INVESTING TO SAVE LIVES: AN IMPACT INVESTMENT CASE FOR … · 2016-10-14 · INVESTING TO SAVE LIVES: AN IMPACT INVESTMENT CASE FOR PREVENTING ROAD TRAUMA Social Finance is authorised

INVESTING TO SAVE LIVES:

AN IMPACT INVESTMENT CASE FOR

PREVENTING ROAD TRAUMA

Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568

21 SEPTEMBER 2016Jane Newman, International [email protected]

©Social Finance 2015

THE FIA FOUNDATION HAS BEEN EXPLORING SOCIAL IMPACT

INVESTMENT TO ACHIEVE A BREAKTHROUGH IN ROAD SAFETY

2


MEETING THE SDG TARGETS WILL REQUIRE BREAKTHROUGHS IN

THINKING, FUNDING, AND PRACTICE

3

Reorient to Prevention

New investment arguments and instruments

Use data to focus on the costs of RTIs


THERE IS AN IMPORTANT GAP IN THE WAY THAT WE MAKE THE

INVESTMENT CASE FOR ROAD SAFETY

4

Issue

Intervention

Benefit

BeneficiaryRoad

Safety

Investment

How do the benefits of an intervention translate to specific beneficiaries, and prospective funders and investors?

FUNDAMENTALLY, THERE IS ALSO A LACK OF DATA

LINKING COSTS TO IMPROVED SAFETY OUTCOMES

• Individuals• Families• Governments• Donors• NGOs• Insurers• Corporations


APPLYING A IMPACT INVESTMENT APPROACH COULD

OVERCOME THIS CHALLENGE

5

Impact investment takes an integrated approach to a social and financial issues, which has powerful applications for road safety:

The first report identified potential areas impact investment analysis, and real investment opportunities:

Focus on outcomes

Measurable impact

Driven by data

Identifies financial incentives for prevention

Builds partnerships of stakeholders

Infrastructure

Behaviour change

Direct investment


THE TRANSPORT ACCIDENT COMMISSION – SAFER ROADS AND

ROADSIDES

6

Location Victoria and Queensland, Australia

Data Large insurance claim and crash type data set

Intervention Infrastructure – safer roads and roadside

Case Study Partner

The Transport Accident Commission


Why Transport Accident Commission (TAC) Victoria?• TAC Victoria is a government owned, no-fault personal injury insurer in

Victoria, Australia• It holds data for all transport accident related personal injury claims

across Victoria

The Data• The TAC shared with us a large claims dataset, which creates a direct

link between different types of road accidents, injury and the resulting claim costs

Building an Impact Calculator• A calculator to quantify the benefits that will flow from an investment

based on the TAC data.

• Focus on five years of claims data covering all transport accident claims from 2006-2010 that we have been able to map against VicRoads* crash data in order to link the claims data to crash type, location and speed.

* Presiding road transport authority for Victoria

WORKING WITH THE TAC VICTORIA TO DEMONSTRATE THE

POTENTIAL OF A DATA-DRIVEN APPROACH


To assess the potential value of an investment by linking interventions with investment cost and benefits

By breaking down the different types of

benefit we can identify “what is in it” for a prospective

investment for different players

8

THE IMPACT CALCULATOR


(….taking into account claimant, crash and injury profile)

(1) Crash data and injury type and (2) cost categorisations for each record is structured as follows:

Year

Time/date

Gender

Age

Basic information and

demographics

Injury severity

• Fatality

• Serious injury

• Minor injury

• Non-injury

Injury type e.g.

• Amputation

• Brain injuries

• Contusions

• Fractures

• Nervous damage e.g.

Paraplegia

• Severe ABI

• Spinal injuries

• Soft tissue e.g.

whiplash

• Sprains / Strains

Injury typeCrash type

• Bicycle

• Pedestrian

• Train

• Vehicle – Head on

• Vehicle – Intersection

• Vehicle – Other

• Vehicle – Rear end

• Vehicle – Run off road

• Vehicle – Turning

Speed zone e.g.

• < 60 kph

Location

• Intersection

• Non-intersection

• Highway

Vehicle type e.g.

