Gender Lens Investing (GLI) deserves to come out from under the wider umbrella of socially responsible investing says Farnoush Farsiar, founder of Plato Capital.
Female entrepreneurship is on the rise around the world. Yet in many developing countries – particularly those in Sub-Saharan Africa – businesses that are run by women are less likely to grow than those run by men. Furthermore, the economic gender gap has only improved by 2.5% in the past 12 years, according to World Economic Forum data.
This is why “gender lens investing” must become more mainstream in 2019 and beyond. Gender lens investing (GLI) prioritises investment strategies which support women-owned or led businesses, which promote workplace equality, or which provide services that improve the lives of women or girls. Given the evidence that companies, where women occupy over half of leadership positions, achieve higher returns on assets, GLI makes financial sense as well as contributing towards a critical social good. Furthermore, it can help to address the problems which prevent women-led businesses from reaching their full potential, ultimately empowering women and encouraging financial independence.
We already know that interventions which target investor behavior can have a ripple effect on the wider industry – impact investing has already demonstrated this possibility. When it comes to gender equality, GLI deserves to come out from under the wider umbrella of socially responsible investing, given the demonstrable social and financial benefits of these approaches.
As the founder of a boutique investment bank, I am passionate about ensuring that investment strategies support development and deliver on social goals. I have also seen first-hand how women-led, diverse businesses incorporate a wider range of perspectives, leading to a higher performing workplace and better returns. Therefore, there is no doubt that the current trend towards gender lens investing must continue – but we must also address the remaining barriers to success, beyond providing original funding.
There are several key factors which are impeding women from developing their businesses and accessing capital, in Africa and elsewhere. One such issue is gender bias at the capital raising stage, which can then be prolonged even where investors claim to be supporting female business-owners. Investors may say they are committed to investing in businesses with women on their boards, however if they maintain the same deal-sourcing processes they may discount some businesses at the outset (for example based on cash flow or projected growth). Passive bias must be addressed at every stage of the process to ensure that women-led businesses get their foot in the door with investors.
Networking is another critical factor for business success across all sorts of sectors globally; allowing business owners to meet potential investors, consumers and suppliers. However cultural norms often make network-building a challenge, and the problem becomes self-perpetuating, as access to networking opportunities are scarce and entrepreneurs are not able to develop this skill. Of course, gender-lens investing alone cannot address the patriarchal structures which give rise to these barriers. Instead, investors committed to this approach can work with local women to create the sorts of networks they and their fellow entrepreneurs need and support them where they already exist.
Certain gender lens investing techniques can equally be applied to the formation of a new investment fund as to a rural agribusiness – although those applying them may come from different sectors and have different growth expectations. For example, AgDevCo, a specialist investor in African agribusinesses, has broken down the stages of the investment process in order to see where gender considerations can be implanted. These findings underline the importance of practices such as including gender actions as part of contracts and including sex-disaggregated data in reporting, helping ensure gender-related aims are achieved throughout the investment process.
This collaborative and cross-sector approach is gradually being supported by conferences and networks – for example, the Gender Smart Investing Summit 2018, which saw 300 investors from across the world, representing $14 trillion in assets, gather to share best practice and announce their latest initiatives and financial pledges.
For smaller, more agile investors, it may not be a matter of announcing billion-dollar pledges. Instead, they can seek opportunities in Africa and elsewhere, which prioritise women-led funds as co-investors, or lower growth businesses which also present less risk. When portfolios are established, they can influence the management processes to promote women and diversity, all while generating revenue for investors.
Investment managers, be they family offices, private banks or corporate giants, and whether or not they have a foothold in Africa, can do their part in promoting gender equality and boosting female empowerment. GLI approaches can be incorporated without complex internal structural changes: networks can be created, and all can do their part to see that awareness is raised amongst the investment community of GLI’s potential impact.
By applying a gender lens to investment, all investors can do their part to promote equality and encourage financial independence while also achieving a positive return on investment, and challenging the wider social barriers which continue to affect women.