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Pandemic Bonds Are a Scam Holding the Global South Hostage

The World Bank’s “pandemic bonds” demonstrate how global capital has an uncanny ability to profit from social ills. So far, investors have earned about $96 million in interest on the pandemic bonds, but developing countries have yet to receive desperately needed money.

Cambodians sit along the ocean watching the MS Westerdam cruise ship at sunset docked in Sihanoukville, Cambodia on February 17, 2020. Paula Bronstein / Getty

The 2013–14 Ebola outbreak devastated West Africa, killing roughly eleven thousand people, mostly in Guinea, Liberia, and Sierra Leone. Had these countries had access to financing at the start, experts contended, they would have been better equipped to quell the crisis, potentially saving thousands of lives.

Promising to get a jump on future outbreaks, the World Bank issued its first ever “pandemic bonds” in 2017 that could be used to finance aid to developing countries in the event of a new pandemic. That time is now. But the Bank has yet to fork over the money.

“Sustainable investing” is all the rage these days. Pandemic bonds are just one item on a growing menu of environmental, social, and governance (ESG) investment products. In the face of catastrophic climate change and skyrocketing global inequality, asset managers and investment banks insist that the best way to fight poverty, disease, and environmental destruction is to put markets to work.

If we give investors a chance to both do good and do well — to transform projects that tackle poverty, disease, and environmental destruction into a profit-making opportunity — ESG enthusiasts say we’ll see a rush of private capital into efforts that genuinely make the world better. It’s just a matter of getting the incentives right.

The pandemic bonds, which raised $320 million, seemed like a perfect example of economic incentives working their magic. Investors could choose between two classes of bonds, one for diseases like SARS (and COVID-19) and another, slightly riskier one (with a higher payout) for diseases like Ebola. If these bonds reached maturity (which they are set to do this July), investors would get their money back, and, in the meantime, they would earn interest. If a pandemic reared its ugly head before the bonds reached maturity, investors might lose some of their original investment, but developing countries would get much-needed funds to fight the disease outbreak. Win-win.

Well, one group has won. So far, investors have earned about $96 million in interest on the pandemic bonds. However, getting the money to actually fight disease outbreaks has proven difficult for developing countries, likely due to the stringent conditions (which apparently took 386 pages to spell out) that must be met for the payout to actually occur.

Last year, for example, Ebola ripped through the Democratic Republic of Congo (DRC), and many hoped the pandemic bonds would be used to provide financial assistance. But the World Bank insisted that the outbreak did not meet the threshold for a payout because not enough people had perished in a country other than the DRC. Investors were able to hold on to their principal and keep earning interest.

The COVID-19 crisis seems to meet the Bank’s ghoulish criteria. But developing countries on the brink of catastrophe have yet to see a dime of the pandemic bond money. Apparently, the coronavirus first needed to rage for twelve weeks across multiple countries, including developing countries, before the tranches would pay out their principal value into the World Bank’s Pandemic Emergency Financing Facility. Countries that are eligible for funding from the International Bank for Reconstruction and Development and that have reached a threshold of coronavirus deaths can then apply to receive the money.

Twelve weeks passed on March 23, and death is raining down on countries rich and poor. More than 770,000 cases of coronavirus have been reported worldwide, and in some places, infections and deaths are doubling every few days. Yet the World Bank says that eligible countries — so far Afghanistan, Pakistan, Nigeria, Cambodia, Senegal, and Nepal — won’t know if they will get any money until April 9 at the earliest.

This is despicable. Even wealthy countries are failing to contain the deadly virus. Poor countries that, for centuries, have seen their wealth and resources pilfered and plundered by rich nations, are facing down a tidal wave of infection and death without adequate medical supplies and facilities. Millions of people in these countries have compromised immune systems due to malnutrition, live in housing and communities that make social distancing impossible, and lack even the most basic necessities of disease prevention, such as access to water and soap for handwashing.

However, in this moment of crisis, when every second counts, global capital is sitting on its hands, holding desperately needed funds hostage as investors decide whether they are required to honor their end of the deal.

The pandemic bonds were advertised by the World Bank as a great way to “tackle social ills through private investment.” Instead, the bonds are yet another example of how hollow most so-called ESG investment is. They demonstrate how private investors have an uncanny ability to profit from social ills — and how, even in times when global solidarity is desperately needed, global capital can’t seem to look past the bottom line.