• Van / Car / HGV

Crash type(1)

(2)Ambulance and

road rescue

Almost all costs

occur shortly after

accident

Administration

and legal

These costs fall mostly within 5 years of the accident

Dependency

and hello

Consists of lump sum and annuity payments to spouses/children. Paid within 5 years

Loss of earnings

and

impairment

Income payments are made to seriously injured people until retirement age

Hospital care hello

90% of hospital costs occur within 2 years of accident

Long term care hello

Payments are made to seriously injured people for their care needs for the duration of their lives

Cost

category1

Detail

Notes: (1) Hospital and paramedical costs included within a number of the categories

COMBINING THE TAC AND VICROADS DATA ALLOWS FOR

GRANULAR ANALYSIS OF BOTH CRASH AND COST DATA…..


THE TAC DATA SET ENABLED US TO LINK CRASHES TO COSTS

AT A VERY DETAILED LEVEL

10

Crashes

41,204

Claims

51,879

Fatalities

1,349 (3%)

Total estimated lifetime costs:

(aggregated for all claims)

AUD$2,832,100,943

Serious injury

23,895 (46%)

• Does not include claimsthat have not been able to be mapped to VicRoads crash data

• Those claims are likely to include a significant proportion of minor clams

• Includes insured financial costs only.

Minor injury

24,628 (47%)


RUN-OFF ROAD CRASHES ARE THE PRINCIPAL COST DRIVER

AND RISK TO PUBLIC SAFETY ON VICTORIA’S ROADS

11

0%

5%

10%

15%

20%

25%

30%

35%

Other key insights from the analysis:

• Long term care costs are by far the largest cost category

• Pedestrian crashes have the highest average lifetime costs

• In an un-insured network, costs would be felt by a large number of public and private sources, including private individuals


TARGETED INFRASTRUCTURE IMPROVEMENTS TO THE BRUCE

HIGHWAY, QUEENSLAND

12

Before: After:

Notoriously dangerous highway with high crash rates, accounting for 17% of deaths on national highway network.

Modelled infrastructure improvements:

• AUD$135M capital investment in a number of interventions to improve Start rating

• Improve from an overall 54% 3-star or better to 99% 3-star or better

• 20 year investment period


THIS UP-FRONT INVESTMENT IN ROAD SAFETY IMPROVEMENTS

WOULD PAY FOR ITSELF IN LIFETIME COSTS AVOIDED WITHIN FIVE

YEARS

13

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Summary of injury reduction and financial investment case

Fatalities avoided p.a. 17

FSI avoided p.a. 150

Reduction in claim costs (p.a.) $27,000,000

$60M

$50M

$40M

$30M

$20M

$10M

$0M

Years

Costs avoided (accrued

over 20 years)

Lifetime costs

avoided

Cost of

interventions


ASIA INJURY PREVENTION FOUNDATION – SAFER ROAD USERS 14

Location Three districts in Cambodia (incl. Phnom Penh)

Data AIP Foundation data, crash costs analysis, RCVIS

Intervention “Head Safe. Helmet On” behaviour change intervention to improve motorcycle passenger helmet use

Case Study Partner

Asia Injury Prevention Foundation Asia


THE HSHO INTERVENTION IN AN IMPACT BOND STRUCTURE 15

Behaviour change:

Mass multimedia campaign

and direct engagement with

motorcyclists

Enabling environment:

Engagement & advocacy with

enforcement officials and

wider stakeholders

School-based programme:

School-based education and

events; students and teachers

receive a free helmet

Outcomes funder(s) contracts with

social investors

Outcomes

Funder(s)

2

1

3

Social investors

finance the innovative

intervention up-front

4Improved safety

outcomes

5Outcomes funder(s) pay investors

for outcomes achieved

Social

investors

Provider delivers

intervention


THE POTENTIAL VALUE OF IMPACT BONDS IN LMICS 16

Status Quo Impact Bond finance

Reactive

spend by

government

Cost Saving

$

Preventative

spend

Reactive

spend by

government

Preventative

spend

Total spend

by

government

Net savings

Better outcomes

achieved

Investor return

• Outcomes funders only pay for success

• Focus solely on outcomes (rather than inputs)

• Rigorous data collection and measurement

• Builds partnerships between different stakeholders


AT TARGET SUCCESS RATE OF 60%, PASSENGER HELMET USE,

HSHO IS COST EFFECTIVE WITHIN TWO YEARS

17

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70%

Co

sts A

void

ed (

US$)

Final passenger helmet use

Outcomes payment Total Costs Avoided Financial costs avoided

$1.1m invested

Target Y2

passenger

helmet use

Payment

‘hurdle rate’


THIS ANALYSIS LOOKS AT ECONOMIC COSTS ONLY – THE TRUE

COST OF RTIS IN LMICS ARE MUCH GREATER

18

There are significant, often catastrophic costs to households that are not captured in analysis of costs in LMICs, which impact upon poor people disproportionately.

