An Introduction to Gender Lens Investing
SVX is committed to embedding greater Justice, Equity, Diversity, and Inclusion in impact investing as one of our strategic priorities. This month, we’re sharing a collection of blogs on gender equality in impact investing and social entrepreneurship featuring knowledge, insights, reflections, and case studies. We hope this collection of blogs will both inform and inspire you to engage with Gender Lens Investing (GLI) and women entrepreneurship. This first blog is an introduction and primer to GLI.
The United Nations Sustainable Development Goal (SDG) #5 is to achieve gender equality and empower all women and girls. Gender equality is achieved when women, men, girls and boys have equal rights, conditions and opportunities, and the power to shape their own lives and contribute to the development of society. It is a matter of equitable distribution of power, influence, and resources in society. There has been much progress over the last decades including greater representation of women in leadership positions, more girls attending school, and stronger legal and regulatory frameworks to advance gender equality. Despite this, numerous challenges remain such as discriminatory laws and social norms, the gender wage gap, underepresentation in executive and political positions, physical and sexual violence against women, among others.
One of the ways in which we can address the prevailing inequities is by directly investing in women, their entrepreneurial ideas, their capacity building, and in organizations that address women’s rights through their product or service offerings as well as incorporate gender diversity within investment criteria. This form of investing is called Gender Lens Investing (GLI).
This primer was developed as a part of the Impact United Impact 360 Diversity & Gender Lens Investing Series, a four-part lineup of webinars focusing on gender and equity lens investing. You can view a recording (17mins) and slide deck from our presentation of this primer here.
While this primer is meant to inform investors and asset owners, anyone interested in learning more about ways to pursue greater gender equity can benefit from reading this primer. We will explain what gender lens investing is and why it matters, three basic gender lenses, GLI market trends, and limitations and opportunities to consider with GLI.
What is Gender Lens Investing (GLI)?
Gender lens is a type of analysis which allows us to see the ways in which gender bias can affect and shape systems, approaches, and assumptions. Hence, Gender Lens Investing (GLI) is a strategy or approach to investing that takes into consideration gender-based factors across the investment process to advance gender equality and better inform investment decisions.
The Global Impact Investing Network (GIIN) defines Gender Lens Investing within two broad categories.
- Gender Equity as an Outcome: The first category is investing with the intent to address gender issues or promote gender equity as an outcome. This includes investing in women-owned or women-led enterprises, enterprises that promote workplace equity, or investing in enterprises that offer products or services that substantially improve the lives of women and girls.
- Gender Focus to Inform Investment Decisions: The second category is using a gender focus to inform investment decisions. GLI is often used to assess the commitment to gender equality of investee ventures by examining amongst other things, their mission and vision in addressing gender issues, vision or mission of ventures to address gender issues, their organizational structure, culture, internal policies, and workplace environment; their use of data and metrics for the gender-equitable management of performance and to incentivize behavioral change and accountability; and how their financial and human resources signify overall commitment to gender equality.
More concretely, Gender Lens Investing calls for changes in the processes and strategies of a traditional investing methodology. For example, rewriting one’s investment thesis or policy to include metrics and standards that promote gender equality, or incorporating strategies such as a scorecard to evaluate a venture’s commitment to gender equality. Asset owners and managers can employ gender lens investing throughout the investment life cycle, starting from pre-investment activities (e.g. sourcing and due diligence) as well as in post-deal monitoring (e.g. strategic venture advisory, exit measurement and strategies).
Why is GLI Important?
While surface-level EDI initiatives aim to simply “check a box”, Gender Lens Investing aims to reframe women as catalysts for societal change and new opportunities.
(1). Impact & Women Empowerment
At its core, Gender Lens Investing seeks to close the “gender gap”, defined by the World Economic Forum as the difference between women and men as reflected in social, political, intellectual, cultural, or economic attainments or attitudes. It is an important intervention for addressing systemic inequality and human rights. By investing in women, we are elevating the rights of women and girls and promoting gender equity.
Through the creation of financial products and vehicles that incorporate a gender lens, innovators in this field have created new investment opportunities. Investors motivated by the themes of gender equality will then deploy catalytic capital towards tangible impacts in this area, thereby creating a reinforcing system.
(2). The Economic Case
While this ought not to be the most important reason for investing in women, it can certainly be a compelling case. Research shows that companies with women in management or on Boards repeatedly outperform companies that have no women in senior roles.
Studies show that a diverse workforces support the retention of talent and employee motivation, and foster creativity and stronger financial performance.
- Working for a women-led organization is desirable for employees due to beliefs that women are more purpose-driven, more likely to have access to childcare, and are more likely to offer equal pay.
Investing in women also brings strong financial returns:
- Although women-led startups received just 2.3% of VC funding, they deliver higher revenue — more than 2x per dollar invested.
- Although only 12% of venture capital decision-makers in the US are women, 69.2% of the top-performing funds have female general partners.
- One study by the Boston-based trading firm Quantopian found that women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men.
Clearly, there is a linkage between gender diversity and better performance results. Generally, women tend to be more interactive leaders. Female executives tend to be more participative in decision-making. They are strong at motivating others, fostering communication, listening, mentoring, and supporting high-quality work. By investing in women, not only are you improving the representation of a traditionally underutilized group, but also creating conditions to improve the performance of an organization.
The Three Basic Gender Lenses
Fund managers and investors can use the following three broad gender lenses to promote gender equity in their investment criteria, activities, and decisions. The Access to Capital, Workplace Equity and Products and Services gender lenses can be used to seek out and categorize investment vehicles and opportunities, as well as to track impact metrics. Note that these lenses and metrics are not exhaustive, as they may vary based on political, social, economic, and geographical contexts — the gap in the Global South differs greatly from the gap in the Global North, for example. Other gender lenses you might have heard of include supply chain equity or value chain equity and advocacy, leadership and governance.
