Gender Lens Investing: A smart lens, but where is the focus?

Whether it’s labelled “gender lens investing” (GLI) or “gender smart investing”, there is increasing recognition of the need to incorporate gender factors into investment analysis and decisions. Why is this? Some will argue on economic grounds that women’s participation in the workforce and leadership provide underexploited opportunities for innovation and growth (McKinsey), are linked to greater productivity and return in companies (MSCI) and bring opportunities for better customer insights – for example, in the consumer goods industry where 70-80% of purchasing decisions are made by women. Others will remind us that gender equality is vital to the achievement of the 2030 Sustainable Development Goals – and that there’s still a long way to go.

However, there are still many uncertainties around what gender factors are exactly and what issues they should cover. In the international development world, the focus is more on Women’s Economic Empowerment (WEE), from their access to resources to their ability to make economic decisions, whereas in the private sector much of the conversation focuses on corporate activities related to diversity and inclusion; for example, the representation of women on board and the gender pay gap.

There are also various ways in which GLI can be implemented – from integration of gender considerations into ESG analysis to a more hands-on approach to address gender disparities.

The thoughtful investor and the hands-on investor

Increasingly, gender dynamics are integrated into ESG analysis and analysed to better inform investment decisions. They can fit in the Social indicators, for aspects such as gender equality and diversity in the workplace or women’s rights in supply chains, and in the Governance indicators for aspects such as the presence of women on the board. Thoughtful investors can use these indicators to align their investments with their values and minimise risks – for example, by reallocating investments to companies with strong diversity policies and screening out those a history of sexual harassment controversies.

Even if still limited in number, some more ambitious, ‘hands-on’ investors are emerging – and they are looking to intentionally address gender disparities. While there are diverse ways in which they can do this, they can be categorised into the following:

  • Channelling capital to women as leaders, entrepreneurs – especially in areas where they lack access to capital, for instance rural areas in developing countries. Considering that women entrepreneurs and venture capitalists are underfunded and often discouraged, there is a real opportunity to tap into the value that women can offer to society and the economy, by prioritising or targeting new investment flows to women-led organisations.

For example, Merian Ventures aims to address the systemic underfunding of female entrepreneurs with a specific focus on the technology sector, by finding and funding “the next woman-led Microsoft, Apple, Alphabet or Facebook”.

  • Investing in products/services companies that address women’s needs – especially in markets where those needs are not sufficiently addressed, for example sexual health products in remote areas, education and financial services for the underprivileged. There are plenty opportunities to support companies with a strong gender case in their market research, product development and distribution efforts, especially in early stage and scaling up phase.

For example, the SPRING Programme, funded by the UK’s Department for International Development (DFID), the Nike Foundation, and USAID, delivers technical and financial support to early-stage enterprises that accelerate women and girls’ empowerment in parts of Africa and Asia. One of them is Zoya in Pakistan, a mobile app that delivers health and wellness information to adolescent girls via mobile phones. The App also connects adolescent girls to locate physicians and health care facility in their area.

  • Investing in companies where workplace equality and economic opportunities for women are there across the value chain – from leadership through to employees and supply chains. As too few women hold executive and board positions, the thoughtful investor often finds it difficult to invest in a well-diversified portfolio of women-led companies. Here the role of proactive investors can be more focused on pressing companies to improve their gender diversity and equity through shareholder engagement on issues like the gender pay gap and women on boards.

For example, Trillium Asset Management describe in detail how they integrate LGBT Equality across investment asset classes. Instead of creating a specific LGBT fund, they incorporate LGBT issues into the investment analysis and decision-making process across all their strategies. LGBT issues are analysed alongside a wide range of other concerns, such as board diversity, community relations, and income inequalities – many of which have disproportionate impacts on the LGBT community.

From counting women to valuing women

As of today, the most prevalent understanding of gender lens investing is workforce diversity and leadership in business, whether it is for screening public entities or targeting women-led businesses. But if you want to have more substantial impact, you should also look at how women are valued in business operations or through the company’s products, services and supply chains, for example:

  • The extent to which women reap the benefits of a particular product or service;
  • The extent to which a company promotes shared childcare responsibility and parental leave between men and women;
  • The extent to which a company’s policies and practices are used to promote economic inclusion of women and other underrepresented social groups when selecting suppliers.

This requires a new type of strategic considerations and related metrics that are still underdeveloped. Some efforts are worth following, such as the GIIN’s Gender Lens Investing Initiative, launched in October 2017 – which aims among other things to compile a database on gender lens investing allocations and strategies. Also, all the ongoing efforts to identify potential business strategies and indicators on the UN Sustainable Development Goals (including on Goal 5: Achieve gender equality and empower all women and girls) can give fresh ideas to the debate in this emerging field. Finally, the Criterion Institute offers a wide range of resources on Gender Lens Investing, helping to build knowledge and consensus in the field.

Is it all about economic empowerment?

While GLI has focused mainly on economic empowerment issues (workforce diversity, promotion of female-led suppliers, investment in women entrepreneurs, etc.), there is a need to look at the broader picture, which is that women often find themselves at a disadvantage in society on multiple levels relative to their male counterparts, not just in their economic lives. Persistent inequalities exist in legal rights, health status, inclusion in decision-making processes and political representation, education training and professional development, as well as other areas. An exclusive focus on the economic aspects of women’s lives, without considering other factors that negatively affect women’s status in society, may mean that any positive outcomes remain limited. For investors and businesses to effectively promote gender equality, a more holistic lens on all underlying barriers needs to be adopted.