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The time is right for gender-lens investing, what is holding us back?
By Angelika Mendes-Lowney, Manager, Development & Partner Engagement
The concept of gender lens investing as a powerful strategy to achieve positive financial and social returns is rapidly increasing. In a workshop during Women’s World Banking’s “Making Finance Work for Women” summit on November 7, discussions highlighted that the time is right for gender lens investing but a few barriers are still limiting its potential impact: the need for more demand, data, misconception of what gender lens investing is, and clarity on the business case.
A room full of eager participants at Women’s World Banking’s Making Finance Work for Women summit in early November gathered for a deeper dive into the topic of gender lens investing. Throughout the workshop, four panelists shared their extensive experience and powerful insights around this hot topic that has recently made it on the agenda of major conferences worldwide.
Earlier this year, Suzanne Biegel, founder of Catalyst at Large and moderator of the workshop, proclaimed 2018 the year of gender lens investing.
However, the term “gender lens investing” remains unclear to many, and one of the first requests from participants was a clear definition. According to Biegel, gender lens investing is “the use of capital to simultaneously generate a financial return and advance gender equality.” This requires an integration of the gender analysis with the financial analysis.
Key gender “lenses” typically include access to capital, workplace equality, value chains, and products and services that positively affect women and girls. Biegel encouraged participants to ask how thinking more consciously about women in specific sectors may improve the financial or social performance of a fund or a particular business, since finance plays a significant role across a variety of sectors.
Clearly, the time is right and opportunities are plentiful for gender lens investors. However, compared to other, more mainstream approaches, such as climate finance, gender still only occupies a niche: $187 billion were invested into climate bonds in 2017 while only $1.3 billion were invested in gender. What is holding us back? Four key themes were touched upon.
“We need more demand,” said panelist Luisamaria Ruiz Carlile, Wealth Manager at Veris Wealth Partners and co-author of the report Gender Lens Investing: Bending the Arc of Finance for Women and Girls. “Clients can now demand a gender-focused fund to invest in for a low minimum and low fees, but it’s still a too well-kept secret.”
There was also agreement that data is key to making the case for gender lens investing since some investors still won’t accept that investing in gender yields better results. “Increasingly, we see information that gender-diverse teams correlate with better returns,” said Christina Juhasz, Chief Investment Officer of Women’s World Banking’s own gender lens investing fund. As an investor, Women’s World Banking requires portfolio companies to commit to equal pay, at least 35 percent women representation on their board, and the collection of gender-disaggregated data.
A common misconception is the assumption that gender-lens investing excludes men or is a silo while it really is an analytical tool that, if used correctly, reveals rich options on how to drive returns. Moreover, investing in women really helps address all other impact goals. More education is needed to help investors understand this potential.
Finally, the business case for gender lens investing has to be expanded. Johannes Feist, who represented the German Development Bank KfW on the panel, stressed that for too long, gender mainstreaming has only focused on equal opportunity and fairness. Now that there is a renewed focus on the private sector to consider the business case for gender, it is key to help nurture more ventures and more private equity-like structures. Other participants felt strongly that the business case had already been sufficiently proven and that perhaps it needs to be brought home through experience and an emotional journey rather than via facts alone. In an earlier session, Sarah Kaplan, Director of the Institute for Gender and the Economy at the University of Toronto had made the same point and referred to her own meditations on the business case for gender equality.
Investors in the room also shared some best practices based on their own experience. Shareholder agreements, for instance, have proven powerful tools for holding portfolio companies accountable and reminding them of their commitments. In one case, a CEO’s compensation was linked to increasing gender diversity in his company. Solving a company’s key business challenge with a gender lens, or illustrating where that company ranks compared to peers in the market also helps. What should not be underestimated is the power of emphasizing that a follow-on investment will be unlikely if an investee doesn’t deliver on the agreement. Bringing women into the design process to understand what barriers they face and to make sure the products and services provided meet their needs is also key. In order to be successful, investees need to know how to conduct a gender analysis and to understand the regulatory environment, because there is no use in designing a beautiful product to which a woman legally has no access.
The workshop on November 7th demonstrated that despite tremendous momentum for gender lens investing, there is more work to be done. Women’s World Banking is proud to be at the forefront of this promising approach, advancing positive results for low-income women.