A couple of weeks ago we held what was likely the most important gathering of the impact investing community in Latin America: the Latin American Impact Investing Forum—or #FLII2019 by its Spanish abbreviation—an event facilitated by #NewVentures and its partners.
The most important players or #FLIIERs convened in Merida, Mexico, to discuss, share, connect and reflect on this field. And this week the 63rd meeting of Commission on the Status of Women or #CSW63 will take place in New York. The #CSW63 theme this year revolves around the discussions on social protection and infrastructure as key drivers of gender equality and women’s empowerment. So, it seemed the perfect moment to make the connection between impact investing and gender issues, a new field better known as Gender Lens Impact Investing or #GLII.
Originating in the early 2000s, “impact investing” may be a relatively new term, but as a concept it has significantly older roots that trace back to before the 1930s. That was when the first screened investment fund, the Pioneer Fund was created in 1928 by a religious group in Boston. Later, the sixties saw the #FordFoundation create its program related investments (PRIs) which have also been referred to as Impact First Investing, shifting from grants concession to low-interest loans to fund a wide range of programs.
In the seventies, the Ford Foundation funded a series of conferences hosted by Yale University that discussed the effects of corporate activities in 1968 and 1969.In 1977, the first screening tool, the Sullivan Principles, was created, and in the eighties, #FranklinResearch&Development (later #TrilliumInvestments) was founded as the first asset manager of socially responsible investments. Since then, many players have entered the impact first investing field, including the #GrameenBank, #Enterprise and #Coastal Enterprises.
During the late 1990s and early 2000s the concept of Sustainable Investing emerged, and #GenerationInvestmentManagement played a significant role in its evolution. The firm was co-founded by former Vice President Al Gore and former Goldman Sachs Asset Management executive David Blood.
This new wave of investing methods proposed that it was possible to do “good” and having simultaneously a positive financial return. Impact Investing brought the financial and the development worlds together, making it possible to achieve what is called “the triple impact paradigm”, meaning social and environmental impact along with financial returns.
It was also during the 2000s that the impact investing concept as we know it today emerged. It’s been almost 20 years of development, and the field is still evolving.
What is impact investing?
Perhaps the easiest way to explain impact investing is with a spectrum between for-profit and philanthropic investment. If we focus on what lies in the middle of the spectrum, impact investing encompasses those investments that seek both social and environmental gains, as well as financial returns.
Source: Adapted by UNDP.
Investors usually make their investing decisions under three lenses: Impact preferencerefers not only to the type of impact they want to generate but also for whom, such as a community, a place, a group of people, the planet, a product or service, a paradigm shifting process or strategy, or a combination of them; Impact risk/return means the degree of intensity of the desired change in relation to the level of risk of failure they are willing to bear; and impact investing strategy is how the desired impact will be achieved.
The variety of instruments, products and asset classes has grown over the years, ranging from cash and fixed income to subordinate loans and private equity, which has made investing more complex. Likewise, the sectors where investors are putting their money vary considerably, but microfinance, financial services and energy are in the lead. Asset classes and impact fields have also been combined to create various investing modalities and approaches including Blended Value Investing, Social Impact Bonds, Development Impact Bonds, Refugee Impact Investing, Green Impact Investing and, of course, Gender Lens Investing.
Source: Adapted by UNDP.
Why does gender lens investing matter?
We know that it will take more than 200 years to close the economic gender gap.Therefore, working towards sustainable development by 2030 in a gender unequal business world simply makes no sense.
Women make up more than half of the workforce globally, yet almost half of women’s brains in working age are out of the talent pool. And even when recent trends show that more women are entering the labour market, there is still a gap of 26.9 percentage pointsbetween male (76%) and female (49%) labour force participation.
And despite the progress in female tertiary education enrolment (37% female versus 33% male) and the proven correlation between gender diverse decision-making teams and better financial performance, women still tend to occupy the lower rungs of the career ladder. Only 5.2% of CEOs in S&P 500 companies and 6.4% of Fortune 500 companies are women.
