How improved data could boost humanitarian investment

The COVID-19 crisis has exacerbated the pressing challenges already faced by families and communities in fragile contexts. The Global Humanitarian Response Plan for COVID-19, together with existing humanitarian appeals, totalled $39 billion. As of November 2020, donors had given $17 billion to inter-agency plans – around a $22 billion shortfall. The United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) estimates confirm that donor funding and development finance remains insufficient to meet the overall need (Figure 1).

Humanitarian and Resilience Investing (HRI) is defined as capital invested in ways that measurably benefits people and communities in contexts of fragility, conflict and violence, while creating a financial return. Over the past decade, private sector capital deployed in investment activity that considers environmental, social and governance factors and social impact alongside financial returns has increased (Figure 2).

Consistent with that, interest in HRI specifically has also increased. HRI can span the full range of investment strategies from responsible and sustainable through to impact investments (Figure 3), although at present it is concentrated within the impact space, given typically high levels of risk. HRI has not yet become established as an investment theme, and there are relatively few examples of HRI taking place compared with other themes, such as climate finance.

HRI is only suitable for a subset of Sustainable Development Goals targets (SDGs) that are investable and that generate revenue streams. Research has suggested that, in the past, these opportunities have tended to arise in SDG9 (Industry Innovation and Infrastructure) and SDG7 (Affordable and Clean Energy). However, businesses have become increasingly engaged with the SDGs, and investor knowledge and disclosure has developed, resulting in wider opportunities.

One of the barriers previously identified to unlocking more private sector capital is lack of sufficient decision-ready data for potential investors. HRI is still a little known area, not helped by the fact that it does not fall neatly into a specific SDG. HRI also relies heavily on social indicators, for which data is among the most challenging to gather.

While there is a wealth of humanitarian and development data available, there is very little standardized at the project, programme, or business level needed to facilitate investment. Existing data has largely been designed for the interests and priorities of other stakeholders, while investors’ own requirements remain largely unmet.

Case studies shows how addressing data gaps can unlock viable and impactful HRI investment strategies, which – underpinned by more robust revenue streams – can mitigate financial, reputational and compliance risks. For example:

● In the Democratic Republic of Congo (DRC), Philips, the Dutch multinational, found that data on traceability and verification were critical in ensuring a conflict-free supply chain for tin, while empowering unemployed miners.

● ICRC has raised around CHF26 million of capital through its Humanitarian Impact Bond to provide physical rehabilitation for people disabled by conflict and disaster in Nigeria, Mali and DRC. Returns on the bond will be linked to the performance of ICRC’s programme against pre-specified metrics.

Through research on existing data, benchmarks and standards, we have identified three priorities.

The substantial flow of funds into ESG investment strategies over the past decade would not have been possible without the transparency arising from companies making the necessary disclosures. Equally, it is unlikely there would have been such an increase in disclosures if that had not helped attract capital. An equivalent virtuous circle for HRI-enabling data would be transformational.

Ideally, existing standards and benchmarks would be used as the foundation for increased data provision. For example, the Minimum Economic Recovery Standards and the IFC Performance Standards are particularly applicable. Additionally, the Corporate Human Rights Benchmark provides detailed indicators that can be widely used across a variety of industries. However, adoption and implementation varies significantly, and there remain gaps on issues such as subcontracted supply chains, essential services and security operations.

Historically, most of the data required by investors would have been collected manually. This consumes valuable time and resources, which is problematic given the humanitarian imperatives at stake. However, with increasing digitization, it has become much easier to collect data while being attentive to the critical issues of data privacy and security.

For example:

● The US Environmental Protection Agency has made publicly available daily air quality data and large environmental datasets through its remote sensing information gateway. This has allowed investors to assess the emissions activities, performance and efficiency of individual US states and industrial sites.

● UNOCHA worked with the International Organization for Migration to pool satellite and drone imagery with other data to determine variations in the terrain of refugee camps in Bangladesh. Equipped with this information, agencies were able to identify camps that were most at risk of flooding before the rainy season began.

In our report Unlocking Humanitarian and Resilience Investing through Better Data, we call on all organizations with an interest in strengthening crisis resilience – including businesses, investors, standard-setters, donors, philanthropists and humanitarian organizations – to collaborate in creating more effective data solutions to unlock the full potential of investment finance as a force for good among some of the world’s most disaster-affected communities.