No.25 - January 2015

by Stephen Browne and Roberto Cordon

Vertical Funds: Lessons for Multilateralism and the UN


The World Health Organization (WHO) has been criticized for its slow response to the Ebola epidemic. This Briefing asks several questions, including:
Were the new funding mechanisms for health created to compensate for the shortcomings of UN organizations in the health field? Are vertical funds effective channels for assistance or distortions of multilateralism? Can the UN learn from them?


“Vertical funds” are development financing mechanisms confined to single development domains with mixed funding sources.  Two vertical funds were conceived in the field of health in 2000: the Global Alliance for Vaccines and Immunization (GAVI) and the Global Fund for AIDS, Tuberculosis and Malaria (GF).

While GAVI and the GF were built on UN foundations, they rival the world organization with programs that fall squarely in the domain of UN organizations. At a time when the UNDS has come under increasing resource constraints, moreover, substantial amounts of new donor money have been channelled into these new organizations. Between them, GAVI and the GF have attracted more than $40 billion in 15 years. So, why were these new funding mechanisms for development assistance created in preference to expanding existing UN organizations? Have they been effective? What can the UN learn?

Vertical funds are a scaling up of the growing practice among major donors of earmarking non-core resources for specific purposes. WHO is a typical UN organization with almost three-quarters of its 2012-13 funding earmarked and provided by relatively few donors: no less than 40% of total earmarked resources were provided by three governments (the UK, the US, and Canada) and by the Bill & Melinda Gates Foundation (BMGF). Such earmarking has been called “Trojan multilateralism” because it creates “the illusion of multilateral intent” while “covertly introducing bilateral goals.”

The two vertical health funds have even more concentrated funding patterns. From its inception in 2000 to 2015, GAVI has been pledged a total of $12.1 billion. Of that amount, the four largest contributors—the UK ($3.2 billion), the BMGF ($2.5 billion), Norway ($1.3 billion), and the US ($1.2 billion)—accounted for over two-thirds of total funding. Since 2001, contributions to GF had reached over $29 billion by the end of 2013, almost two years’ development expenditure by the entire UN development system; the top seven country donors contribute 75%.

For health, the two vertical funds have facilitated the growing dominance of traditional rich-country donors, with the addition of the BMGF. These donors focus on visibility and results, and the two funds provide both. GAVI and GF can point to statistics of reduced morbidity and numbers of lives saved. For donors, and especially governments that need to justify aid before parliaments and public, the funds provide hard evidence of identifiable results. Yet because GAVI and GF programs are so narrowly targeted, their managements maintain no earmarking by any donors, in contrast with the WHO that has a much broader health mandate but has become increasingly supply-driven by the interests of individual donors. To that extent, the vertical funds are less of a “Trojan horse” than the WHO.

The vertical funds represent innovative multilateralism. In addition to the limited number of donors, their governance systems are mixed and selective. Experience shows that consensual decision-making is sometimes hard-fought but is more expeditious than in the UN’s inter-governmental forums. However, distortions arise from their sheer size and the top-down nature of their operation, and they can draw funding away from other areas of health.

Extensive earmarking in WHO also creates distortions and is problematic for multilateral principles and practice. While the organization has the merit of universal membership and affords every country a voice in the World Health Assembly, the donor domination of its program increases the risk that WHO is even more supply-driven than the vertical funds.

The earlier abandonment of an Ebola program and overall slowness in reacting to the pandemic in West Africa in 2014 may be symptomatic of such a distortion and have led to criticism of Director-General Margaret Chan. A further concern is more practical. WHO’s project managers have told the authors that a major proportion of their time is spent on managing the relationships with over 400 donors, which is directly deducted from their availability for professional health work. The vertical funds are not similarly burdened by donor solicitation, are not as constrained by political and diplomatic imperatives as the UN, and their approach is very different since performance and the use of funds is a major determinant of eligibility.

Universality is a fundamental UN principle, but how well has it served development when applied to its operational functions? Hitherto, eligibility for UN assistance has left performance criteria almost entirely out of account, with the consequence that UN organizations continue to channel resources to countries that make poor use of aid.


UN development organizations’ universality is the basis of their legitimacy, but in its operations, the UN’s universal intergovernmental structures have contributed to bureaucratic and cumbersome performance. Moreover, UN operations increasingly compete with other sources and mechanisms of technical assistance; and the creation of the vertical funds was in part a response to the UN’s widely perceived operational shortcomings, which successive FUNDS surveys have confirmed. There is even a case to be made for the UN to abandon its operations entirely.  Inertia makes this outcome unlikely, and so it may be more instructive to summarize four learning opportunities.

1.       Governance: The vertical funds have boards of limited and rotating membership, including civil society and private sector representatives. While formal approval and oversight of their operations continues to be the responsibility of member states, UN organizations should consider establishing advisory boards of limited size with mixed state and non-state membership
2.       Innovative funding: UN organizations have been successful in enlarging the range of funding sources, although the traditional donors remain dominant. They should endeavour to attract more innovative multi-year and multi-donor funding mechanisms to provide more programming continuity and security, while diluting the influence of individual donors
3.       Program performance and transparency: While the narrower operational mandates of the vertical funds are more amenable to establishing clear performance metrics, UN organizations should nonetheless elaborate better criteria for success in creating longer term sustainable capacity in developing countries. These criteria should be drawn up—or at least agreed to—by program countries themselves; and they should determine program success or failure as determined by independent evaluations. Because they are present in all program countries and well connected to local counterparts, UN organizations could be used more extensively by vertical funds for implementation and oversight.
4.       Program orientation: There are serious distortions in both vertical funds and UN organizations. The former divert substantial funds into narrow, albeit critical, fields of health-care, drawing resources and personnel in program countries away from other areas. The operations of the WHO and other UN organizations are driven in directions that reflect as much the priorities of donors as recipients. Correcting these distortions requires closer collaboration between vertical funds and UN organizations in country programming, and strengthening the capacity of recipient countries in strategic sector planning.

Download the full briefing paper 'Vertical Funds: Lessons for Multilateralism and the UN' in pdf.

Stephen Browne is Co-director of the Future of the UN Development System (FUNDS) and Senior Fellow of the Ralph Bunche Institute for International Studies, The Graduate Center, The City University of New York and former Deputy Executive Director of the International Trade Centre. He is the author of several books on development, including 'United Nations Industrial Development Organization' (2012) and 'The United Nations Development Programme and System' (2011). He is coeditor with Thomas G. Weiss of 'Post-2015 UN Development: Making Change Happen?' (2014).

Roberto Cordon is Professor of Management and International Relations at Franklin University, Switzerland. Previously he served as manager of training programs in market analysis at the International Trade Centre and worked as a senior consultant in the development practice of PricewaterhouseCoopers in Washington DC. He has also taught at the Pontificia Universidad Católica de Chile and at The Wharton School. His academic interests focus on the institutional efficiency of international organizations and their relationship to the private sector.


Add comment

Security code

No comments yet.