(1). Access to Capital
- Historically and currently, women lack access to traditional capital and credit. In 2020, only 2.3% of global venture funding went to women-led startups.
- The use of this gender lens thus focuses on the gender disparities in capital and credit availability. This lens identifies ways to move capital of different values, sources (e.g. microfinance institutions, banks, venture funds etc.), and types (e.g. grants, debt or equity) directly to women.
- Earnings generated by female individual distributors from selling the organization’s products or services during the reporting period.
- Share of women among owners or right-bearers of agricultural land, by type of tenure.
(2). Workplace Equity
- Women face the glass ceiling effect whereby there are systemic barriers that impede a woman’s ability to advance in their workplace. Globally, women held 31% of senior leadership positions in 2021.
- This lens focuses on the extent to which women are represented in workforce leadership. Whether in the upper management tiers of a Fortune 500 company or amongst field-workers in a South American rural farming cooperative, a Workplace Equity Lens can help investors focus on the representation of women in the leadership and workforce of organizations and on how well their particular needs are supported (e.g. in health care coverage and maternity leave).
- Ratio of the average wage paid during the reporting period to female employees of the organization for a specified position
- Proportion of women in managerial positions
(3) Products and Services
- Lastly, women drive 70%–80% of all consumer purchase. Currently many products and services ignore the desires and needs of female consumers. In meeting the needs of female consumers, businesses improve the condition of women by both reducing burdens placed on women and empowering women — ultimately, fostering fuller social participation and productivity amongst the women of the world.
- The Products and Services gender lens allows investors to identify and support products and services that directly improve the well-being of women and girls such as medical care or improving financial literacy skills.
- Indicates whether the organization offers a product or service that disproportionately benefits women
- Percent of customers who are female
By intentionally incorporating these three basic gender lenses into the investment process and criteria, investors can directly support women entrepreneurs and women’s economic empowerment. There is great potential to improve the gender disparities in accessing financing, improving the career advancement and workforce representation of women, and deploying capital that will address women’s needs through product or service development.
Market and Trends
There has been a growing interest in GLI
- A recent survey from the Morgan Stanley Institute for Sustainable Investing found that 67% of global asset owners identify gender diversity as an area of interest within their investment portfolios.
- 90% of funds said that gender-related criteria were very or critically important in investment decisions.
- Due to shifting investor preferences and consumer behavior, investors are seeking opportunities to align their values, one of which being gender diversity, within their investment portfolios.
Growth of Public GLI Products
- The 2019 Project Sage report estimates investment in gender lens products in the private markets amounted to a total value of $2.2 billion. In 2020, there were 138 total funds deploying capital with a gender lens, up 58.6% from the 87 funds in 2019. Total raise across all the funds is at least $4.8B.
- In 2019, there were more than 50 publicly available GLI products, showing a 300% increase since 2015
- A rise in demand for GLI products has led to a rise in the number of gender-focused investment funds globally.
Limitations and Opportunities
Many gender lens investment products remain limited in scope
- Limitation: They tend to focus on women representation in leadership as their sole GLI metric. While important, this metric is the “easiest” leverage point for gender equality and to measure.
- Opportunity: A more holistic effort that tackles a multitude of metrics is needed for systems change. Public and private GLI products are increasing in sophistication and integrating other gender lenses.
‘’Impact Washing’’ may be prevalent
- Limitation: There may be instances where gender equity and sustainability objectives in GIL are used as a marketing tool and produce limited tangible impacts.
- Opportunity: As sophistication increases, organizations are expected to establish a clear theory of change and report clear impact metrics.
- Limitation: Currently collected GIL data is often limited and does not always consider the intersectionality of race and other identities.
- Opportunity: The intersectionality of race, sexuality, those with disabilities, religion, among others can exacerbate the challenges faced by various minority groups. A more multidimensional approach is needed to address this intersectionality. Gender diversity data is improving, and will increasingly be disaggregated by intersectionality.
On the Horizon
Gender Lens Investing is a new but also growing field. Public and private GLI products are increasing in sophistication and integration with other gender lenses. Organizations are expected to strengthen and establish a clear theory of change and report clear impact metrics. As we see interest from all sides: investors, ventures, researchers, and on an individual level, investment products, methodologies, and strategies will only become more clear and inclusive.
Recent Activity in the GLI Space:
- The 2X Challenge mobilized $4.5 billion in gender smart investments in 2 years, exceeding its initial goal by 50%.
- Mastercard’s Impact Fund invested $20 million in the Impact Investing Platform CNote to assist women-led and minority-led businesses in recovering from the pandemic.
- BDC’S Women in Technology (WIT) Venture Fund: $200M fund dedicated to investing in women-led technology companies and helping build a robust ecosystem to support women in tech today and in the future.
- Equality Fund: A $300M fund meant to ensure that meaningful resources — and power — flow to women’s rights organizations and feminist movements everywhere.
Organizations To Watch In The Space:
Here is a non-exhaustive list of organizations that are part of the Equality of Fund’s collective of partners, centered around a shared vision to build a gender equal world along with a number of different ecosystem partners:
- Canadian Women’s Foundation
- Deetken Impact
- Equality Fund, powered by The MATCH International Women’s Fund
- Toronto Foundation
- Philanthropic Foundations Canada
- African Women’s Development Fund
- Oxfam Canada
- Calvert Impact Capital
- Grand Challenges Canada
- Criterion Institute
- FinDev Canada
- Philanthropy Advancing Women’s Human Rights (PAWHR)
- Community Foundations of Canada
- Black Women Professional Worker Co-op