Igor Shuvalov: ‘VEB.RF Sees Great Potential of Impact Investing for National Projects’
VEB.RF has held a conference to bring together Russian and international experts discussing social impact projects in Russia. The event was attended by representatives of international organisations, financial institutions and associations, experts in impact investing, and representatives of Russian federal and regional executive authorities.
A distinguished guest was Sir Ronald Cohen, a British and American investor, businessman, manager and political figure, described as “the father of British venture capital” and “the father of social investment”. The conference was moderated by Nyuta Federmesser, founder of the VERA Hospice Charity Fund, and Gor Nakhapetyan, a businessman and philanthropist, honorary professor at SKOLKOVO Business School, co-founder and partner of Sensemakers.
VEB.RF Chairman Igor Shuvalov said in his speech at the conference that investing in human capital is increasingly important, smart investment. With limited resources, governments cannot endlessly increase expenditure on the social sphere, and any government initiative in this area should be supported by private investors.
“We see the great potential of this mechanism to obtain private funding for the social sphere, primarily as part of the presidential agenda, under national projects,” Igor Shuvalov said. “Social impact bonds combine private initiative, public funding and, most importantly, outcomes-based contracting. These are new technologies in reaching the government’s goals. VEB.RF took on a new role of the SIB project operator under national projects. Fulfilling certain functions of federal authorities, we are aware that VEB.RF is one of the main tools in the SIB project market, but we perform these functions on behalf of the Russian government, on behalf of the Russian president.”
According to Sir Ronald Cohen, social impact bonds expand the philanthropy market by involving conventional investment resources. “There’s more than 200 trillion US dollars in investment money worldwide, and only 1.5 trillion in money for philanthropy. If government guarantees make it possible to attract investment in social impact projects, this must be done. Impact investment is a social revolution, the same as the tech revolution. It comes from changes in people’s values. Consumers stop consuming products from companies that pollute the environment, exploit other people. And investors who understand that these changed values lead to changes in profit flows avoid investing in toxic companies,” he said.
In her speech, VEB.RF’s Deputy Chairperson and Member of the Board Svetlana Yachevskaya noted that Russia was a unique country in more ways than one, and the introduction of social impact bonds was no exception. “We are the only country in the world where SIBs begin at federal level rather than municipal level. I and most of my team have experience of working both in government and in business. Our first main task was to get the government interested in starting this project. And it was great to receive support from the Ministry of Finance. During the pandemic, we didn’t have time to be bored. We organised seminars for hundreds of people from regional administrations and municipalities, where we told them about the SIB mechanism and its importance. And we have non-profit organisations that know how to improve people’s lives. Now we are at a new stage, facing a new challenge: we should convince investors. Today we live in a paradigm where everything is around people. Well-being became the primary value. This is a growing trend throughout the world. Quality of life is the main priority,” Svetlana Yachevskaya emphasised.
VEB.RF’s Senior Vice-President Mikhail Alashkevich believes that there are certain preconditions for impact investing.
“We should stick to the principle of returnable investment without ignoring social responsibility. We need socially oriented investors, professional non-profit organisations, and the government’s willingness to transfer some of its traditionally public functions to professionals working in the social entrepreneurship sector. The role of a development institution is irreplaceable here; it should structure such projects, balance the interests of government and business, and formalise advantages for both sides. The KPIs for a development institution are maximising the inflow of private investment in social impact projects and switching over to public investment in the social sphere partly on a pay-for-success basis. Government expenditure on social services in Russia is 13 trillion roubles now. If even a small portion of this amount was converted into impact investments, we’d achieve substantial effects,” Mikhail Alashkevich said at the conference.
“I believe that if properly designed, social impact projects have enormous potential. This sector will attract institutional investors if its geographies and products are diversified. That is why our role is to prove that the model works in different regions and in different spheres,” Alexei Chekunkov, CEO, Far East Development Fund, said in conclusion.
VEB.RF Chairman on WHO Commission Advocates Efforts to Develop Digital Medical Services and Use PPPs for Health System Improvement
VEB.RF Chairman Igor Shuvalov took part in the second meeting of the Pan-European Commission on Health and Sustainable Development (the “Commission”), initiated by the WHO Regional Office for Europe (WHO/Europe). The meeting focused on a report of the Scientific Advisory Board on rethinking policies in the light of the pandemic and the Commission’s road map. Following the Commission’s inaugural meeting (held on 26 August) and based on information about the fight against the pandemic in the region, reputed scientists and experts suggested priorities to the Commission to change health systems and make them more effective and resilient.
The report says that despite numerous warnings about the pandemic, many countries were totally unprepared. There will be a great number of other major risks in the future. What needs to be done to ensure resilience? According to the document, health and social care systems should be reformed in order to ensure prompt crisis response, flexible redeployment of resources and revision of priorities, effective management systems, and modern information systems of disease control services.
Commenting on the conclusions and proposals contained in the report, Igor Shuvalov noted that as early as 2006, at the G8 Summit in Saint Petersburg, Russia proposed stimulating pharmaceutical companies to search for new vaccines. Recognising the dangers posed by viruses that originated in developing countries, the initiative suggested compensation for such investments if the countries spreading epidemics were unable to pay for vaccine research.
“I believe the Commission’s priorities should include promoting public-private partnerships and digital medical services to modernise health systems,” Igor Shuvalov said. “Without close cooperation between the private and public sectors, we won’t be able to create a truly modern system that meets the needs of all people.” He called for a thorough assessment of health system deficiencies identified in all countries during the fight against the ongoing pandemic and advocated that practical methods for health system improvement should be discussed.
The Commission’s work is to culminate in a report to be published in September 2021 and distributed to heads of state and government. The report will provide practical guidance on how to modernise and improve health systems, using the experience of fighting against the COVID-19 pandemic. Beginning at the second meeting of the Commission, its working groups will develop political, economic, medical and other measures. Before the publication of the final report, the Commission will hold five more meetings to discuss the interim results of its activities.
The Commission is chaired by Mario Monti, former Prime Minister of Italy and former European Commissioner. The other members (acting in their own capacity rather than representing their governments) are reputable political and public figures and well-known researchers and experts in various fields, including Tarja Halonen, former President of Finland; Toomas Hendrik Ilves, former President of Estonia; Roza Otunbayeva, former President of Kyrgyzstan; and Sylvie Goulard, former Minister of Defence of France. The only Russian representative on the Commission is VEB.RF Chairman Igor Shuvalov.