“Few natural hazards threaten more loss of life, economic disruption, and social disorder than large-scale disease outbreaks. An influenza pandemic could infect billions, kill millions, and reduce global economic output by trillions of dollars.” These words from a 2019 World Health Organisation (WHO) report on Pandemic Preparedness Financing turned out to be visionary. The report found that investing in pandemic preparedness would protect societies and economies from significant losses. But it also pointed out that progress in creating and financing preparedness systems had been slow in non-crisis times – something that became painfully clear at the outbreak of the coronavirus pandemic.
When we think of pandemic preparedness, banks do not immediately come to mind. But the work of international financial institutions, such as the European Investment Bank Group, plays a crucial role in mitigating the economic impact of a pandemic and the ensuing public health crisis.
For example, the European Investment Bank, the EU bank, is instrumental in providing a safety net for small and medium-sized firms affected by the crisis through the establishment of the European Guarantee Fund. The fund is tapping nearly €25 billion in guarantees from participating EU countries to provide loans, guarantees, equity financing and other financial instruments to bolster mostly small or mid-sized companies. The European Investment Bank is also an important financier of COVID-19 emergency measures and projects around the world. We have approved or are in the process of approving more than €11 billion in such financing since the start of the pandemic. These investments strengthen healthcare systems and services, support innovative life science companies in developing vaccines, tests or cures for the coronavirus and help fund global initiatives like COVAX, which provides equitable access to COVID-19 vaccines for people in low- and middle-income countries.
Financial groups like the European Investment Bank Group also help fill the market gaps inherent in public health care systems. Free markets sometimes struggle to allocate resources efficiently or take into account the social benefits garnered from certain investments. This creates market distortions, which arise when private investors fail to recover the costs of their investment despite generating an overall economic benefit for society. These gaps can result in a lack of resources for health care services, with serious consequences for individuals and communities alike.
The European Investment Bank intervenes to plug these gaps, using financial instruments such as project investment loans, project financing, investment programmes and framework loans.
When Spain was badly hit by the first COVID-19 wave, we provided €600 million to help the region of Madrid increase the capacity of its hospitals, intensive care units and emergency services. Earlier this year, we topped up our loan with another €200 million to support the region’s vaccination programme and help it buy medical supplies and protective equipment.
The EIB Group doesn’t just provide money. We also have a depth of technical expertise that can help design projects in a way that ensures their success. Thanks to a diverse and highly skilled team of doctors, natural scientists and health care professionals, the bank can check the financial viability and technical feasibility of financing proposals for projects. This expertise is particularly valuable for life science or innovative firms that traditionally have difficulty attracting private funding because their products are in the early stage. Risk aversion can significantly slow down innovation. BioNTech, the first producer of a successful COVID-19 vaccine in the western world, is a case in point. The company received European Investment Bank financing twice, €50 million for their cancer research in 2019 and another €100 million when it became clear that their mRNA technology had the potential to help prevent COVID-19.
The European Investment Bank was actively involved in vaccine research, development and manufacturing before the pandemic, working with global players such as the European Commission, the World Health Organization, the Coalition for Epidemic Preparedness Innovations, and the Global Alliance for Vaccines and Immunizations.
BioNTech wasn’t the only COVID-19 vaccine developer to receive our support. Curevac, another German mRNA pioneer, and the French immuno-oncology company OSE Immunotherapeutics also received loans from us.
In general, the pandemic resulted in record amounts of financing being raised last year for innovative biotech firms in the European Union. But the picture is deceptive. A 2018 study from InnovFin Advisory, one of our advisory services, anticipated a funding shortfall of €30 billion to €40 billion from 2017-2021 for life sciences companies in four representative European regions alone (Bavaria in Germany, Catalonia in Spain, Poland, and South East England). For decades, funding for European biotechnology firms was significantly lower than for their US peers. The average US company received five times more financing. Needless to say, this lack of funding hampers the development of a sector that is uniquely positioned to create value for our society and which lays the foundation for universal health and prosperity.
The EIB Group is in a strong position to help attract funding for health projects, particularly in the biotech sector. We have a toolbox of financial instruments that allow us to provide the financing start-up firms need to develop ground-breaking health solutions.
Those financial instruments include equity financing, venture debt and classical debt financing as well as sovereign loans and guarantees. In many ways, our job is to identify the market failures that are holding back innovation and advancement and then to implement the financial tool that best manages risk and unlocks public and private funds.
In short, this is the role banks can play in pandemic preparedness and in addressing the world’s major health concerns. And this is the role we, at the EIB, are strongly committed to play. In the end, providing funding for innovative health care solutions and novel pharmaceuticals, such as vaccines, protects all of us against future crises.