“Hidden cost”

Human cost

Financial and

economic costs

Hidden Cost =

• Long-term reduction on household income

• Enforced selling of productive assets

• Reduced household financial resilience

• Impact on social outcomes e.g. children leaving school, gender pay disparity, wider country development goals


PROSPECTIVE FUNDERS OR INVESTORS 19

The analysis of who bears the costs of RTIs helps us to identify potential funders and investors, and investment models.

There are several dimensions to consider, including:

Country context

• Do savings accrue to the government, the economy or private households?

Safe system intervention

• How proven is the intervention model?• Can a focus on outcomes promote innovation?

Human / social cost

• Cost to households – do donors have a responsibility to protect poorest families?

• Are there incentives for private companies?


4. Gain multi-stakeholder

commitment and resources

to develop the evidence base

Impact

Breaking the Deadlock –

Impact investment for

road safety

Theory

Investing to Save Lives –

Case studies to

demonstrate potential

Test

3. Build partnerships to

implement demonstration

projects & develop evidence

Action

THE JOURNEY TO INCLUDING SOCIAL INVESTMENT IN THE

TOOLKIT TO ACHIEVING THE THE SDGS

20

“[FIA Foundation would like to work together to make

projects a reality…the only way to make things happen

is to act together…]”


THANK YOU 21


THE FIA FOUNDATION ARE IN THE VANGUARD OF

OVERCOMING THESE CHALLENGES

22

This is the fourth paper on financing for development commissioned by the FIA Foundation.


23

Outcomes funder(s) contracts with

social investors

Outcomes

Funder(s)

2

1

3

Social investors

finance the innovative

intervention up-front

4Improved safety

outcomes

5Outcomes funder(s) pay investors

for outcomes achieved

Social

investors

Provider delivers

intervention

THE HSHO INTERVENTION IN AN IMPACT BOND STRUCTURE

(2/2)


22

$180M $380M

$2,700M

NPV 0BCR 1IRR1 0%

NPV $200MBCR 2.1IRR1 13%

NPV $2,520MBCR 15IRR1 120%

TAC benefit realised over initial 20 year period

TAC benefit taking into account full lifetime cost reduction

Benefit taking into other non-insured and social costs (based on willingness to pay valuation2)

Net benefit based on ACTUAL FINANICAL CLAIMS

COST REDUCTION realised by TAC insurer:…. taking into account BROADER

FINANCAL & SOCIAL BENEFIT:

TAC investment can

reduce claims by

3,650 at no net cost

Fatality and Injury claims cost reduction

=

Notes: (1) IRR calculated using discount rate of 0%(2) Full Social and Financial benefits estimated at $2,700 million based on Australian Willingness to Pay rates (e.g. fatality = $7,787,700)

COMPARING THE COST SAVINGS INVESTMENT CASE TO A

WILLINGNESS TO PAY INVESTMENT CASE


ROAD TRAFFIC ACCIDENTS ARE A SIGNIFICANT AND RAPIDLY

GROWING GLOBAL PROBLEM

25

Source: The Economist 2014, sourced from WHO data

Road accidents are forecast to become the leading cause of death

globally by 2030


‘Single’ Funder

Model

Collaborative

Funding &

Investment

Models

Pooled Investment

models at scale

Build

the evid

ence

base

Start with the

problem

What are the

dimensions? E.g. data, scale,

intervention type

Investment design

Funders/investors

WHERE DO WE START?

Documents

INVESTING TO SAVE LIVES: AN IMPACT INVESTMENT CASE FOR … · 2016-10-14 · INVESTING TO SAVE LIVES: AN IMPACT INVESTMENT CASE FOR PREVENTING ROAD TRAUMA Social Finance is authorised