What is Gender Lens Investing?
Gender lens investing has emerged as a powerful impact investment strategy that combines pursuing financial returns with pursuing gender equality and social well-being. It recognizes the importance of investing in women as business owners, as purchasers/customers, as well as in their workforce and leadership roles, to foster stronger, faster-growing institutions that achieve better financial returns and create a more equitable world.
At its core, gender lens investing seeks to generate positive social impact by supporting women’s engagement in business and the economy. This usually encompasses investing in women-owned businesses, or businesses that offer products and services that increase women’s well-being, or businesses that create job and leadership opportunities for women, or all of the above. By directing capital towards companies and initiatives that promote gender equality, investors can drive positive change while also achieving financial success.
The Power of Gender Lens Investing
According to 2021 data published by GenderSmart, sustainable or impact investing flows were estimated at USD 40 trillion in 2021 but, of that, only USD 17–20 billion included gender lens investing. This is a substantial missed opportunity since the potential gains of investing in women’s economic engagement is well documented. The McKinsey Global Institute found in 2020 that advancing gender equality and opening economic pathways for women could add $13 trillion to the global gross domestic product (GDP) by 2030, furthering social and economic growth and resilience for all groups. A report from Oliver Wyman in the same year estimated that financial services firms are missing at least a $700 billion revenue opportunity each year by not fully meeting the needs of women customers.
Research consistently shows that companies with diverse leadership teams and inclusive practices outperform their peers. By investing in businesses that prioritize gender equality among their customers and their workforces, investors can tap into this potential for financial outperformance.
How does Gender Lens Investing Work?
The process of gender lens investing involves each stage of the investment cycle. At the investment selection stage, gender lens investors would evaluate target companies’ gender diversity in leadership, workplace policies that support women, and products or services that benefit women, such as access to finance, education, or healthcare for women and girls. At the negotiation of terms and conditions stage, gender lens investors would require commitments from management around gender best practices and gender disaggregated reporting for accountability. During the holding period, gender lens investors would exercise their influence to push for such best practices, and structure management incentives that reward progress toward gender parity in the workforce and customer base.
To measure the impact of gender lens investing, rigorous data collection and analysis are essential. This includes collecting gender-disaggregated data, which provides insights into the experiences and outcomes of women within the investment portfolio. This data-driven approach helps companies track progress, identify areas for improvement, and collect important data on which to base management decisions. For the gender lens investor, it will demonstrate the social and financial impact of their investments. Finally, at the conclusion or exit of the investment, gender lens investors would seek to lock in gender gains by ensuring new investors will continue to value gender diversity.
It should go without saying that gender lens investors should themselves reflect gender diversity in their investment teams, but to date the investment industry is still male-dominated with relative few women in leadership positions and investment decision-making roles. This, too, must be a focus for gender lens investors, especially as the outperformance potential of gender-diverse investment teams is also supported by research.
Women’s World Banking’s Experience with Gender Lens Investing
With WWB Capital Partners and WWB Capital Partners II funds, Women’s World Banking Asset Management (WAM) has invested approximately $100 million in 21 inclusive financial institutions spanning Asia, Sub-Saharan Africa, Middle East & North Africa, and Latin America. These investments have had a transformative impact, reaching approximately 8.5 million women. We have shown positive correlations between gender diversity among workforce and customer bases and growth and profitability. We have shown positive correlations between women and credit quality. We have also helped drive toward gender parity in average loans sizes.
Each WWB Capital Partners II Portfolio Company, undergoes a comprehensive Gender Performance Study, to generate and leverage data-driven insights. This assessment delves deep into the gender dynamics within the company, its operations and its client base, enabling the development of a customized, strategic Gender Action Plan. This unique approach to gender lens investing is meticulously designed to drive meaningful change and maximize the outcomes of our investments.
Gender lens investing within the realm of impact investing harnesses the power of capital to drive meaningful change. By building gender-diverse investment teams and strategically deploying investments in women-led businesses, gender-diverse institutions, and companies championing gender equality, investors can make a quantifiable difference in advancing gender equality while simultaneously reaping financial rewards. The growing prominence of gender lens investing signifies a powerful shift in investment practices, one that embraces the interconnectedness of financial returns and social impact. Through this approach, investors can be catalysts for change, driving us closer to a world where gender equality is not just an aspiration but a tangible reality.
This blog was written by Women’s World Banking Communications Intern & Hollins University Student Charvi Gangwani.