We’re told 2018 is going to be “the year” of gender lens investing. But what does that mean?
As the #MeToo movement reminds the world of the power and value that women hold, there is rising interest in investing in ways that benefit women and girls. It can happen on a spectrum, from the indirect approach, which means investing in clean energy or clean cooking fuel, for example, because the broad societal and climate improvement will also be beneficial to women and girls, to a more direct version, which involves funding female entrepreneurs or companies focused specifically on women’s advancement.
Last year, asset flows to investments focused on women and girls eclipsed $2.2 billion, according to Bloomberg data – a new record. It’s a significant amount, but is still a mere fraction of the $72 trillion of global wealth women are expected to control by 2020, according to Boston Consulting Group.
Assets invested in gender lens strategies rose 41 percent through June 30, 2017, according to analysis from Veris Wealth Partners. That strong pace has kept up in 2018 and if it continues, gender lens investing strategies could hit $3 billion within the next one to two years.
Building the Business Case
Advocates for gender inclusivity have spent the past decade making the business case for why gender diversity helps businesses outperform their competitors, but running the numbers only goes so far. As with every business decision, allocating capital to bring an idea to market is the real test. Now, companies and investors are willing to put real money behind gender equality.
“Investment factors have a life cycle,” explains John Wilson, head of research at New York-based Cornerstone Capital Group – an investment firm focused on integrating sustainable development factors in its investment practices.
“People start talking about a problem – climate, environment, gender – and then eventually a business case is created for why an issue should be taken seriously.
“From there, the issue becomes more mainstream, people start focusing on norms and how to factor it into financial performance. I think we are finally starting to get there with gender.”
Beyond Women on Boards
Incorporating a gender lens into business and economics typically involves evaluating companies and policy against three broad factors: the presence or advancement of women in leadership roles; having products or services that benefit women and girls; and improving women’s role in the value chain.
According to the Global Impact Investing Network, more than 100 investment funds globally use these factors to create investment strategies that give investors the ability to advance equality and add to their portfolio.
“We are seeing more funds come to market and we’re seeing them take on a broader scope,” says Jackie VanderBrug, managing director at the Bank of America global wealth and investment management division and a pioneer in gender lens investing. “In the beginning, we saw more impact funds and ‘women on boards’ strategies, but you can invest more globally now and there are options for individual investors and institutions.”
Some of the biggest investment firms in the world, including Bank of America, State Street Global Advisors and UBS, all offer exchange-traded funds that have women in leadership or invest in businesses offering products and services that are beneficial to women and girls.
Other funds take a more direct approach, finding women entrepreneurs and partnering with them in a growth-equity style relationship, where they expect to see investment returns based on business growth.
VanderBrug says gender lens investing has grown in part because we have more data now than ever before.
“Part of making the business case has been to underline the importance of gender-disaggregated data. A lot of organizations are doing work on this and with the Sustainable Development Goals, we are starting to see a push for more disclosures.”
Identifying value is how markets justify capital allocation and that is a key factor to giving more economic power to women. Better data improves service delivery and enables the creation of new markets.
Connecting Women Entrepreneurs Worldwide
In the Pacific, women have been able to use data to create new markets for their businesses, rather than relying on aid grants to grow. Last year, the Australian government backed the launch of Pacific RISE, an effort to support women who live in the Pacific Islands through economic investment.
According to data from Pacific RISE and the think-tank Criterion Institute, 40 percent of the businesses in Samoa are led by women, but in order to expand they need access to new markets and consumers. In Papua New Guinea, women generate the vast majority of food production, amounting to some $55 million per year. But opportunities to grow are limited.
Through data gathering and investment partnerships, Pacific RISE is working to make the Pacific Islands more accessible to private investors in order to help these markets access capital and build systems that support growing businesses.
SheTrades, a platform supported by the International Trade Centre in Geneva, is working on something similar on a global scale. SheTrades is a trade platform designed with gender lens investing in mind. The platform works just like many other global trade arrangements, but gives women access to the same economic avenues that men have had by default, simply because advisers and customers tend to take men-owned businesses more seriously. It also pushes for more equal rights in countries where women aren’t allowed to hold or maintain their own trading accounts, or only with permission from a man. The platform aims to connect 1 million women entrepreneurs by 2020.
Governments and businesses that join SheTrades are asked to commit to gathering and disclosing gender and business data; furthering gender-inclusive policies; make government business contracts available to women; make financial services available to women; and provide business and property ownership rights to women.
So far, the platform has launched in Kenya, Liberia, Nigeria and Finland, bringing more than 5,000 women-led businesses online, and is expected to launch in India later this year.
Who Builds the Future?
Bank of America’s VanderBrug says these use cases are key to understanding how gender lens investing is likely to grow in the future.
“When we talk about financing entrepreneurship, what we’re talking about is who gets to build the future,” she says.
“There are all sorts of implicit and explicit biases that go into that, not just gender. But gender is a big part and it was left out of the conversation for a long time. We are starting to make progress on overcoming gender bias. The forces driving gender lens investing aren’t going away – this isn’t a fad.”