Mainstreaming Gender Lens Investing
Investing in women is an opportunity, not a constraint—and one that can accelerate change for everyone.
“We’d love to have a gender lens, but we’d have nothing to invest in.” I rocked back on my heels, absorbing this statement from the head of the Africa division of a large social investment fund.
Yet he is not alone. Two years ago, when I first talked with the head of a domestic fund investing in women entrepreneurs, she said, “Jackie I don’t have a gender lens.” Her concern was that a “gender lens” made her appear soft, not return-focused.
For the last two years, I’ve led Women Effect Investments, a field building initiative for gender lens investing. In the process I’ve discovered multiple challenges talking about gender in the investment world. It surfaces concerns about quotas and quality, culture and stereotypes. It is seen as soft, unnecessarily feminist, or limiting. I see a huge opportunity in transcending these concerns. Given women’s centrality worldwide to economic development, health, education, and a strong civil society, investing with a gender lens illuminates opportunities and highlights risks. Take, for instance, the need for electricity in maternity clinics or the challenges that emerge when loan officers are all men. If more investment vehicles employed a gender lens, we could accelerate change for everyone.
To clarify what I by lens—I mean the point(s) of view by which we can analyze investments. There are at least three different lenses that highlight investment opportunities, and they can and often do overlap.
Access to Capital. Women entrepreneurs represent great investments—whether they run micro or high growth businesses in the developed or the developing world. Yet they are often capital constrained. While many people think 90 percent of microfinance loans are made to women, the number is now near 6o percent—and drops even lower for the larger loans. In the United States, The average venture-backed company run by a woman had annual revenues 12 percent higher than those run by men using one third less committed capital. And an NCRW study found that while women fund managers outperform their male counterparts, they manage significantly less capital.
Workplace Equity. Studies show that women’s leadership and employment positively affect the financials of companies. Fortune 500 companies with the highest percentages of women board directors outperformed those with the least by 53 percent return on investment, according to Catalyst. Leadership behaviors more often applied by women reinforce a company’s organizational performance on several dimensions, according to McKinsey. And gender diverse teams make better decisions. These are just a few examples of workplace equity lenses that drive stronger businesses.
Products and Services. With women making 80 percent of consumer decisions, many companies are looking to design for the female consumer. But there is less attention on investment in products that directly addresses the issues disproportionately affecting women: maternal mortality, clean water, cook stoves, safety, human trafficking. Investing with a gender lens can help scale the companies that significantly improve the lives of women and girls.
So returning to the African fund manager, yes a gender lens includes women entrepreneurs, and we should not be satisfied with their limited numbers. But opportunity lies also in the roles women play as loan officers and managers in microfinance organizations, in the gender diversity of boards and design teams looking at solar appliances, or in the implementation of policies that train cooperative producers to address domestic violence and report trafficking.
Simply put, gender lens investing holds a very clear opportunity to accelerate impact. The data is overwhelming that investing in, by, and for women accelerates social change and drives return. Goldman Sachs has documented what it calls a “gender dividend,” created by the rate at which women reinvest increased earnings in health, education, and nutrition—80 percent vs. 40 percent compared to men. So why aren’t more impact funds focused on enabling this dividend?
Some investment vehicles are emerging, fueled by both opportunity and investor demand. The Calvert Foundation recently launched WINWIN program, which provides investors with a (reasonably) liquid fixed-income instrument and an entry point of just $20! Women’s World Banking’s ISIS fund demonstrates the true impact of a gender-focused microfinance fund, and US Trust’s Socially Innovative Investing strategy can be customized for a variety of gender lenses in public equities and debt. Further, investors seeking to understand and increase their impact on women has led to the creation of Root Capital’s Women in Agriculture Initiative, which seeks to finance 200 gender-inclusive businesses and reach 200,000 female producers in rural Africa and Latin America. There are now opportunities to invest in women moving out of poverty, such as WISE, and to invest in high-growth entrepreneurs, such as Golden Seeds. Women Effect Investments is producing an online map of gender lens investment opportunities, which I imagine will be increasingly populated.
Joe Keefe, CEO of Pax World Funds and a gender lens pioneer, once said: “Conventional wisdom dies a hard death. You have to drive a stake through it.” I say: What will it take to mainstream gender lens investing? The benefits in impact and return are waiting.