THE SITUATION:
Today’s global humanitarian landscape is the most complex since the end of World War II. According to United Nations High Commissioner for Refugees (UNHCR) estimates, there are a record 110 million people around the world who have been forcibly removed from their homes, in part because of ongoing conflicts in Ukraine, Gaza, Sudan, Syria and Afghanistan.
THE CHALLENGE:
UNHCR sought an impactful way to finance the developmental and humanitarian needs of these displaced people, including education, shelter, healthcare, green energy, and water and sanitation.
OUR OBJECTIVE:
A McDermott impact finance team, led by Ranajoy Basu and supported by Priya Taneja and Siddhartha Sivaramakrishnan, acted as lead counsel to UNHCR in the development and launch of the Global Islamic Fund for Refugees (GIFR), a partnership between UNHCR and the Islamic Development Bank (IsDB).
The GIFR is an endowment fund established to generate funding to address the needs of displaced people and host communities in IsDB member countries.
THE OUTCOME:
The GIFR has emerged as a first-of-its-kind, Shariah-compliant global endowment fund, with a target of raising $500 million. It is the largest UN-backed fund seeking to address the needs of displaced populations, with UNHCR and IsDB as co-founders and seed donors.
UNHCR and IsDB signed a charter on September 22, 2022, establishing the GIFR in a ceremony during the week of the UN General Assembly. Since then, UNHCR and IsDB have been working closely together on the operationalization of the GIFR.
Shariah-compliant funds must comply with the principles of Islam and the guidelines of Shariah law, including a prohibition on investing in businesses that earn their income from certain sources, such as gambling, alcohol, drugs, pork or weapons.
For more than a year ahead of signing, and from the deal’s inception, McDermott worked with UNHCR and IsDB on the GIFR’s structural aspects and its related cashflows and governance terms. The team took a hands-on approach, assisting from a finance and funds perspective and drafting the relevant transaction documents.
During drafting sessions, the team addressed a host of complex legal issues related to institutional policies, governance procedures, cashflow-related considerations, fund management and operational aspects of the GIFR. The team also helped set up the documentation framework to support sustainable funding for UNHCR programs to help displaced persons and host communities.
DIG DEEPER:
In coming years, this groundbreaking GIFR model will serve as a template for structuring funding at scale to target humanitarian and environmental interventions.
Successfully implementing programs funded by the GIFR to tackle the displaced persons crisis will likely impact the wider market, generating a ripple effect with the adoption of a similar structure by new organizations. Ensuring that philanthropic and private investors are aware of funding models like the GIFR will be key to scaling the fund and encouraging others to replicate its innovative structure.
McDermott remains involved in this partnership between UNHCR and IsDB and will track the governance structure’s implementation and suggest improvements over time.
Lance Bartholomeusz, UNHCR’s general counsel, said, “With a record number of refugees around the world in need of assistance, innovative funding solutions for the operations serving them are urgently needed. The Global Islamic Fund for Refugees will provide a sustainable, Shariah-compliant financing tool, which aims to enhance the international community’s humanitarian response to forced displacement and unlock new funding channels. UNHCR is grateful for McDermott Will & Emery’s excellent support and advice in establishing the Fund with best-practice governance. We look forward to continuing to work with McDermott.”
McDermott’s impact finance team advises on strategic cross-border environmental, social and governance (ESG)-related impact finance structures around the world. Many of these structures are dedicated to targeting the UN Sustainable Development Goals and addressing other significant global issues.
The GIFR is still fundraising. To learn more or contribute, reach out to Ranajoy Basu.
Learn more about our ESG, Impact & Sustainability capabilities, and read our International News ESG, Impact & Sustainability spotlight article.