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Former UK Prime Minister Gordon Brown has announced a number of impact investment projects he is developing in the areas of global education and health.
Brown, who is United Nations Special Envoy for Global Education and Chair of the International Commission on Financing Global Education Opportunity, was speaking at the London School of Economics to mark the launch of new book Can Finance Save the World? written by former World Bank Group CFO Bertrand Badré.
“The book points the way to a better future,” says Brown, who wrote a forward for the new publication. “Every country has signed up to the Sustainable Development Goals (SDGs)….and we need $2.5trn to achieve this. We have to find ways of using finance innovatively to be able to meet them.”
Brown said he was working on a number of ideas for social impact funds with Badré, including a health impact fund: “We won’t pay companies charging whatever they like. But we pay-by-results for what they achieve if they sell at cost price and not for a huge profit.”
Focusing on education, Brown said 260m children did not go to school, 400m children finish formal education at the age of 11 and 800m children finish formal education without adequate qualifications to equip them for working life.
“We are $100bn short of what is needed a year to be able to meet our goals. We need innovative finance. Traditional aid for education is equivalent to $10 per child.”
Brown spoke of raising money through government guarantees, leveraging the money by borrowing on traditional markets and creating a fund to offer low-interest loans to countries for education, describing it as the “equal of a World Bank for Education”.“There is no global fund for education like for global health or climate,” said Brown. “There is a generation of children lost to education who won’t get the opportunity they deserve.”
Brown also spoke of outcome-based financing such as social impact bonds where investors returns are tied to measured social outcomes. The world’s first social impact bond, in the UK city of Peterborough, was one of his last decisions when he was Prime Minister of the UK.
Brown said there were ambitious plans to grow the social impact bond space. He spoke of a $1bn social impact bond fund for Africa and the Middle East and a similar product for India to raise money for education. Brown is working on these products with Sir Ronald Cohen, chair of the Global Steering Group for Social Impact Investment.
Pressed by an audience member on whether the financial system was the right channel to address social need, Brown said it was necessary to shape the financial system as the servant not the master and it was possible to mobilise the industry for social objectives.
Badré’s book – which also includes a forward from France’s President Macron – looks at the destructive role finance played in the global economic crisis of 2007-2008 and how it can be transformed into a force for good.
Badré is now CEO and Founder of investment manager Blue like an Orange Sustainable Capital.
“We are creating an ecosystem so pension funds and endowments feel comfortable channelling money into the SDGs,” he said.
Its focus areas for investment are education, sustainable infrastructure, agriculture and financial services.