!creditors!received!shares!in!local!companies!(often!state/owned!
enterprises)!in!return!for!cancelling!outstanding!debt.!!
12.2 Chile! established! the! first! debt/for/equity! swap! program! to! 1985,! and! subsequently! many!
other! lenders! and! borrowers! followed! suit! –! ultimately! unlocking! billions! of! dollars! in!
transactions.! Since! 1991,! these! transactions,! and! other! buyback! programs,! have! typically!
involved!bilateral!loans!made!by!Paris!Club!members!–which!is!used!to!negotiate!restructuring!
collectively!on!behalf!of!creditors.!By!the!year!2000,!USD!2.2bn!worth!of!debt/for/for!equity!
swaps!had!been!executed.!
12.3 At!around!the!same!time,!a!market!grew!for!debt/swaps!with!amore!developmental!focus!–!
particularly! in! with! regard! to! environmental! management.! Analysis! showed! that! heavily!
indebted!countries!were!particularly!susceptible!to!environmental!degradation.!A!number!of!
environmental! NGOs,! including! the! World! Wildlife! Fund! and! Conservation! International!
spearheaded! this! effort,! converting! commercial! and! export! credit! to! fund! environmental!
management! programs.! By! 2000,! the! World! Bank! estimated! that! USD1.6bn! had! been! raised!
for!conservation!in!over!30!countries!by!retiring!over!USD3bn!of!debt.!!
12.4 Over!the!last!15!years,!debt/swaps!have!diversified!outside!the!environment!sector!to!cover!
broader!public!benefits!–!principally!in!health!and!education.!Other!debt!swaps!were!used!to!
fund! multiple! government! expenditures! simultaneously,! across! infrastructure,! education,!
health!and!rural!development.!Annex!2!describes!some!high!profile!recent!debt!swaps!of!this!
kind.!A!number!of!countries!have!made!substantial!commitments!to!debt!swaps,!notably!the!
US,!France,!Spain,!Italy,!Switzerland!and!!
12.5 At! the! same! time,! development! financiers! also! introduced! buy/down! models,! whereby! the!
creditor!did!not!forgo!the!loan!value;!instead!a!third!party!provided!either!partial!or!full!debt!
relief.! DfID,! BMGF! and! Australia! have! led! this! market.! Annex! 3! describes! historic! loan! buy/
down!transactions.!!
12.6 Common!themes!that!arise!from!these!transactions!include:!!
47!
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1) Debt+ leverage+ mechanisms+ tend+ to+ have+ large+ transaction+ sizes:! ! In! order! to! have!
meaningful! impact! on! indebtedness! and! creditor! ODA! flows,! debt! leverage!
mechanisms! have! tended! to! be! large! scale! –! though! a! handful! of! exceptions!
demonstrate! that! the! model! can! accommodate! more! modest! funding! objectives.!
Sector! focused! debt/swaps! (e.g.! Debt2Health,! debt/for/education! and! debt/for/
nature)! range! from! USD1m! to! USD100m;! broader! country/specific! debt! swaps! (i.e.!
those! favoured! by! France)! can! be! as! high! as! USD! 700m! –! with! options! to! extend!
programing!over!15+!years.!Loan!buy/downs!are!also!viable!for!larger!transactions!–!
with!the!Polio!Eradication!buy!downs!unlocking!USD250m!across!two!countries.!!
2) Debt+ leverage+ mechanisms+ unlock+ large+ amounts+ of+ funding+ relative+ to+
commitments:! Creditors! –! be! they! governments! or! multilaterals! –! value! loans! at!
substantially! below! face! value.! This! valuation! is! lower! for! countries! with! higher!
perceived! financial! risk,! which! often! correlates! to! a! greater! need! for! institutional!
capacity! building! and! investment! for! development.! The! transaction! involves!
purchasing/cancelling! this! risk/adjusted! valuation,! but! cannot! unlock! the! full! face!
value!of!the!loan.!As!such,!small!amounts!of!funding!leverage!large!total!impacts!on!
the!borrower!–!especially!for!the!loan!buy/down!model.!
