By Jimena Serrano, Gender Specialist, IDB Invest
Gender lens investing has steadily increased over the past few years. According to data from Project Sage 4.0, a gender lens investing report published by the Wharton Social Impact Initiative, the number of gender lens investing firms increased by 250% from 2017 to 2021. As of June 2021, the funds included in the report had raised a total of US$6 billion dollars to address gender gaps.
These numbers undoubtedly reflect the incredible potential of gender lens investing. This potential was the focus of discussion at the 2X Global Meeting, a community of practice for investors and a leader in industry standards, and at the Pro Mujer GLI Forum LatAm, the first event in Latin America focused on promoting gender lens investing. The conversations held at these events highlighted some of the benefits and challenges of gender lens investing.
1. There is clearly an appetite for gender lens investing, but there is also a risk of “gender washing.”
Through its 2X Challenge initiative, 2X Global claims to have mobilized US$16.28 billion in funds that meet the 2X Challenge Criteria. Given the market interest in gender lens investing, and the fact that this data is self-reported by investors without any form of verification, it is a challenge to confirm the veracity of the reported information, and there is a risk of “inflating” the figures regarding the total investment capital mobilized. To address this, 2X Global has been working on a mechanism through which the asset manager/owner would obtain a certification guaranteeing that the mobilized capital has been correctly deployed and/or processes that ensure compliance with the 2X Criteria. While recognizing that this initiative is important to provide confidence and security within the field, this certification mustn’t become a barrier to market entry for newer or more cost-sensitive capital allocators. This is particularly important considering that Project Sage 4.0 identified that 65% of the gender lens investing funds identified in the report were first-time funds.
2. Increasing key performance indicators (KPIs) focused on gender in thematic bonds is also critical for a just transition.
A recent market study published by the Luxembourg Stock Exchange found that 169 “gender-focused” bonds were issued on the market as of February 2023. Although this number is nothing to scoff at, if we look in detail, many of these bonds are sustainable and social bonds that allocate some of their capital to gender initiatives. Of the 169 total bonds, only 40 allocate funds entirely to women. The same report highlights that about 77% of the bonds allocate less than 50% of their funds to gender initiatives. This highlights the potential for increasing the use of funds for gender initiatives.
According to the same report, less than 5% of sustainable bond issues include a gender KPI. This is of concern in the context of a just transition, which seeks to ensure that the benefits of the energy transition are equally accessible to men and women.
3. Investing with a gender lens doesn’t just mean mobilizing capital for women.
While most gender gaps negatively impact women, it is important to remember that certain gender gaps have a more significant impact on men. The classic example is differences in secondary education in Anglophone Caribbean countries, where dropout rates are higher for men than for women. To close these gaps, we need to make investments that support men’s access to the labor market. Closing these gaps requires changing what society expects of men and generating new masculinities. This requires different interventions that are not necessarily presented as priorities in the gender lens investing world but clearly fit within that concept.
Gender lens investing is here to stay. The important thing is to ensure that the evolution of this approach is supported by standards and shared language that strengthen and boost the transparency and information required by investors.
Jimena Serrano
Jimena Serrano is a gender, diversity, and inclusion officer in the IDB Invest Advisory Services team in Washington, DC. Since 2015, she has advised IDB Invest clients in promoting practices to ensure equal access to opportunities for men and women in the business world, including leadership positions, value chains, and strategies to meet the needs of underrepresented groups as a market opportunity. She has designed gender programs tied to results in the context of blended finance and was one of the leaders in the design of a business tool based on the Women’s Empowerment Principles (known as the WEP tool). Before joining IDB Invest, Jimena worked in the public policy consulting area of The Economist Intelligence Unit; she was also part of the core team that prepared the Report on the Full Participation of Women and Girls for the Gates Foundation and the Clinton Foundation. She holds a law degree from the Universidad de Los Andes in Colombia and a master’s degree in international economics from Johns Hopkins University School of Advanced International Studies (SAIS).
