Impact 101: What is gender-lens investing?

Bewildered by buzzwords? Drowning in jargon? Pioneers Post journalists and expert guest writers break down the terminology and get back to basics on impact economy concepts. Here, GenderSmart co-founder Suzanne Biegel provides your Impact 101 on gender-lens investing.

Gender lens, gender finance, gender-smart – what do they all mean? 

Suzanne BiegelSuzanne Biegel: Gender-lens investing is the integration of gender analysis into the investment process for better social and financial outcomes. 

Gender-smart investors recognise that financial systems engage with and benefit men and women differently, and particularly women of colour, and are actively committed to using finance as a tool to promote gender equality. 

Gender finance is the field of finance viewed from the perspective of gender-lens and gender-smart investing. 

 

What other terminology or concepts would you like to see covered in Impact 101? Let us know by contacting news@pioneerspost.com.

 

So does this mean all gender-lens investing is a form of impact investing – or not necessarily?

SB: Whether you’re coming from an impact investing background or more mainstream finance, there are as many ways to do this as there are investors, and different lenses you can apply. The lens many people are familiar with is investing in companies with gender-balanced boards or leadership teams, or backing women entrepreneurs in private markets. But the full impact of gender finance is truly unlocked when you look beyond leadership and governance, across the value chain and across the investment cycle – from diversifying pipelines and improving due diligence, to integrating gender intelligence into product design and strategy, and analysing supply and value chains to see who really gets it right for both women and men, and who is missing the risks of getting it wrong.

The full impact of gender finance is unlocked when you look beyond leadership and governance, across the value chain and across the investment cycle

An impact investor might be motivated by greater gender equity, and also recognise the financial opportunities in backing women entrepreneurs in developing markets, or in creating greater economic inclusion for women in workforces. But a fund manager with a tech VC portfolio motivated by alpha might equally recognise that they’re exposing themselves to financial risk if they ignore the needs of 50% of the population – who wield huge swathes of purchasing power – in their strategies. 

 

GENDER LENS GLOSSARY

Gender-lens investing: integrating a gender analysis into investment processes, for better social and financial outcomes

Gender-smart investors: investors who recognise that financial systems engage with / benefit men and women differently (particularly women of colour), and are committed to using finance as a tool to promote gender equality

Gender finance: finance viewed from the perspective of gender-lens and gender-smart investing

 

Is a gender lens just about women?

SB: Absolutely not. You could invest in a male founder who intentionally creates quality jobs for 500 women, who then go on to have a disproportionate impact within their homes and communities: feeding and educating their families and providing care for their elders. When you invest for gender equity (particularly when it's intersectional), everyone wins.

The recent shift towards a deeper, more intersectional approach to gender-lens investing that integrates a racial and ethnic equity lens was really missing a few years ago, and it is absolutely crucial to realising the impact of gender-lens investing. That takes on different flavours in different countries – and it’s something we’re doing a lot around at GenderSmart

 

Why is gender-lens investing such a hot topic right now? 

SB: The field of gender finance has come a long way in the last decade and is increasingly seen as just smart investing. We're at a moment in history where a lot of gendered challenges are now getting mainstream attention – for example, after months of working from home, there’s a huge appetite and opportunity to invest in equitable care economy solutions, or to recognise that the healthcare solutions we need for Covid-19 and beyond are just as likely to come from women innovators as they are from men. Some areas are not as well understood – such as the nexus of gender and climate solutions. This is one of many areas where I’m doing a lot of work. There is also a growing recognition of the risks of not paying attention to gender-based violence (the ‘shadow pandemic’), and the solutions that investors can pursue to address that across all asset classes and thematic investment areas. 

There’s also increasing interest in sustainable investing more broadly, which demonstrated its resilience during the pandemic. As ESG continues to grow and become part of mainstream investment strategies, there’s an opportunity to take an integrated approach and ensure that gender (and other forms of identity such as race and ethnicity) become an integrated part of the S and the G. While capital moved with a gender lens has increased dramatically in both public and private markets, it’s still insignificant compared to the trillions moved globally in ESG products and strategies. 