Photo credit: UNDP Eurasia
Women are also paid less than men across countries, regions and industries. On average they receive 20% less income than men, meaning that on average women earn 20 cents for each dollar earned by men. Not only do they represent a higher share of the low-wage workforce, but they are more likely than men to be self-employed and perform home-based production, supplementing household efforts to escape poverty. It is estimated that around 740 million women work in informal employment worldwide out of 2 billion workers.
Women also face challenges in terms of access to financial services and assets. Research conducted in 141 countries by the European Bank for Reconstruction and Development or #EBRD found that in 79% of countries women have less access and usage of bank accounts than men and have no access to credit cards, while in 78% of them they have no access to loans. When it comes to property, only 13% of women compared to 87% of men are agricultural landholders.The rural population in general has limited access to credit, supplies, fertilizers, technology, information and markets for agricultural activities, and it is even worse for rural women.
It is estimated that, globally, approximately 2 billion people don’t use financial services, and even though women-owned businesses make up 30% of registered businesses worldwide, only 10% have the capital required to grow.
Women are also disproportionately burdened by unpaid care work, doing between 2 and 2.5 times as much unpaid care and domestic work as men.In addition, more than 50% of urban women and girls in developing countries live in conditions where they lack at least one of the following: access to clean water, improved sanitation facilities, durable housing, and a sufficient living area.
On top of that, worldwide, 1 in 3 women have suffered from domestic violence during their lifetime, including physical or sexual abuse. Plus, according to recent estimations, 1 in 4 women and 1 in 10 men experience sexual harassment in the workplace in the US at least once during their lifetime.
And finally, thanks to carbon-based economic models, while the effects of climate change are detrimental to all humanity, they are more so for women, and it is even worse for rural and indigenous women. Consider these estimates: Between 2010 and 2015, the world lost 3.3 million hectares of forested land Yet poor rural women have been disproportionately affected by their depletion. In most of the world, women in rural areas still cook with coal, leading to numerous respiratory diseases.
Then why does it matter?
First, gender equality is a fundamental human right and a necessary foundation for a peaceful, prosperous and sustainable world. It is, without a doubt, a moral imperative!
We admittedly have a varied array of persisting gender gaps, and sometimes the future seems kind of dark which can make the future seem a bit bleak. But this is precisely the reason why Gender Lense Impact Investing matters.
Second, gender equality is an essential aspect of “leaving no one behind” #LNOB, one of the guiding principles of the 2030 Agenda. #LNOB holds that no one should be excluded on the grounds of sex, age, race, ethnicity or localization.
Third, gender equality is a multiplier of benefits for society as a whole. Simply put, it is not possible to think of a future without poverty and hunger and with universal education when women are excluded from the economy, decision making and the opportunity to grow, develop and actively contribute to their societies.
And fourth, gender equality is not only the right thing to do but it is a smart choice. It just makes good business sense!
What are the emerging opportunities in this field?
We cannot deny that there is untapped potential for women as dynamic actors in their economies. In fact, many empirical studies and models have estimated that increasing female labour force participation by 25% by 2025 could add more than U$5 trillion to the global economy and reaching parity has the potential to add U$28 trillion dollarsby the same year.
If women had the same access to productive resources as men, they could increase the yields on their farms by 20% to 30%, which could raise total agricultural output in developing countries by 2.5% to 4% annually.
When it comes to the financial industry, recent research conducted by #BNYMellon and the #UnitedNationsFoundation established that financial service firms could grow their share in annual revenue contributed to the retail investment market by women to $120 billion. And, if more women could have access to insurance and retail banking, the industries could generate $290 billion and $40 million in global revenue respectively.
It is also known that diverse companies are more innovative, and innovative companies are more diverse. Companies with a higher level of diversity on average are getting 38% higher innovation revenues from new products and services. Moreover, a large amount of empirical research has proven the correlation between gender-balanced boards and better financial performance. For instance, companies among the 4,216 listed in the #MSCIIndex that featured strong female leadership generated a return on equity or #ROE of 2.7 pp higher than those that did not in 2015.
