Gender lens investing: Unleashing billions for greater equity

Value for Women, a catalyst for equity, guided 25 fund managers, impacting more than $100 billion of assets towards gender lens investing between 2020 and 2022. Rebecca Fries and Luis Marquez outline their 2028 vision: 50 000 entities adopting gender-forward practices and directing $1 billion with a gender lens. Join this transformative journey towards gender inclusion.

 

In a rapidly evolving financial landscape, investors are constantly seeking innovative strategies that align with progressive values and yield competitive returns. One such approach that is gaining traction is gender lens investing (GLI), a strategy that incorporates a focus on gender into financial analysis with the aim of driving gender equality.

If an investment firm were to ask if you are prepared to catalyse a billion-dollar fund with a gender lens, it would be pertinent to understand what they’re asking, why they’re asking it, and how you can do it effectively. Here, we delve into these pertinent questions.

Firstly, let’s unpack what is meant by a “gender lens”. The concept of gender lens investing originated in 2009, and it involves integrating gender analysis into the investment process. This approach recognises the social and economic value of gender equality, and strives to use capital to promote equitable outcomes.

Secondly, the reason why such a proposal would be made is that gender lens investing has been shown to be beneficial for funds.

Various studies indicate that more gender diversity in leadership and employee positions is linked with improved financial performance, greater returns on investment, and enhanced social outcomes.

For instance, the International Finance Corporation (IFC), in collaboration with Oliver Wyman and RockCreek, found that funds with gender-balanced teams had a 13% higher performance than those without such diversity.

Similarly, research by McKinsey & Company discovered that companies with more gender diversity were 25% more likely to surpass average profitability rates. Root Capital’s portfolio analysis also highlighted the tangible benefits of gender diversity among employees, associating a 10% increase in female staff with a 1.2% lower default rate.

Championing women in business

There is also a growing consensus that discrimination or exclusion of any demographic, whether intentional or unintentional, can negatively impact businesses and economies. Therefore, the adoption of a gender lens approach can make economic sense, even beyond its clear social implications.

Now, to understand what catalysing a billion-dollar fund with a gender lens would look like, one can turn to successful case studies from the field. Various organisations have successfully implemented gender-focused strategies and demonstrated significant progress.

Mango Fund, an East African impact investment fund, recognised that despite women borrowers performing better than men, they accounted for less than 10% of the borrowers. This prompted Mango Fund to target a greater share of the women’s market, a strategy which saw the proportion of women borrowers in its portfolio increase from 15% to 25% in just six months.

Goodwell Investments, based in the Netherlands with local teams across India and Africa, undertook a similar initiative. They actively invested more in businesses that served women and girls, thereby increasing the share of women-led enterprises in their portfolio.

ALIVE Ventures, a Latin American investment firm, helped its portfolio companies implement gender inclusion plans, leading to significant transformations. An example of this is UPlanner, a South American EdTech company, which increased its female workforce from 25% to 38% and reduced the turnover of women employees from 49% to 4%.

At the larger end of the scale, the 2X Global’s 2X Challenge initiative surpassed its US$15 billion target, raising US$16.3 billion in gender lens investments in 2021 to 2022.

The trend is clear, and for those inspired to contribute to catalysing multi-million dollar investments with a gender lens, the first recommended step is to undertake the Gender Smart Nexus. This self-assessment tool helps investors identify their current gender investment practices and provides tailored advice for next steps.

As Ascend Vietnam Ventures (AVV), noted, “It is a lot easier to get started [incorporating a gender lens into investing] than private sector investors might think.”

• Value for Women is a global pioneer catalysing women’s participation and leadership in business, finance, and investment in emerging markets. Email valueforwomen@v4w.org to explore how Value for Women can help you achieve your gender inclusion goals.

READ NEXT: Seedstars boosts migrant women’s finances