Investing in organisations that promote female leadership and entrepreneurship can pay dividends to investors and benefit society
by Sarah Kidner
Gender lens investing (GLI) or gender-smart investing is a strategy that intentionally uses capital to address inequalities between women and men, according to a 2020 report jointly produced by impact investor CDC Group and the International Finance Corporation (IDC). GLI relates to Goal 5 of the UN’s 17 Sustainable Development Goals: ‘Achieve gender equality and empower all women and girls’.
A 2020 report issued by Project Sage 3.0, a collaboration between the University of Pennsylvania’s Wharton Social Impact Initiative and Catalyst at Large, a GLI consultancy, presented findings from a global survey. It finds that funds have a broad understanding of GLI, with 50% selecting all five definition options given:
- Advancing women in finance: for example, fund managers, or more women on investment committees.
- Advancing women in leadership: such as in C-suite positions, entrepreneurship, boards.
- Advancing products and services that improve the lives of women.
- Advancing companies that have a positive impact on the women they employ.
- Advancing companies that improve the lives of women in their ecosystem.
The results show that “there is no universal standard for what qualifies a fund as using a gender lens”, it says.
Some benefits of GLI
1. Economic growth
Gender equality is a fundamental human right, but it is also essential for economic growth, according to a Deloitte report published in 2018, looking at the business perspective of the SDGs. The US economy would be 11% smaller, it says, if women’s employment patterns hadn’t changed in the preceding 30 years.
2. A growing market with huge potential
Investment vehicles with a gender lens increased 300% in the four years prior to 2020, according to the CDC/IFC report. However, there is potential for more growth. GLI assets managed in 2019 were estimated at over US$3.4bn, but this represents a small proportion of the US$74tn in global assets under management at the time. The report values investor appetite for GLI at US$26tn.
3. Return on investment
Female-founded companies deliver twice as much revenue per dollar as male-founded firms, according to research conducted in 2018 by Boston Consulting Group.
4. Keep pace with competitors
According to a March 2021 report by KPMG, “investments in the potential of women have disproportionally high social and economic impact because of the spill-over effects in healthcare, education and economic growth and job creation”. The report says that 67% of global asset owners identify gender diversity as an area of interest within their investment portfolios.
5. Broad spread of investment opportunities
In 2020, there were 138 funds deploying capital with a gender lens, up 138% from the 58 funds in 2017, according to Project Sage 3.0. It finds that larger funds are available for investment: 54% in the US$20–100m range, and just under 22% raising more than US$100m plus.
6. Female leadership boosts profitability
A report by the International Monetary Fund (IMF) finds that swapping a male for a female member of the senior management team/board brings about a 3–8% increase in profitability.
Five examples of gender lens investing
1. European Investment Bank SheInvest Initiative
A year after the SheInvest Initiative launched in 2019, it achieved its initial target to mobilise €1bn in GLI to boost gender equality and empowerment across Africa. In 2021, the European Investment Bank doubled its ambition and announced it would mobilise €2bn worth of investment.
2. International Finance Corporation: Banking on Women
The IFC’s Banking on Women programme has been providing financial and business solutions to women-led small and medium-sized enterprises (SMEs) since 2010, mobilising and investing over US$4bn to date, with 204 investment and advisory services projects in 66 countries. Nearly 40% of the projects are in fragile and conflict-affected countries.
It has catalysed sustainable financial services for women and women-owned SMEs in Thailand, Afghanistan, Kenya, and Brazil.
3. British International Investment
British International Investment (formerly CDC Group) is the UK’s development finance institution. It has investments in over 1,000 businesses in emerging economies and total assets of £7.5bn. CDC invests in companies in Africa and Asia with a focus on fighting climate change, empowering women and creating new jobs and opportunities.
All proceeds are reinvested in Africa and South Asia.
4. RH Capital
RH Capital invests in early- and growth-stage ventures working on sexual, reproductive and maternal health solutions in the United States. It focuses on women affected by systemic inequities.
RH Capital is a subsidiary of Rhia Ventures, a non-profit based in California that aims to create an equitable reproductive and maternal health market.
Rhia Ventures also works with shareholders to promote corporate responsibility for reproductive and maternal health. It seeks to deepen the conversation about racial justice and reproductive health.
5. AlphaMundi Foundation
AlphaMundi Foundation provides support to SMEs that are likely to achieve positive social and environmental impact. The Swiss-based company focuses on the unmet needs of low- and middle-income consumers in Latin America and Africa, investing across agriculture, education, microfinance, renewable energy, and more. It applies a gender lens across the whole value chain.