How to invest during Covid-19? My top tip

As Secretary-General of the International Chamber of Commerce I am often asked for advice on the investment outlook for the global economy.

You might be forgiven for thinking that making a sound investment decision today would be difficult – both for business and governments. After all, we are still in the early stages of a pandemic that has already caused the greatest recession since the Second World War and – perhaps more than anything – radical uncertainty about the future.

Global economic conditions will only get worse before they get better. The IMF presently predicts global output to fall by 4.4% this year. Sectors highly reliant on physical contact and travel, such as tourism, have been decimated. Hundreds of millions of jobs have been lost and countless business have gone bankrupt. We still do not have a clear idea of when the pandemic will end – and the longer the pandemic lasts, the deeper the economic damage and the slower recovery.

So, how should governments and businesses invest in the face of such dire economic predictions and uncertainty about the future?

The clear answer is that rather than speculating about the future, we must shape it by investing in the tools that will most quickly bring an end to the acute phase of the pandemic. Only then will businesses be able to survive, thrive and drive economic growth. This is as true for businesses as it is for governments as we all have a stake in rapidly controlling Covid-19.

More precisely, the world needs to massively scale-up investments in the research, manufacture and global, equitable distribution of tests, treatments and vaccines. Thankfully, there is a single vehicle in which governments and companies can invest in these essential medical weapons in the fight against Covid-19.

The Access to Covid-19 Tools Accelerator – the unprecedented coalition led by Dr Tedros, Director-General of the World Health Organization bringing together all the major health delivery and research agencies from across the world – has created a set of tools, now beginning to emerge, that will give us the chance to shift control of the pandemic from the virus to the people.

Since ACT-A was established in April, it has made remarkable progress. New rapid tests have been developed and made available at very low costs (US$3-5) to low-income countries. There has been staggering progress on therapeutics, with the first life-saving therapy (Dexa) in rollout in the developing world only 20 days after discovery. Over 186 countries have signed-up to COVAX, which has created a dynamic portfolio of vaccines, and several vaccine candidates could be ready for production in the next few months.

In short, science and international partnerships have given us the tools to fight Covid-19. Now we need to make them available globally, quickly and equitably.

The economic case for investing in ACT-A could not be clearer – as I and others argued during this week’s second meeting of the ACT-A Facilitation Council, of which ICC is the only private sector representative.

ACT-A needs a total of US$38 billion to fully deliver on its mission of researching, producing, procuring and distributing globally the tools we need to end the pandemic. More immediately, US$4.5 billion is required over the next few months.

At first blush, this sounds like a lot. The US$38 billion represents more than the annual foreign aid budgets of the world. And US$4.5 billion is roughly the same as the yearly budget for all of the World Health Organization’s activities.

But in reality fully funding ACT-A would be, as Sir Jeremy Farrar said last week, “the greatest financial investment ever made”.

Here’s why:

1.      There is no trade-off between saving lives and supporting the economy. It is the pandemic itself that is causing economic damage. Fear of the virus has changed how we live, how we spend and how we act. Only once the virus is sufficiently under control will more normal economic activity return. Right now, the best economic policy is to comprehensively fight Covid-19 – with the ultimate objective of brining the acute phase of the pandemic to a rapid end.

2.      The only response is global. In an interconnected economy, no government can protect the livelihoods of its citizens without having regard to the welfare of those in other nations. Mass vaccination may symbolically liberate the United States from the virus, but a cloud of economic uncertainty will hang over the families of the 10 million Americans whose jobs rely directly on exports if the pandemic still runs rampant in foreign markets. Modelling has shown that lockdowns in countries can have a significant impact on economies thousands of miles away. Simply put, there’s an iron-clad economic case for ensuring international cooperation is foundational to all efforts to tackle the spread of the virus.

3.      ACT-A is the world’s pandemic exit strategy. If we keep doing what we’re doing, Covid-19 will not go away. The pandemic is becoming endemic. While governments have taken many measures, we have done nothing to change the waves of infection. We must change our approach and alter the fundamentals of how the virus spreads. That is precisely what ACT-A aims to do – by developing and rolling-out at scale all the tools we need to fight Covid-19 globally. ACT-A is our best chance of defeating the pandemic and returning to normal as quickly as possible.

4.      The financial returns of funding ACT-A would be enormous. The IMF has calculated that successfully combatting Covid-19 through the ACT-A approach could contribute up to US$9 trillion in global income by 2025. This is the difference between the IMF’s baseline forecast and its scenario where effective, safe and trusted vaccines and treatments are widely used. 

5.      The costs of funding ACT-A are relatively small. While US$38 billion may sound like a lot, it is a tiny fraction of global GDP (less than 1/10 of 1%), and a rounding error of what governments have already spent on stimulus measures. In fact, it’s less than one third of 1% of the ~US$12 trillion that G20 governments have spent so far. 

6.      That makes for a return on investment of around US$236 for every dollar spent. Spending US$38 billion for a US$9 trillion return is nothing other than an extraordinary return on investment.

7.      It is much cheaper to act quickly than wait. The longer the pandemic persists, the greater the economic damage. The greater the economic damage, the more expensive policy measures designed to ameliorate the damage become. In more positive terms, the quicker we spend the US$38 billion to get the tools we need, the sooner the world can return to normal and the greater the economic returns. Indeed, the US$38 billion would be paid back within 36 hours after international mobility is restored.

8.      We cannot afford to delay funding. Given the limited fiscal space of many governments, especially in developing countries, governments would be better off spending a relatively small amount now rather than waiting and having to spend more later. The longer the wait the more we will risk Covid-19 fatigue (with consequent lapsing of good health practices), increasing tensions and social unrest.

So far, ACT-A has raised only a small portion of what it needs to fully deliver on its mission despite it being an investment we cannot afford not to make.

That is why ICC will continue calling on governments to pay their full, fair share. 

And it is also why we will be writing to corporate leaders all around the world to ask them to contribute to the cause and invest in ending the pandemic.

More to come!