Conference Presentation, Panel
Galvanizing Global Growth: Lessons from Milken Institute Financial Innovations Labs
Milken InstituteCaitlin McLean, Carrie Stever, Craig Courtney, Alice Albright, David Ferreira, Larry Coben
- The Milken Institute's Financial Innovations Labs aim to address market failures and capital gaps in emerging and frontier markets by blending public, philanthropic, and private capital to drive global economic growth.
- Africa's labor force is projected to become the largest globally by 2035, necessitating immediate investment in infrastructure and human capital to avoid long-term negative macroeconomic impacts.
- Carrie Stever (ARIS) highlighted that drug-resistant tuberculosis (MDR-TB) is now present in 84 countries, including the US and all European nations, with no current vaccine options.
- ARIS developed a market model for a future TB vaccine projecting a $13–14 billion 10-year market, intended to incentivize pharmaceutical R&D by de-risking investment.
- ARIS and the European Commission are designing a financial structure where governments play a catalytic, de-risking role while industry funds expensive R&D phases, optimizing public funds to unlock private capital.
- Craig Courtney (Tamarack Partners/GAIN) explained that small food companies face negative net present value (NPV) due to low margins, requiring public grants to de-risk the front end of investment before private capital enters.
- GAIN is launching a $100 million+ private equity/private debt fund in partnership with LGT to invest in the agricultural supply chain, targeting single to low double-digit returns alongside impact metrics on stunting and wasting.
- The GAIN fund utilizes a "first loss" structure with anchor commitments from CDC and DFID, which signals credibility to attract additional private institutional investors.
- The fund includes a technical assistance facility funded by grants to provide sector expertise (e.g., product formulation, marketing) without diluting financial returns for investors.
- GAIN launched the Access to Nutrition Index two months prior to the panel, ranking the world's top 25 food manufacturers; $4 trillion in assets under management have signed on, intending to use the index to lower the cost of capital for companies with better practices.
- Alice Albright (Global Partnership for Education) contrasted the current funding landscape with 2001, noting that austerity measures and changed risk appetites require new sustainable financing models beyond traditional aid.
- The US Export-Import Bank (Ex-Im) is a self-funded, taxpayer-free entity that returned $1 billion to the US Treasury in the previous fiscal year while financing $38 billion in business to sustain US jobs.
- Ex-Im Bank operates at a national scale with an $108 billion balance sheet, filling capital gaps left by private banks due to regulatory changes (e.g., Basel III) and market weakness.
- The Global Partnership for Education (GPE) currently funds systemic education reform in 55 of the world's poorest countries, aiming to avoid "pilotitis" through long-term sector-wide programs rather than one-off projects.
- GPE projects funding growth to exceed current levels of $350–400 million annually, focusing on countries with post-conflict or non-functional education systems.
- David Ferreira (Gavi) noted that 1.7 million children die annually from vaccine-preventable diseases, with infant mortality dropping from over 12 million in 1990 to under 7 million today due in part to immunization.
- Gavi's International Finance Facility for Immunization (IFM) securitizes $6.3 billion in government pledges to raise $3.85 billion in bond markets, allowing for predictable funding rather than waiting for annual donation checks.
- The Gavi Matching Fund, backed by $130 million from the UK and Gates Foundation, aims to raise $260 million by end-2015 from private sources, currently at $88 million raised with nine partners.
- The Matching Fund leverages private sector assets beyond capital, such as Vodafone's technology for recording births and immunizations in Mozambique, with plans to scale the model to other countries.
- David Ferreira proposed a results-based instrument where investors receive payback contingent on specific health outcomes (e.g., HPV vaccination targets), with donors funding the payout only if results are achieved.
- Larry Coben (Sustainable Preservation Initiative) uses a not-for-profit venture capital model to provide micro-equity and training to local entrepreneurs, transforming cultural heritage sites into revenue-generating community assets.
- Coben's first project, funded with $40,000 in micro-equity, generated $5,000 in Year 1 and $11,000 in Year 2, creating 22 full-time jobs and catalyzing additional private business activity like snack bars and artisan stands.
- Local governments in Peru have shifted from opposing archaeological preservation to actively promoting it as an economic driver, forming tourist boards and funding signage after seeing community economic transformation.
- Coben is pursuing "common asset banks" to pool community resources (e.g., eco-tourism, cultural heritage) to access government green banks and scale impact from 2-3 projects to 50-100 annually.
- GAIN is scaling its approach by creating an investable index product linked to the Access to Nutrition Index to channel institutional capital into companies with better nutrition practices.
- Panelists agreed that scalability requires aligning financial instruments with specific stages of the value chain, using de-risking mechanisms to bridge the gap between early-stage pilot funding and mature market operations.
- Alice Albright suggested that education financing could leverage broad-based mechanisms like Financial Transaction Taxes (FTT) or "Product Red" style levies to generate scalable revenue for domestic service delivery.
- David Ferreira emphasized avoiding "pilotitis" by establishing testable hypotheses for growth; if a pilot works, a pre-agreed pathway to expansion (e.g., across 73 Gavi countries) is triggered immediately.
- Larry Coben advised that government agencies must innovate their own metrics and risk tolerance, dedicating specific funds to high-risk innovation rather than demanding immediate, large-scale ROI.
- Alice Albright cited Canada's Export Development Corporation (EDC) as a model for blending trade and aid, suggesting that flexible government policy can break the "glacial" pace of traditional budgeting.
- Panelists concluded that the future of innovative finance lies in defining success through long-term social and financial returns, requiring a vision that treats development challenges as investment opportunities rather than pure philanthropic burdens.