Attribution: Akanksha Khullar, “Increasing Women’s Economic Productivity: The Case for Gender Lens Investing,” ORF Issue Brief No. 607, January 2023.
Introduction
Global economic activity is experiencing a broad-based slowdown sharper than expected, with inflation rates running higher than in the previous decades. Indeed, in 2022, uncertainty and volatility were the dominating themes of the global economy, despite cautious optimism in the beginning as COVID-19 restrictions were gradually eased. Today the global economic outlook is uneven, and some countries, regions and territories are managing post-pandemic recovery better than others.
The Russian invasion of Ukraine has compounded the challenge as it caused a severe energy crisis in Europe which has further hampered economic activity. With Russia cutting deliveries to less than 20 percent of the 2021 levels, gas prices have increased more than four-fold in the region since 2021.[1] The conflict has also pushed food prices up, causing erosion of real incomes for large populations in many developing countries.[2]
Expanding costs of government borrowing and large capital outflows are also exacerbating fiscal and balance of payments pressures in these economies.[3] Meanwhile, global warming is reaching an alarming point, where heatwaves, drought events, and other extreme weather events are becoming more intense and frequent.[4] Also contributing to the uncertainty is the resurgence of COVID-19, particularly in China. The country’s property sector is in crisis, causing spillover effects on the domestic banking sector, which is weighing heavily on the country’s growth and thereby having negative cross-border effects.[5]
It is amidst these volatile conditions that recent data releases have confirmed projections that the global economy will grow between a mere 2.5 and 2.8 percent in 2022—[6]a substantial downward revision from previous forecasts released by the Department of Economic and Social Affairs of the United Nations in January[7] and May 2022.[8] Inflation, which has risen to a multi-decade high, prompting rapid monetary policy contraction and constricting household budgets—and a tightening fiscal space have made future projections highly uncertain. Most indicators suggest, however, a further slowdown in global economic growth in 2023.[9]
This brief argues that any attempt at a global recovery must include women. After all, women contribute both directly and indirectly to economic growth, and investing in women’s human capital can boost economic development, help overcome poverty, and reduce inequalities. The brief makes a case for governments and companies to rigorously consider gender-based factors in their investment decisions.
In particular, the brief underlines the potential of Gender Lens Investing (GLI) as a way to not only boost Gross Domestic Product (GDP) but also serve as a platform to bridge the gender gap and reduce poverty.
Gender Lens Investing: An Overview
GLI is a form of impact investment that is intended to create a beneficial social or environmental impact alongside the expected financial returns. What sets GLI apart from green and other similar impact investments is that it considers gender-based factors across the investment process, thereby creating a more beneficial environment for women and girls. It is a framework through which investors can create real impact.
The term ‘gender lens investing’ was coined in 2009 by Jackie VanderBrug and Joy Anderson to refer to the practice of integrating gender factors in investment decisions; it became increasingly popular by the mid-2010s. An early example of GLI was the Valeurs Feminines, created by a French money-management firm—Conseil Plus Gestion—in 2005 with the purpose of investing in women-owned and women-led businesses across the European continent.[10]
The process of GLI can be divided into two broad categories:[11]
Since 2005 when the first known example of GLI was conducted in France, various other firms started offering GLI as an investment strategy for some of their portfolios. In 2013, the Criterion Institute organised a summit for gender lens investors in Hartford, Connecticut.[12] In the same year, the International Finance Corporation (IFC) set up a ‘Women’s Bond’ that has been responsible for the allocation of at least US$175 million in investments so far to women-led businesses in various developing countries.[13] Banks such as the Royal Bank of Canada and Barclays have since replicated these initiatives, launching funds that focused on increasing the capital flow to women-owned businesses and women-entrepreneurs in various territories.
In 2017, the National Bank of Australia announced that it had sold gender equity bonds that were worth AUD500 million.[14] These bonds were to be invested in a portfolio of businesses which had already been certified as “gender equitable” by the Australian government’s Workplace Gender Equality Agency.[15] In 2018 the G7 nations launched the 2X Challenge—as a way to empower and strengthen the economic capacities of women—mobilising US$3 billion that was to be invested for women in the workforce and in leadership positions, or towards the provision of products and services that directly benefit women.[16]
Over the years, GLI has also become an important point of discussion amongst philanthropists and high-net individuals. In a 2019 survey by the Morgan Stanley Institute for Sustainable Investing, 67 percent of global asset owners said “gender diversity” was one area of interest in their investment portfolios.[17]
This need for organisations, funds and individual investors to respond to social requirements and demands—both internally through their organisational structures as well as externally through their investment ventures—was underlined by the COVID-19 pandemic and its massive socio-economic fallout. In mid-2020, Goldman Sachs announced that the investment bank would not take companies public unless they had a minimum of one “diverse” board member; they raised the number to two in 2021.[18]
Similarly, a number of large private equity firms have signed up to the global Diversity in Action Initiative that requires them to maintain a proper track record of internal hiring as well as promotion statistics segregated by gender and diversity. The initiative encourages them to provide data to investors, thereby making new commitments during the process of fundraising.[19]
While such initiatives may be notable, there is yet to exist a uniform approach or methodology behind the process of GLI. The Forum for Sustainable and Responsible Investment is seeking to fill this gap, and is working to develop a standardised, sustainable, responsible and impactful investing method[20]—including for GLI.