Photo credit: UNDP Colombia
What are we doing at UNDP to advance this field?
In 2018, we launched the #SDGImpact initiative, in which we envision a world where all capital flows advance the #SDGs. We provide investors with the clarity, insights, and toolsrequired to support and authenticate their contribution to achieving the SDGs.
The #SDGImpact supports the development of the impact investing ecosystem, offering an online training series on impact measurement and management anchored in the Impact Management Project’s existing frameworks and developed by a global consortium of academic institutions; promoting the development and adoption of universally agreed upon standards for #SDG-enablingInvestments and enterprises; and developing the #SDGImpactSeal and certification training.
We have also also been developing data-driven, investor-oriented market intelligencereports that highlight specific sectors, geographical regions, or thematic areas of interest for #SDG investment opportunities by leveraging UNDP’s global network of 170 countries. Additionally, we provide matchmaking services for investors seeking to connect with local entrepreneurs.
When it comes to #GLII, in 2019 we will design and deploy the Gender Lens Impact Investing arm of the #SDGImpact initiative. We will support the creation of an enabling environment to boost a gender-sensitive impact investing ecosystem. We will also support the generation of standards, regulatory frameworks and policy-development to advance this field (#Ecosystem). We will source a pool of gender smart investing opportunities and generate relevant data to inform underserved markets (#Data+Intelligence). We will connect investors interested in advancing gender equality and women’s empowerment with SDG-enabling investment opportunities (#Matchmaking) as well as connect knowledge, experiences, practices and resources to advance the gender lens investing field through a network of investors, practitioners, experts and policy-makers (#KM+Networking). We will also support incubation and acceleration of gender smart social enterprises (Incubation+Acceleration).
What can be done to integrate the gender lens perspective into impact investing?
The private sector needs to embrace gender equality and women’s empowerment in their core business strategies. We all know that the business community cannot continue to overlook the most pressing challenges in our societies. That said, we have a huge financing gap to achieve the #SDGs, and we need to catalyze private capital to move the needle towards a #GenderSmart #SustainableDevelopment.
We already know there is a huge financing gap to achieve the global goals by 2030. One that has been estimated in $5 to $7 trillion dollars annually globally, and in $3.3 to $4.5 trillion dollars in developing countries alone.
And for sure, if gender equality targets remain with little or no progress, we won’t be able to achieve a sustainable development as we dreamed of by 2030. So, we need to turn the table, and advance towards a “gender smart sustainable development”.
As we see it, there are two opportunity streams when it comes to embracing gender equality and women’s empowerment in business strategy:
Stream # 1: Transforming the corporate DNA to make it gender-sensitive by having...
First, a senior management that embraces gender equality as a key driver of innovation and strategy and a leadership capable of bringing all corporate pieces together to follow a vision and achieve a common goal.
Second, effective policies and business practices challenging discrimination and ensuring that real opportunity is given to women. Companies are changing their professional development policies to promote #FemaleLeadership. They are transforming the way they recruit to bring more women and men to non-traditional occupations and industries. They are using inclusive and non-sexist communication internally and in their marketing strategies; they are promoting #WorkLifeBalance with shared social responsibility. They are eradicating sexual and sex-based harassment in the workplace, and they are helping to build new models for #Masculinity.
Photo credit: Shutterstock
And third, an inclusive culture embedded in the corporate DNA and permeating the entire organization, one that creates a supportive environment for women to be equally valued and respected.
There is no sustainable future with gender inequality, period! There should be a commitment of both governments, the private sector and civil society should commit to Leaving No One Behind (LNOB). And It should also be noted that the private sector is a catalytic actor to advance the SDGs, impacting the communities where they operate.
Stream # 2: Contributing to advance “gender-smart sustainable development”
Gender equality is both a goal and an accelerator in the 2030 Agenda, and it intersects 14 out of the 17 SDGs, 81 out of the 169 SDG targets and 54 out of the 232 indicators, an indication that there are explicit and implicit gender targets across the SDGs.
