Gender Lens Investing: Emergence of an inclusive and diverse approach
Today is International Women’s Day and what could be more apt than an article on Gender Lens Investing, which has been gaining momentum over the last few years — a strong indication that the financial sector is working to balance a legacy of lopsided investments. This article is written by Jayakumar I, and was originally published on www.sapehstrainer.com
It is an almost 22 years old story when I was working as a chemist right after my post-graduation studies. I came across highly energetic, confident female colleague named Vasantha, who always wanted to start her own organization. The main driving factors for her to go for the startup was to become economically independent, have a better quality of life and to earn higher income. Vasantha tried at many places to secure the loans for her start-up which mainly aimed at development of ion-sensing electrodes. The reasons why Vasantha could not secure loans was that women entrepreneurs were perceived as high risk, there were many reasons for not meeting the eligibility criteria in terms of bank security etc. and even Vasantha was hesitant to go for full-fledged loan due to cultural issues. After initial struggle, Vasantha convinced her husband to invest in her venture and started running the organization. Today, it is running successfully and employs more than 10 full time employees with many of them being women employees. The struggle which Vasantha faced for her start-up might get resolved in years to come, thanks to the concept of Gender Lens Investment, which is picking up across the world.
Recently, many thought leaders around the world are encouraging an investment option named Gender Lens Investing (GLI). As per a report published by FSG, the private debt vehicles are growing at a higher rate. It was at $1.1 billion in 2017 and stands now at $4.8 billion. In case of India, still we notice women entrepreneurs being encouraged but are rather a random investment which do not specifically are designed as Gender Lens Investments. There are limited scenarios where gender is considered for investment options, it is still sporadic. As you can notice there is 15–20% lower loan approvals reported for women barrowers, with perceived business risk. The Gender Lens Investment can be defined as incorporation of gender factors into investment analysis for better decisions. It aimed at encouraging women or with equal gender-based organizations which employee women. The aim of GLI is to support social and economic empowerment of for example, capital access to women, workplace equity, and development of services for the benefit of women i.e., affordable healthcare, clean energy, water and sanitation. There are various means of achieving GLI such as creating products and services which improve women, encouraging or backing women, moving them in corporate leadership and finally advancing in finance.
There are many ways by which GLI can be implemented in countries like India. For example, identifying business cases like Vasantha who successfully started and managing their company, starting pilot GLI investment using both private / public investment options and tracking as key success measures. As only 12% of startups which came into operation during the year 2019 has women as co-founders. Besides these measurements, there are many suggested approaches for extending such GLI, which include, strengthening of non-financial support facilities, clarifying the role of GLI investors, ensuring women to manage the funds related to GLI and finally train women and encourage women to become investors in GLI activities.
The GLI has many positive impacts like it encourages adoption of sustainable development goals, encouragement of economic improvement of women, improve financial position, helps in ensuring women come to the fore of Investment and creates gender pay equity. There are many challenges right from access to necessities, water resources, cooking etc., which have seen improvement in recent years. There are case studies covering more than 1000 companies which suggest gender diverse boards perform more than 28% compared to their peers. GLI continues to be an investment vehicle to involve and is expected to grow in years to come. With countries like India, where only two thirds of Indian girls/women are literate and almost 300 million cannot read and 75% of women living in rural India engage in agriculture, it is a particularly challenging scenario. There requests impact investment on this theme in years to come. With more than 192 active Gender Lens Investment vehicles in place south Asia target for many funds, it is expected to grow in years to come. Companies are required to closely track, the key performance metrics like percent of female ownership, percentage of senior leadership who are female, percent of full-time female employees, products or services specially designed for benefiting women etc. to understand investment success.
To conclude, ESG, Sustainability Investing, Impact Investment or Responsible Investment have picked up in recent years. More and more corporations aim to uplift the female entrepreneurs, give equal opportunities and elevate female work force to key positions, or even those who are in the field of agriculture sectors by supporting with capital, knowledge enhancement and other means. We have a theme of “Women in leadership: Achieving an equal future in a COVID-19 world on the way to the Generation Equality Forum” for International Women’s day. Using the investment vehicles such as Gender Lens Investing, organizations and investments can help minimizing the gender gap we all notice in our world for the past many years which is expected to take around 70 years to close in case of South Asia alone.
Originally published at https://www.thinkesg.in on March 8, 2021.
