We’ve all heard the expression, “money makes the world go around.” But we also know, that money can change the world… for the better.
That’s the theory behind impact investing, that investors can use capital to “generate a measurable, beneficial social or environmental impact alongside a financial return.” To date, most impact investments have focused on driving impact in areas such as sustainable agriculture, renewable energy, conservation, microfinance, housing, healthcare, and education.
But here at Women’s World Banking, we think impact investing can drive something bigger. Impact investing can drive the global goal that is a key enabler for so many of the other UN Sustainable Development Goals: gender equality. And this International Women’s Day, we’re highlighting exactly how we think investing can advance gender equality… through our gender lens impact investment fund.
Gender Equality Won’t Happen in Our Lifetime
It’s undeniable that tremendous progress has been made in the area of women’s rights in the spheres of labor, social norms and politics since International Women’s Day was founded in 1911 by Sufragettes in the US. For instance, just this year, Iceland passed a law that made it illegal to pay men more than women, Saudi Arabia allowed women to drive, and the US saw record numbers of women running for office.
But despite this progress, the World Economic Forum’s 2017 Global Gender Gap Report found that gender parity in employment and pay is 217 years away… 47 more years than their estimate just last year.
This setback just goes to show that we cannot let up in the march towards equality for women. The great thing is, we’re in a great moment to try more and do bigger. As part of this forward momentum, Women’s World Banking wants to see the powerful force of capital be deployed for this good.
#PressForProgress with Gender Lens Investing
Women’s World Banking Capital Partners is a private equity fund that makes direct equity investments in women-focused financial institutions. It is the only women-focused, women-managed microfinance equity fund in the impact investing space.
Our approach of investing in women-focused inclusive finance companies is unique in the market as it focuses on both benefiting low-income women in developing countries, and promoting gender diversity at the institutions we invest in. This style of investing (investing in projects that benefit women directly) has been touted by The Economist as the “super strength” version of gender lens investing, as opposed to milder versions which make up most of the industry today: “mainstream funds and exchange-traded funds (ETFs), such as the SHE-ETF by State Street, that filter out listed companies with few women in senior management.”
The investment strategy is based on what Women’s World Banking has long maintained: that providing women with access to financial services is profitable business for banks, while contributing to the economic growth and welfare of families and communities. Further, given increasing evidence that gender-diverse institutions outperform those with low levels of female representation, ensuring gender diversity within the institution is critical to boost financial performance.
Currently, the Capital Partners Fund has US$50 million under management with 9 investments in 7 countries. Our all-female investment team invests in institutions that outperform their peers on key gender metrics. They work with investees to ensure they are reporting on both financial and social metrics, including detailed disaggregation of financial and organizational data by gender, and help them develop strategies to improve outreach to women as well as gender diversity within institutions.
The Gender Lens Dividend
We know it works—from a financial and social performance standpoint. Our first exit to date (the Ujjivan IPO in India) yielded 30% IRR (in USD), 2.5x MOIC. Comparing the Fund’s returns to a 2017 benchmark from Cambridge Associates shows that the Fund generated top quartile returns compared to emerging market PE funds with impact focus and similar vintage year.
Recent analysis of the Fund showed that investees are closing the gender gap in financial inclusion in their markets. In fact, investees increased the number of women clients by 60% during the investment period and diversified the kind of products they serve their women clients, including the expansion of insurance products in 3 investees—a critical risk-mitigation tool for low-income families.
Investees are also leading the market in closing the gender gap in the workplace: they outperform peers in their markets in percent women clients, managers and directors. Building a gender diverse pipeline of staff and leaders enables our investees to fully tap the talent in the market and realize the benefits of gender-diverse teams: lower turnover, more innovation, higher returns and greater profitability.
The Next Big Thing in Impact Investing
Capital Partners isn’t alone in realizing the tremendous value of gender lens investing. A study by the Wharton Social Impact Initiative and Project Sage found that there are now 58 private gender lens investment funds out there with a total value of USD1.34B. More are being founded every year. A vast majority are focused on investing in the US market, and technoloy and health-focused companies dominated the fund portfolios. Capital Partners remains the only fund focused on closing the gender gap in financial inclusion in emerging markets.
However, this is just a drop in the ocean of the immense investment industry. Imagine if a greater percentage of the trillions of dollars in the investment market were invested with a gender lens… the returns that we can deliver to women as clients, employees and managers can potentially make gender equality something we see in our lifetime, not in 2235.
As the International Women’s Day campaign said, now, more than ever, there’s a strong call-to-action to press forward and progress gender parity. A strong call for all of us to think, act and be gender inclusive.
It’s time for investors to make a gender lens approach a key part of their global investment strategy and drive value for their portfolios while advancing gender equality.