10 solutions to scale gender lens investing

 

Daniel Rostrup

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Why is gender lens investing still just a ‘drop in the ocean’ of mainstream finance?

I recently had the pleasure of attending the 2022 GenderSmart Investing Summit in London. The Summit drew together gender lens investing experts, field builders and changemakers from around the world for two days of learning, connecting and collaboration.

What is gender lens investing?

Gender lens investing (GLI) integrates gender analysis into the investment process in order to produce better social and financial outcomes. For those new to gender-lens investing, this snappy video by Suzanne Biegel lays it out clearly. ‘Gender-smart investors recognise that financial systems engage with and benefit men and women differently, and particularly women of colour, and are actively committed to using finance as a tool to promote gender equality’ (Pioneer’s Post).

Sounds good, right? So what’s holding back GLI?

Here are the reflections, challenges, and solutions that most stood out for me.

Reflections

  • We have come a long way in the last 10 years. There has been a huge increase in the tools, actors, expertise, and financing vehicles available.
  • We are moving from the ‘why’ of GLI to the ‘how.’
  • Private wealth is fundamentally changing. Wealth is changing hands, clients are getting younger and are increasingly female. In fact, there are now more female wealth owners than ever, particularly in Asia. This is good news for GLI.
  • GLI is a business imperative. If you want to survive, you need to take it seriously.
  • Female investors are good for people and planet. Female investors behave differently. They are not more risk averse, but more risk aware. They are more likely to invest with values and over the long term. In a world where short-termism and a high-risk culture threaten long-term value creation, getting more capital into the hands of women is a good thing for society at large.
  • This is not philanthropy or ‘doing good.’ GLI is good for society and good for business. Tremendous value (both financial and social) is unlocked when businesses see women as customers, in the supply chain, as investors, as investees, etc.
  • Despite the growing interest and take-up of GLI, ‘the market is still not moving at the volume nor the pace we would wish to see‘ (Suzanne Biegel).

Challenges

  1. Risk aversion. ‘General Partners say they can’t find enough female fund managers but still won’t take a chance on first-time female fund managers’ (Summit participant).
  2. More like a ‘trickle than a flood.’ Only 2 per cent of US venture capital is going to ventures run by women.
  3. Scale, scale, scale. Evidence shows that GLI is working, but nowhere near the scale needed to make a significant impact.
  4. Bias. There is still a lot of archaic thinking working against GLI.
  5. Outdated notions of fiduciary duty. ‘Are we even legally allowed to do this?’
  6. Fear of failure. ‘What happens if we don’t succeed?’
  7. Inertia stops. ‘It’s too hard.’

Solutions

  1. Make it easy and simple. ‘The lower the transaction costs, the quicker a market expands’ (Dr Kshama Fernandes).
  2. Governments need to help and can use a ‘stick’ (ex. regulation) or ‘carrot’ (financial incentives/tax breaks) to increase the take-up of GLI
  3. Create homegrown collaborations that are relevant in the local context (don’t transplant solutions from abroad)
  4. Investors can create a ‘gender board’ responsible for setting and maintaining gender and diversity metrics across all investments
  5. Comms and storytelling – these conversations need to make it out of niche conferences and into the mainstream investment community.
  6. JEDI – Important that we continue to expand the GLI topic to include issues of justice, equity, diversity and inclusion (JEDI)
  7. Men need to be part of the solution
  8. Data – we have plenty of data already, but not always on a granular enough level
  9. Intersectionality is key. The power of investing with a gender lens is multiplied when it connects with other topics, like climate, entrepreneurship, etc.
  10. We need the ‘plumbing’ for GLI, i.e. all the stuff in the ‘back end’ that is needed to make it happen. For example, Hogan Lovells put together legal standard terms and conditions for GLI.

What is clear is that plenty of progress has been made in taking GLI from an interesting idea to a viable investment approach. We now need to take GLI out of our ‘bubble’ and into the mainstream so that in the future, every investment has a measurable, positive impact on issues like gender, justice, equity, diversity, and inclusion.

Daniel Rostrup is Regional Business Development Lead at Sattva Consulting.


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