$10bn Covid Innovation Bonds needed to develop mass testing - Ronald Cohen

Pay-for-success financing models could help pave the way out of the Covid-19 crisis, according to one of the world’s most influential figures in impact investment.

Sir Ronald Cohen, who chairs the Global Steering Group for Impact Investing, has argued that outcomes-focused structures could attract private investors to fund the innovation needed to help develop mass testing, with investors only repaid when effective tests have been supplied.

Writing in Barron’s, an American financial news publication and sister publication to The Wall Street Journal, Sir Ronald argues that regular testing of a large portion of the population will be the most effective way to shorten the duration of containment, which has huge economic costs.



The US, for instance, loses $350bn to $450bn a month on reduced output due to the economic effects of social distancing, according to Nobel laureate economist Paul Romer and The Rockefeller Foundation president Dr. Raj Shah. Spending $100bn on widespread testing could therefore be a cost-saving measure, if it successfully slowed the spread of the virus.

Pay-for-success structures would “provide very powerful incentives for companies and investors to join the fight against Covid-19”

Pay-for-success structures would “provide very powerful incentives for companies and investors to join the fight against Covid-19”, argues Sir Ronald, adding that similar initiatives could help drive innovation in related areas such as vaccines and personal protective equipment.

Sir Ronald, who co-founded social impact bond specialists Social Finance, recommends in last week’s op-ed that governments commit to providing a combined $10bn to purchase tests at a pre-agreed rate. Contracts should be priced “at very attractive levels” for companies to incentivise innovation, and prices would rise for tests delivered earlier, in greater quantity and at higher accuracy levels. The money would be raised from investors via Covid-19 Innovation Bonds, which would be guaranteed by relevant governments, and which could offer investors returns of up to 10% a year.

Header photo: Sir Ronald Cohen speaking at the 2019 GSG Summit.

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