3) Debt+leverage+mechanisms+can+support+a+range+of+activities:+Loan!buy/downs!tend!
to!have!a!high!level!policy!objective!rather!than!focus!on!a!narrow!target!population!
or!activity!–!rooted!in!a!concrete!outcome!that!the!government!is!then!incentivized!
to!deliver.!Debt!swaps!can!be!even!broader!–!with!a!single!transaction!channelling!
funding!to!gov’t!programs!in!health,!education,!infrastructure!and!agriculture.!
4) DebtYleverage+ mechanisms+ have+ impact+ at+ a+ national+ level:+ both! debt/leverage!
mechanisms!are!able!to!be!applied!at!a!national!level!–!a!degree!of!magnitude!higher!
than!impact!bond!models.!However,!the!flexibility!of!the!debt!leverage!mechanism!
allows! it! to! also! be! applied! at! a! more! localised! and! targeted! level! if! necessary! (cf!
Mozambique!BIOFUND!transaction).!
5) Reasonable+transaction+costs:+developing!a!debt!leverage!mechanism!does!require!
external!expertise!and!usually!takes!12/24!months!to!come!together.!However,!the!
costs! associated! can! be! paid! out! as! part! of! the! transaction! itself! (e.g.! 2%! of! the!
transaction!size!in!the!case!of!debt/for/nature!examples),!and!total!costs!of!e.g.!$2m!
are!reasonable!relative!to!the!total!quantum!of!funding!that!a!single!transaction!can!
generate.! Oversight! and! management! of! a! transaction! after! completion! can! be!
undertaken! by! the! stakeholders,! and! does! not! necessarily! require! any! third! party!
input!–!barring!impact!evaluation!verification!for!loan!buy!downs.!
13 Implications+for+CGIAR+
13.1 The!large!amount!of!total!funding!and!broad!scope!of!the!debt!leverage!mechanism!strategy!
suggest! that! this! mechanism! may! be! a! good! fit! for! system/level! resource! mobilization!
incorporating! support! from! a! number! of! member! centres.! As! such,! we! see! this! model!
operating!best!at!the!CRP!level!–!providing!results/based!funding!for!a!CRP!workstream!within!
a!given!country.!!
13.2 While! debt! leverage! mechanisms! tend! to! focus! on! brick/and/mortar! investment! for! funding!
generated,! there! is! scope! to! finance! broader! policy! expenditure! –! and! this! could! extend! to!
48!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
R&D! activities! (but! has! not! historically),! alongside! improving! the! infrastructure! and!
functionality!of!local!agricultural!markets.!!
13.3 As! such,! an! approach! incorporating! debt! leverage! mechanisms! may! catalyse! closer!
engagement!with!NARIs!and!other!state!agriculture!programs!–!a!key!component!of!CGIAR’s!
historic!and!future!strategic!objective.!It!is!also!in!line!with!what!some!stakeholders!felt!was!a!
key! unique! selling! point! (USP)! for! the! CGIAR! –! relationships! with! host! governments! are!
particularly!strong!for!many!centres.!
13.4 For! outreach! to! lenders,! CGIAR! is! in! a! strong! position! given! its! inherently! robust! link! to! the!
largest! agriculture! lender! for! development! –! the! World! Bank! –! as! well! as! other! MDBs.! Loan!
buy/downs!have!also!been!strongly!supported!and!tested!by!key!CGIAR!stakeholders!–!namely!
BMGF,!DfID,!and!Australia.!For!bilateral!debt!swap!projects,!the!CGIAR!may!be!able!to!work!
closely!with!existing!donors!from!Europe!and!North!America!who!have!extensive!experience!
executing!transactions!over!the!last!three!decades,!e.g.!France,!Italy,!Switzerland,!Spain.!!
13.5 Expertise! and! structuring! support! can! be! leveraged! from! both! multilateral! lenders! and!
borrowers,! specifically! treasury! and! sovereign! lending! teams.! External! legal! and! financial!
advice!will!be!required!–!funding!this!advice!can!come!from!some!combination!of!fees!payable!
from! the! transaction! itself,! a! special! CGIAR! fund! for! technical! assistance! on! transaction!
structuring!financed!by!donors!and/or!from!the!other!participants!in!the!transaction.!!
13.6 A!strategy!to!structure!debt!leverage!mechanisms!over!a!number!of!years!is!in!line!with!the!
wider!CGIAR!resource!mobilization!targets!of!an!additional!USD1bn!by!2020!–!though!much!of!
the! funding! raised! under! this! program! will! be! consumed! outside! direct! CGIAR! expenditures!