 

So what is the current scale of gender-lens investing? 

SB: At the end of 2020, the public gender-lens market was valued at close to $11bn (based on GenderSmart calculations), up from $3.4bn in 2019 – due in part to the $2.9bn allocation from Japan’s GPIF pension fund in the Morningstar Gender Diversity Index, but also based on inflows into products from many asset managers. 

The private markets are harder to quantify, but a conservative estimate by the GenderSmart team puts it at $5-$7bn, based on the average fund size in the latest Project Sage, an annual scan of private markets vehicles investing with a gender lens, from Catalyst at Large and Wharton Social Impact Initiative. There are new funds launching all the time – Sage 3.0 included 138 funds in 2020, up from 87 in 2019, and our current count is well over 200. Sage 4.0 research is happening now and that data will be released before the end of the year. 

Add in microfinance, angel investing, crowdfunding, loans to women entrepreneurs through the banks and the multilaterals, a broader view of investing in companies whose products and services benefit women and girls, or equitable quality job creation for women and men, and the numbers are definitely growing. But it is nowhere near meeting the demand for capital. 

There are new funds launching all the time – our current count is well over 200

 

There have been some big announcements in the field of gender finance recently. What should Pioneers Post readers be aware of in particular? 

SB: The GPIF/Morningstar public markets investment above is significant: it signals how mainstream allocators are picking up on this theme.

The most notable news of 2021 is the launch of the 2X Collaborative (GenderSmart is a core partner), started by the development finance institutions and now including multilaterals, some banks, and other asset owners. The 2X Collaborative is a global industry body for gender-lens investing which has collectively made a $15bn commitment to mobilise capital towards women’s empowerment and investing with a gender lens. 

In the world of supply chains, Unilever made a commitment to spend $2bn with diverse suppliers annually by 2025. 

The Generation Equality Forum in June-July 2021, designed around SDG5, mobilised financial commitments to the tune of $40bn including $21bn of gender equality investments and grants. 

 

Impact Finance Bulletin

 

What are the key barriers to more gender-lens investing?

SB: The top 100 institutional asset owners controlled $20.1 trillion in global assets at the end of 2019: imagine the impact if even 1% of that was invested with a gender lens. There are many barriers to getting more institutional capital moving: constraints around deal size and entrenched norms can make it difficult for bigger institutional investors to back early-stage or emerging gender-smart fund managers (many of whom are also racially or ethnically diverse). Pension fund intermediaries, bond issuers, and other gatekeepers are also still not offering institutional clients the range of gender-smart vehicles that they could be. 

Similarly, many financial and wealth advisors perceive gender finance as inherently risky at worst, or simply overlook opportunities because of ignorance or inherent bias. There is a huge amount of structured product now available. A big area of need for gender-lens investing is early-stage investment – and the gatekeepers don’t make that easy. 

Many financial advisors perceive gender finance as inherently risky, or simply overlook opportunities because of ignorance or inherent bias

There has been a huge increase in data and tools, but what’s needed now are people fluent enough to translate findings and shepherd investors and advisors towards appropriate resources. Policy actors have an immense role to play in accelerating gender finance at scale (consider what climate policy has done for green investment) but aren’t as engaged as they could be. Criterion Institute is doing great work here. 

Effective and impactful deployment of gender-lens capital also needs a better understanding of the people that capital aims to serve - or, in the words of one GenderSmart Investing Summit delegate, “people who are closest to the issue but furthest from the power”. We need capital flowing in the right structures, at the right time, in the right ways, to really meet the needs of the demand side. 

 

How can newcomers to gender lens investing get started?

SB: There are dozens of resources and tools to help, depending on which asset class or investment themes you’re most interested in. We’ve compiled four recent and particularly good ones to help investors get started in the GenderSmart resource library. You can also explore key insights from the 2021 Global Summit

  • Suzanne Biegel is founder of Catalyst at Large Ltd and co-founder of GenderSmart. She advises foundations, development finance institutions, and other institutional investors on gender-smart investing.

 

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