There are gender dimensions in poverty, education, hunger, health, water and sanitation, climate change, inclusive growth, employment, safe cities, and peaceful and inclusive societies, to name a few.
Then what can the private sector do about it?
It can incorporate gender lenses along value chains, for instance, investing or purchasingfrom women owned businesses, investing in women-led, women-supported companies or companies with a gender-balanced leadership and composition.
They can adopt gender-smart product and service design addressing specific needs, interests and expectations from both men and women. They can even add new lenses on what is called “inter-sectionality” or the “#DiversityLenses”. They can realize that the needs and interests of a pregnant woman are completely different from those of, say, a millennial. Or the needs of a man about to retire, completely different from those of a man with a disability.
Photo Credit: Argos
The approximation of gender intelligent value proposition design to address the needs of different social segments should incorporate gender lenses to capture the untapped market potential of those underserved markets, not only from the perspective of the differences between the sexes, but also from the perspective of diversity in general. The business sector thus needs to grasp market opportunities by serving the last mile, by understanding the urban-rural continuum, and by incorporating approaches linked to life-cycle, ethnicity and disability.
They can invest in women to empower female human capital in those areas that are key now and will be in the future. Because right now we are already experiencing the Fourth Industrial Revolution #4IR. The time is now, not tomorrow! Moving the needle towards having more women in STEM fields seems crucial for re-drawing the balance.
It is not enough being socially responsible! This is about adopting sustainable and disruptive growth models; and about reaching a “gender- smart corporate sustainability”. Investors must adapt their strategies to deliver not only financial results, but positive social and environmental outcomes as well.
They can create solutions to tackle gender inequality through transformative partnerships with governments, multilateral organizations, academia and civil society to advance a #GenderSmart #SustainableDevelopment.
And they can embrace inclusiveness and sustainability today as part of their core business strategies.
So, what needs to be done to take a quantum leap in this field?
First, strengthening the impact investing ecosystem and making it gender smarter. We need to advance towards gender-sensitive regulatory frameworks, standards, and supporting policies; gender-smart infrastructure; a wide range of available business development services (BDS), including incubation and acceleration services, business training, financial education, etc.; new funding alternative mechanisms; gender smart technologies applied to this field; gender-sensitive exit strategies, to name a few.
Second, supporting the creation of skills and knowledge around #GLII. We need more training services, we need more postgraduate degrees in business schools, more knowledge networks and communities of practice, to name a few.
Third, generating data and market intelligence, to identify and source #SDG-enabling investment opportunities to advance gender equality and women’s empowerment. We need better data on underserved markets.
And fourth, having more matchmakers or connectors to couple investors and gender-sensitive, SDG-enabling investment opportunities.
In short, we need to bridge the gender divide between the worlds of finance and development. Are you interested in joining this movement? Contact us now: [email protected]/» target=»_blank» rel=»nofollow noopener»>[email protected]
Michael S. Knoll, “Ethical Screening in Modern Financial Markets: The Conflicting Claims Underlying Socially Responsible Investment”, Business Lawyer (Feb. 2002), 57 Bus. Law. 681.
John G. Simon, Charles W. Powers and Jon P. Gunnemann, The Ethical Investor, Yale University Press, 1972.
From Trillium Asset Management’s history of socially responsible investment. Accessed on July 21, 2016 at: http://www.trilliuminvest.com/joan-bavarias-future-of-socially-responsible-investing
“The IMP is facilitating a network of leading standard-setting organisations to coordinate specific impact measurement and management efforts, so that enterprises and investors have complete rules of the road.” This is an initiative led by UNDP, PRI, OECD, World Benchmarking Alliance, Social Value International, GIIN, GRI, GSG and IFC.
World Economic Forum, 2017.
Catalyst, 2017 and Fortune, 2017.
McKinsey Global Institute (MGI), 2015.
BCG-Technical University of Munich, 2017.