(i.e.!government!budget!support!and!investment!in!tangible!assets).!!
13.7 The! capacity! to! develop! debt/leverage! mechanism! typically! requires! active! cooperation! and!
engagement! from! three! parties! –! plus! an! external! funder! in! the! case! of! loan! buy/downs.!
CGIAR! can! act! in! the! coordinating! role,! noting! the! above! comment! that! structuring!
transactions! of! this! kind! is! outside! the! CGIAR’s! area! of! expertise! –! but! delivering! on!
agricultural!impact!(i.e.!how!funds!are!used)!sits!squarely!in!CGIAR’s!USP.!
14 Recommendation+for+developing+a+3rd+innovative+finance+mechanism+for+CGIAR+
14.1 On! the! basis! of! the! analysis! above,! we! recommend! actively! allocating! resources! to! further!
developing!options!for!a!mechanism!under!the!oversight/coordination!of!the!CGIAR.!!
14.2 We!would!note,!however,!that!the!impact!bond!model!does!offer!possible!benefits!to!CGIAR!
stakeholders.! Developing! an! impact! bond! transaction! is! not! mutually! exclusive! from!
implementing! a! debt! leverage! mechanism,! should! a! funder! or! investor! want! to! pursue! this!
model!further!with!a!specific!centre!of!CRP!and!under!the!oversight!of!the!Fund!Office.!
14.3 Relative! returns! on! investment! show! that! the! debt! leverage! mechanism! has! substantially!
more!scope!to!create!impact!at!the!scale!CGIAR!is!seeking:!
Design!
Cost!
Design!
Cost!
Debt!Swap!
USD1.5m!
Loan!Buy!
Down!
USD1.5m!
49!
Donor!Cost!
Leverage!
CGIAR!Funding!
Scope!of!Impact!
USD25m!
USD50m!!
(i.e.!2x,!up!to!10x+)!
USD10m!–!i.e.!20%,!but!
e.g.!USD40m!for!NARIs!
National–!typically!
millions!of!farmers!
USD25m!if!results!
are!triggered!
USD75m!
(i.e.!3x,!up!to!5x)!
USD25m!–!i.e.!20%,!but!
e.g.!USD50m!for!NARIs!
National–!typically!
millions!of!farmers!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
Impact!
Bond!
USD1.5m!
USD25m!if!results!
are!triggered!
USD20!
(i.e.!0.8x!–!but!
upfront!and!at!risk)!
USD20m!as!
implementing!partner!
MARCH!2015!
Defined!population!–!
e.g.!10,000!farmers!
!
14.4 In!terms!of!next!steps,!there!are!two!immediate!actions!that!can!be!taken!by!CGIAR!to!further!
develop!a!debt!leverage!mechanism:!
1) Canvas!centres!to!create!a!long!list!of!possible!countries!that!could!act!as!the!borrower.!
Key!criteria!for!identifying!and!selecting!potential!developing!country!partners!include:!!
a. Agriculture+sector+impact:!to!maximise!the!developmental!benefit,!stakeholders!
should!review!shortlisted!markets!in!terms!of!level!of!public!sector!agriculture!
investment,!population,!and!level!of!agriculture!sector!development.!!
b. Implementation+capacity:!the!CGIAR!should!aim!to!pilot!a!debt!leverage!mechanism!
in!a!country!where!it!has!the!capacity!and!relationships!with!the!national!
government!and!NARIs!to!develop!a!successful!funding!program.!Notable!options!
include!India,!Kenya,!and!Indonesia.!
c. Donor+engagement:!CGIAR!should!aim!to!work!in!countries!that!are!aligned!with!its!
donor!base!so!that!the!pilot’s!activities!contribute!to!the!overall!fund!raising!strategy!
(i.e.!the!broader!Strategic!Results!Framework!and!Resource!Mobilisation!Strategy).+
2) Reach!out!to!lenders!to!assess!interest!levels!and!generate!long!list!of!possible!countries!
in!their!existing!debt!portfolios!or!future!agriculture!lending!pipeline.!Key!targets!include!
the!World!Bank,!Asian!Development!Bank,!Inter/American!Development!Bank!and!African!
