Impact investing with a gender lens strategy

By Helene Diyabanza Peterson

What is Gender Lens Investing? What potential investment advantages can it offer? And does it really make a difference to integrate financial returns with social impact?

The Kota Alliance is a strong advocate of Impact Investing and is especially keen on the relationship between gender-focused work and financial sustainability. That is why we were delighted to participate in the event “Demystifying Gender Lens Investing – how to integrate financial returns with social impact” held by the organization Impact Capital Forum.

Investing with a gender focus continues to grow among the impact investing community but there is no single one-size-fits all approach. This was one of the key takeaways by the presenters who shared their views of the subject, what gender lens looks like in practice, and what opportunities and challenges there can be when using the strategy of gender lens investing:

• Leigh Moran, Director Strategy, Calvert Impact Capital who also was the moderator.
• Rebecca Fries, Managing Director and Co-Founder, Value For Women.
• Eve Ellis, Financial Advisor and Portfolio Manager, The Matterhorn Group at Morgan Stanley.
• Nowara Munir, Board Member, Impact Capital Forum, was an appreciated event host.

What is gender lens investing?

Gender lens investing means incorporating gender analysis into financial analyses to get a better outcome. It is a way of seeing through the lens of gender companies’ and organizations’ opportunities and how to make the best out of these opportunities to gain profit and social value. Gender lens investing does not mean that financial returns has to be sacrificed, it is rather the opposite, it is a strategy that can benefit everyone. By using gender lens strategy investors can also better see the full market opportunity and can help discover if they are missing significant parts of their potential customer base. Calvert Impact Capital, who invests in sectors and regions that are often overlooked or underserved by the traditional capital markets, says on their website that research has shown that diverse businesses are smarter businesses.

Eve Ellis and her partner Nikolay Djibankov of the Matterhorn Group, are pioneers on sustainable and gender lens investing. They introduced the Parity Portfolio, a discretionary Portfolio Management gender lens investment strategy. This strategy seeks to achieve financial returns through capital appreciation and current income: Ellis and Djibankov made an analysis of companies listed on regulated US exchanges and examined, for example, the number of women in the board; free cash flow; profit; valuation; business model adaptability; management strength; innovation strength; and financial strength. One of the requirements in the strategy is that there should be a minimum of three women in the board. When Ellis and Djibankov started the portfolio construction process, they looked at impact investors and how they can use gender data to increase profit, and how to use the gender lens.

Who is a gender lens investor?

The most important thing to understand is that anyone can be a gender lens investor, both institutions and individuals. Some companies may even have a gender lens strategy without thinking about it. Rebecca Fries emphasized that gender lens investing is not about changing everything; there is also not only one way to do it. Her organization, Value For Money, works to identify and test new solutions that foster women’s empowerment and gender inclusion while unlocking women’s powerful economic potential, especially in Africa and Latin America in the agriculture and clean energy sector. Solutions that have had a direct impact on women’s work and that also benefit the companies as a whole was for example setting up wash rooms and introduce flexible work hours. Fries has seen a direct impact on the lives of women. They also work against unconscious bias against women in for example banks, when women apply for loan. Their strategy is to always start with building on what already exists on location. Leigh Morgan added that gender lens investing does not need to be a several pages thesis, it can be just adding something, and anyone can do it.

What are the advantages with gender lens investing?

According to Value For Women, over 30% of small and growing businesses (SGBs) are owned by women. Women are playing a key role in driving economic and social growth: Women around the world invest 90% of their income back into their families and communities, which translates into greater access to nutritious foods, education, healthcare, and increased economic activity. They see a world were business embrace economic inclusion and by bringing a gender lens to business, women’s economic participation, leadership and entrepreneurship contributes to thriving economies, healthier societies, and a more sustainable planet.

Other advantages include:

• Businesses that understand how to target women consumers can lead to an increase in sales (this is key, due to the fact that women control over US$ 20 trillion of total consumer spending globally, and make or influence 80% of buying decisions globally);
• Companies investing in women can increase their overall sales;
• Companies with women’s representation outperform those without women representation;
• Companies with more board gender diversity have higher stock market returns adjusted for sector bias; and
• Companies with higher female representation at the board level show higher return on equity, higher valuations, and higher payout ratios.

In addition, research reported by Calvert Impact Capital shows that economic growth for women has an important multiplier effect. When women flourish the whole society benefit and that means that investing in women is smart economics. This is why Calvert Impact Capital launched a Women Investing in Women (WIN-WIN) initiative, which focuses on both empowering women as investors and empowering women through their investments.

What are the challenges with gender lens investing?

Gender lens investing is not without its challenges. The brief “The bottom line: Why Gender Inclusion is Good for Business Making the business case for a Gender Inclusive Organization” highlights systemic challenges to women’s success:

• Women have limitedaccess to finance or capacity building opportunitiesand to credit;
• Cultural restraints like social norms and traditions maymarginalize women and limit them to non-public spheres of life. For example, lack of childcare prevents many women from working to their capacity and starting a business.
• There is a lack gender disaggregated data that can show how gender affects performance and profits makes the business case for gender inclusion across organizations and firms in diverse ecosystems is challenging;
• Many organizations lack the tools, resources, and know-how to include gendered approaches into their everyday work and overall strategy;
• Issues of gender often feel abstract or intangible, particularlyin terms of the roles of women in the workplace and and how gender dynamics can impact effectiveness and performance, as well as in terms ofaccess to women clients;
• Finally, organizations maynot see or understand the business case for gender inclusivity.

How far have we come?

The panelists gave different examples from their own experiences and based on questions from the audience. Rebecca Fries had expected a lot of resistance and was pleasantly surprised that her experiences in Africa and Latin America proved her wrong. In contrast, Eve Ellis did not want to present a rosier image than it is. She noted that companies that have women in their boards have increased from 250 to 400 – This is good, but it should be thousands. The panelists noted that it has been harder to get small companies than big companies to embrace gender lens investing. The media have been covering the phenomenon. This is something that the panelists have been actively working towards. The #metoo movement has also had some impact in raising awareness of gender lens investing.

SDGs and gender lens investing

As women consist of more than half of the population, improving the lives and working conditions for women by financial inclusion and gender lens investing will also help to reach many of the UN Sustainable Goals (SDG) and lead to a positive domino effect on many areas, in particular SDG 5, Gender equality. Calvert Capital Impact concludes in one of their blogs that “Ultimately, gender equity is not only an important impact goal as highlighted by SDG 5, but a critical tool that has the potential to make all of us better investors.”

What can you do?

As consumers we can make gender investing a common practice. We can communicate with company boards and enquire about the board composition? Money talks so anyone of us can say: “I am interested in your company because you emphasize on diversity”, or “I am not interested in you because you do not have enough diversity”. It has to come from the ground and there is a tremendous power in women using their voice.

For more details about the event click HERE.