Development!Bank,!as!well!as!prominent!debt!swap/loan!buy!down!stakeholders!
including!USA,!Germany,!Spain,!France,!Italy,!and!Japan.!
14.5 Additional!input!can!and!should!be!sought!from!non/OECD!DAC!country!members!of!the!Fund!
Council!and!other!active!stakeholders!in!Fund!Council!and!Funders!Forum!events!(IFAD,!GFAR,!
FAO).!
14.6 A!shortlist!of!possible!countries!in!which!CGIAR!could!operate!a!debt!leverage!mechanism!can!
be!found!be!mapping!these!two!long!lists!on!to!each!other!to!identify!candidates!that!fit!both!
CGIAR!and!lender!objectives.!
14.7 On! this! basis,! direct! contact! should! be! made! with! Finance! Ministries! in! the! shortlisted!
countries!to!assess!the!level!of!interest!in!participating!in!a!debt!leverage!mechanism!–!noting!
that!ultimately,!CGIAR!may!be!able!to!execute!multiple!transactions!over!the!next!5/10!years!
(i.e.! this! is! not! a! beauty! parade).! Key! factors! to! determine! the! suitability! of! a! debt! leverage!
mechanism!include:!!
1) Country!debt!profile,!debt!sustainability!and!repayment!schedule!(if!at!risk,!explore!debt!
swap;!if!stable,!explore!loan!buy/down)!
2) Relationships!with!lenders!that!may!be!willing!to!participate!in!a!debt!leverage!
mechanism!(e.g.!WB!(IDA/IBRD),!prominent!Paris!Club!members)!
3) Fiscal!capacity!to!service!a!debt!leverage!mechanism!
4) Compatibility!with!existing!policy!development!and!implementation!around!agriculture!
R&D!and!rural!development!
14.8 CGIAR! may! benefit! from! appointing! an! external! advisor(s)! with! legal/financial! knowledge!
applicable! to! emerging! market! sovereign! debt! transactions.! These! advisors! can! lead! the!
50!
CGIAR
!INNOVATIVE!FINANCE:!IN/DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
review! process! above! to! create! a! shortlist! of! target! countries! and! a! pre/feasibility! study! on!
that!shortlist!for!FC14.!!
14.9 CGIAR! can! then! launch! a! process! of! official! multi/stakeholder! national! and! international!
consultations! using! this! pre/feasibility! study! as! a! basis! for! conversations! to! advance! the!
potential!transaction!structure!and!implementation.!
14.10 The! timeline! for! implementation! once! the! key! stakeholders! have! been! identified! is!
approximately!12/24!months.!In!part,!the!timeline!will!be!determined!by!the!decision/making!
processes! at! lender! and! borrower! organisations! in! terms! of! evaluating! credit! decisions!
(especially!for!buy/downs,!which!tend!to!work!with!new!transactions)!and!developing!viable!
national!policies!in!conjunction!with!the!CGIAR.!
51!
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
14.11 Debt!Leverage!Mechanism!Design!Process!and!Implementation!Scenarios:!
!
Implementation+(Multiyear)+
!
!
!
! Immediate+Next+Steps+(6m)+
!
9. Appoint!design!advisory!working!group!
at!Fund!Office!
10.
Canvas!Centres!for!borrower!long!
list!
11.
Appoint!advisor!to:!
a. Prepare!lender!long!list!
b. Draft!country!shortlist!
c. Contact!shortlisted!countries!
d. Prepare!feasibility!report!
12.
Iterate!shortlist!and!analysis!with!
stakeholders!at!FC14!
Grant*funding*for*CGIAR*and*external*
advisors*to*conduct*outreach*and*prepare*
feasibility*report:*
Estimated*cost*USD*250,000*
52!
Design+Phase+(12:18m)+
13. Select!borrower!from!shortlist!
14. Coordinate!centres!and!borrower!to!
develop!proposal!for!uses!of!funding!
15. Agree!performance!targets!and!payment!
triggers/!thresholds!between!lender,!
borrower!and!3rd!parties!
16. Appoint!legal!advisors!and!draft!
transaction!documentation!
Funding/structuring*input*from*donors*willing*
to*participate*in*the*transaction;*process*led*
by*external*legal*and*financial*advisors.*
Estimated*cost*USD1m*
Scenario+1:+
Loan+Buy:
Down+
Scenario+2:+
Debt+Swap+
Transaction*Size:!USD500m!
Borrower:!Indonesia!
Lender:!IBRD!
Funders:!Germany,!Norway,!UK!
Centres:!ICRAF,!IITA,!IRRI!
Terms:!No!interest!on!loan!
Trigger:!Landscapes!approach!to!
climate!smart!agriculture!
Transaction*Size:*USD100m*
Borrower:*Congo!
Lender:*France*
Funders:*France!
Centres:*CIAT,!IFPRI,!ICRAF!
Terms:*Cancellation!of!Debt*
Trigger:*Gov’t!expenditure!for!
improved!nutrition!&!
agriculture!dev’t!
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
15 Annex+1:+Implemented+Impact+Bonds++
Outcome(Pmt(
(USDm)(
New(Parent(and(Infant(
5+((
Australia(
7(years(
Family(Support(
(7.6+(AUS)(
Country( Activity(
Australia(
Belgium(
Canada(
India(
Nigeria(
Intensive(Family(
Support(Services(
Migrant(skills(and(
employment(
Supporting(At[Risk(
Single(Mothers(
Education(attainment(
for(girls(in(Rajasthan(
Working(capital(for(
smallholder(farmers(
Period(
5(years(
Up(to(9.3(
(12(AUS)(
2(years(
N/A(
1(
(1.3(CAD)(
0.36((
3(years(
(up(to(13%(IRR)(
5(years(
N/A(
0.5(
(0.3(GBP)(
12.2(
(8(GBP)(
UK(
Recidivism(
8(years(
UK(
Workforce(
development(
(10(SIBs)(
46((
3(years(
(28.4(GBP)(
(across(10(SIBs)(
UK(
Support(to(children(in(
care(
5(years(
53!
N/A(
Investment(
(USDm)(
5.4((
(7(AUS)(
Outcome(
Payors(
New(South(
Wales(Gov’t(
7.75(
(10(AUS)(
New(South(
Wales(Gov’t(
Implementing(Partners(
UnitingCare(Burnside(
Benevolent(Society(
0.25(
Actiris(
Duo(for(a(Job(
(EUR(0.23)(
0.8(
Gov’t(of(
EGADZ(
(1(CAD)( Saskatchewan((
0.25(
CIFF(
0.45(
(USD(0.15(&( DFID(
GBP0.2)(
Development(notes(
59,(including(private(Individuals,(
Corporates(
57(over(2(tranches(including(
private(individuals,(Westpac(and(
Commonwealth(Bank(of(Australia,(
other(institutions(
15(months(from(proposal(to(
implementation(
Private(Investors(
Kois(Invest(led(fundraising(
Private(Investor(
Conexus(Credit(Union(
First(in(Canada;(investor[led(
design(on(basis(of(NGO(proposal(
Designed(by(Instiglio(over(24+(
months(
Educate(Girls(
UBS(Optimus((private(clients)(
Doreo(Partners(/(
Babban(Gona(
Acumen((pending)(
Otunba(Tunwashe(Fdtn(
UK(Gov’t(
St(Giles(Trust(
Ormiston(Trust(
SOVA(
16((
(10(GBP(
across(10(
SIBs)(
UK(Gov’t(
10,(including:(
APM(UK(
Tomorrow’s(People(
YMCA(
Advisa(
1.8(
(1.2(GBP)(
Manchester(
City(Council(
Action(for(Children(
7.6(
(5(GBP)(
Investors((
17,(including:((
Barrow(Cadbury(Fdtn,(Esmée(
Fairbairn(Fdtn,(Friends(Provident(
Fdtn,(Panahpur(Charitable(Trust(
and(the(Tudor(Trust(
Barrow(Cadbury(Trust(
Berkshire(Community(Fdtn(
Big(Society(Capital(
Bracknell(Forest(Homes(
Bridges(Ventures(
CAF(Venturesome(
Esmée(Fairbairn(Fdtn(
The(Impetus(Trust(
Bridges(Ventures(
Two(pro(bono(bank(advisory(
teams(plus(Social(Finance(
Australia(
Rapid(development([(<1yr,(led(by(
Doreo(Partners(
First(SIB,(developed(by(Social(
Finance(over(24m+(
10(SIBs(under(single(framework;(
Support(from(Cabinet(Office’s(
Social(Outcomes(Fund(
Bridges(input(on(design(with(
MCC;(Support(from(Cabinet(
Office’s(Social(Outcomes(Fund(
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
!
Country( Activity(
UK(
“It’s(All(About(Me”(
foster(home(program(
UK(
Reduced(
Homelessness(in(
London(
UK(
Foster(care(
US(
Reduced(Recidivism(in(
Massachusetts(
Period(
Outcome(Pmt(
(USDm)(
4.5((GBP(2.8)((
+(up(to(9%(IRR((
10(years(
(46m(into(
revolving(fund(
US(
US(
Local(
Authorities(
4(years(
7.6(
(5(GBP)(
8(
(5(GBP)(
Greater(London( St(Mungos(
Authority(
Thames(Reach(
5(years(
10.6(
4.7(
(3.1(GBP)(
7(years(
!
!
!
!
54!
Implementing(Partners(
3.2(
(2(GBP)(
Reducing(Recidivism(at(
4(years(
Riker’s(Island(
Employment(for(
5.5(
formerly(incarcerated(
years(
individuals(
Early(Age(Educational(
Attainment(/(Language( 7(years(
Development(
US(
Investment( Outcome(
(USDm)(
Payors(
MARCH!2015!
!
27(
18(
2.1(
9.6(
21.5(
13.5(
N/A(
7(
Essex(County(
Council(
Investors((
Consortium(of(Voluntary( Big(Society(Capital(
Adoption(Agencies(
Bridges(Ventures(
Action(for(Children(
Massachusetts(
US(Dept(of(
Roca(Inc(
Labor(
Orp(Foundation(
Big(Issue(Invest(
CAF(Venturesome((private(
individuals)(
Bridges(Ventures,(
Big(Society(Capital(
Goldman(Sachs(Social(Impact(Fund(
Kresge(Foundation(
Living(Cities(
New(Profit(Inc(
Boston(Foundation(
Laura(and(John(Arnold(Fdtn(
Goldman(Sachs(
Bloomberg(Fdtn(guarantee(
40(private(and(institutional(
investors(via(BAML(
Rockefeller(Fdtn(guarantee(
City(of(New(
MDRC(
York(
New(York(State(
Centre(for(Employment(
US(Dept(of(
Opportunities((CEO)(
Labor(
United(Way,(
Goldman(Sachs(
State(of(Utah(
Granite(School(District,(
JB(Pritzker(
Park(City(School(District(
Development(notes(
Support(from(Cabinet(Office’s(
Social(Outcomes(Fund.(The(fund(
generates(up(to(£50m(over(its(life(
–£2m(kick(starts(the(activities(but(
returns(over(9%(IRR(are(recycled(
back(to(the(program(
18(month(design(process;(advice(
provided(by(Triodos(Bank(
Social(Finance(advised(over(28(
months(from(concept(to(contract(
Design(input(and(management(by(
Third(Sector(Capital.(Additional(
inputs(from(Goldman(Sachs(and(
Harvard(Kennedy(School((
(
Social(Finance(advised(on(the(
design(and(acts(as(a(manager(
(
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
16 Annex+2:+Implemented+Debt+Swaps+(10+Examples)+
Lender(
Sovereign(Borrower( Framework(
Germany(
Indonesia(
Debt2Health(
34.8(
55(
(EUR(50)(
EUR25m((allocated(to(domestic(Global(Fund(
programs(from(2008(to(2012!
Germany(
Pakistan(
Debt2Health(
26.4(
43(
(EUR(40)(
Germany(
Cote(d’Ivoire(
Debt2Health(
12.3(
27(
(EUR(19)(
Germany(
Egypt(
Debt2Health(
4.8(
7(
(EUR(6.6)(
Australia(
Indonesia(
Debt2Health(
34.7(
55(
(AUD(75)(
USA(
Indonesia(
Debt[for[Nature(
19.6(
30(
Funds(allocated(to(domestic(Global(Fund(
programs(from(2009(to(2012!
Funds(allocated(to(domestic(Global(Fund(
HIV/AIDs(programs(from(2010(!
Funds(allocated(to(Ethiopian(Global(Fund(
malaria(programs(in(2011(
Funds(allocated(to(domestic(Global(Fund(TB(
programs(from(2010.(
Funds(allocated(to(domestic(Global(Fund(TB(
programs(from(2010.(
Germany(
Indonesia(
Debt[for[Nature(
6.25(
55(
(EUR(50)(
France(
Mozambique(
C2D(
N/A(
France(
Cote(d’Ivoire(
France(
Cameroon(
!
55!
C2D(
Cost(to(Donors( Loan(Value((USD(m)(
0[82m(
C2D(
0[64m(
!
Resulting(activity(or(beneficiaries(
EUR25m((allocated(to(domestic(Global(Fund(
programs(from(2008(to(2012!
Support(for(Biodiversity(Protection(efforts(
(BIOFUND)(from(2010(
Education(and(skills((EUR(93(m);(Health((EUR(
69.6(million);(Ag,(Rural(Dev’t(&(Biodiversity(
(EUR(111.6m)(Urban(dev’t,(WASH((EUR(126.2(
820(
(EUR(630(Tranche(1)( m);((
Transport(infrastructure((EUR(138.5(m)(and(
Justice((EUR(23(m)(
Infrastructure((EUR(230(m),(Rural(Development(
(EUR(73(m),(Environment(EUR20(m),(
644(
(EUR(537(Tranche(1)( Healthcare((EUR90(m),(and(Education((EUR90(
m)(
10(
(EUR(8)(
Development(notes(
First(of(new(strategy,(issued(in(2007;(goal(
to(leverage(2x(co[finance(never(came(
through(
Issued(in(2008(under(Debt2Health(
Framework(Agreement(
Issued(in(2009(under(Debt2Health(
Framework(Agreement(
Single(payout(in(2011(–(only(cross[border(
transaction(
Only(non[German(Debt2Health(
transaction.(Only((
Only(non[German(Debt2Health(
transaction.(Only((
First(of(new(strategy,(issued(in(2007;(goal(
to(leverage(2x(co[finance(never(came(
through(
Follow(up(to(initial(swap(in(2001(–(smaller(
scale(but(with(a(focus(on(biodiversity(
Signed(in(2012;(First(tranche(runs(for(3(
years;(part(of(large(transaction(that(
included(three(other(countries,(with(AfD(as(
the(key(agent(in(structuring(and(
developing(the(transaction(
Signed(in(June(2006;(runs(for(15(years.(
Criticized(at(OECD(for(high(administration(
costs.(Cameroon(makes(payments(–(these(
are(returned(in(CAF(for(gov’t(programs(
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
!
MARCH!2015!
17 Annex+3:+Loan+Buy+Downs+
56!
Year!
Buy0Down!
Lender!
Loan!Size!
External!donor!
Grant!size!
Effect!
Pmt!Triggers!
Status!
2002!
China!Tuberculosis!
IBRD!
$104m!
DfID!
$37m!
2%!interest!
No!
Closed!
2003!
Pakistan!Polio!
IDA!
$138.3m!
BMGF!
Loan!NPV!
Loan!to!Grant!
Yes!
Ongoing!
2003!
Nigeria!Polio!
IDA!
$138.7m!
BMGF!
Loan!NPV!
Loan!to!grant!
Yes!
Ongoing!
2004!
China!Education!
IBRD!
$100m!
DfID!
S34.5m!
2%!Interest!
No!
Closed!
2005!
China!Rural!Dev’t!
IBRD!
$100m!
DfID!
$38m!
2%!interest!
No!
Closed!
2008!
Botswana!HIV!
IBRD!
$50m!
EC!
$20m!
No!interest!
Yes!
Ongoing!
2008!
Samoa!Power!
ADB,!JICA!
$26.6m!
AusAid!
$8m!
Lower!
interest!
No!
Ongoing!
2013!
Pakistan!Polio!
IsDB!
$227m!
BMGF!
Interest!&!fees!
No!interest!
Yes!
Ongoing!
CGIAR
!INNOVATIVE!FINANCE:!IN0DEPTH!OPTIONS!ANALYSIS!
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PAGE!INTENTIONALLY!BLANK!
57!
MARCH!2015!