Advantages of GLI
An organisation’s motivation for adopting GLI can either be to improve the performance of its firm and investment, or to improve gender outcomes. Therefore, the value of these activities—e.g., investments made in women-owned businesses; investing in organisations that promote workplace equity or in organisations offering products or services that improve the lives of women—can manifest in varied ways.
One outcome is economic. Studies have shown a positive correlation between the proportion of women in leadership positions in a company, and the financial performance of that company. One 2015 analysis has highlighted how “most of the women-focused funds and investment strategies—a tiny slice of the $6.6 trillion-socially responsible investing world—have been standout performers over the years.”[21]
Another study from 2019 found that companies which took a holistic approach towards equal representation outperformed their less diverse counterparts by 3.1 percent per year.[22] Indeed, during the eight-year period from 2011 to 2019, companies with greater gender diversity recorded a one-year return on equity, which was at least 2-percent higher than those recorded by companies with low gender diversity.[23]
A gender-balanced approach also facilitates value creation—while delivering a quantifiable impact for gender parity—for an organisation. According to the IFC, businesses with greater gender diversity in their leadership teams had valuations that were 25-percent higher than those for teams that had lower gender parity.[24]
Supporters of GLI argue that firms with higher proportions of women in positions of leadership increase their value creation because their non-discriminatory approach allows them to hire the best available talent.[25] This enables the organisation to tap into new markets, add new revenue sources, and take inclusive as well as sustainable decisions—all of which often have complementary and compounding effects on the strength and long-term success of a business or an investment.
Furthermore, the facilitation of women’s economic empowerment through GLI practices not only leads to the creation of a virtuous circle for organisations but also helps achieve development goals. Making inclusive decisions based on GLI empowers women, giving them opportunities to participate in economic activity and contribute to their local and national economies. In turn, such progress helps improve global GDP. As the UN Women noted, “If women played an identical role to men in the labour force, as much as $28 trillion or 26 per cent could be added to the global annual GDP by 2025.”[26]
Alongside the economic benefits, GLI also intends to create beneficial social and environmental outcomes; mitigate risks; and uncover new investment opportunities. These benefits bring about spillover effects in sectors as varied as healthcare, education, and job creation. Higher investment in women’s education alone, results in numerous dividends. There is no dearth in evidence that countries where more women go to school, often witness a boost to their economic growth. The United Nations has suggested that “for every 1 per cent increase in the number of women completing secondary education, per capita income of the country increases by a minimum 0.3 per cent.”[27]
The Challenge of Mainstreaming GLI
Certain efforts are underway to push GLI to the mainstream and transform it from a niche investment opportunity to an overall strategy, at par with any other alternative mode of investment. The process, however, has been rather slow. It is therefore important that organisations—whether public or private— take proactive steps to circumvent biases against women and boost GLI.
One way of doing this would be undertaking affirmative action, which mandates the organisation to bring increasing proportions of women across all levels of the organisation, especially in corporate leadership. This could either take the form of imposing hiring quotas specifically allocated for women or put in place firm organisational commitments for the management to follow non-discriminatory strategies during the hiring process.
Companies can perhaps also sign up to the global Diversity in Action Initiative, initiated in 2020 by the Institutional Limited Partners Association. This initiative requires organisations to keep a track of internal statistics on hiring and promotion by gender and diversity along with providing data to investors, while making new commitments during fundraising.
There is also a need to raise awareness about GLI and break certain misconceptions that impede the growth of GLI—such as that “women’s empowerment” is a mere social cause and there is no economic case to be made of it; that GLI will not allow investors to reap market-rate returns; and that, overall, GLI is not a compelling investment strategy. To do this, evidence generation on returns and the impacts of GLI is extremely crucial, which can potentially be undertaken by multi-national organisations and disseminated across the board by government agencies.
At present, there exist useful studies, albeit limited, conducted by organisations such as IFC[28] and Wharton Social Impact.[29] These studies offer reference points for organisations to understand GLI, find GLI opportunities in the market, and create their own structures for striking investment deals.
Another area for improvement is the measurement of impact. There is a need for consistency of frameworks designed to measure the gender equality spectrum. At present, every organisation has its own independent way of measuring progress, which makes it difficult to compare performance across organisations, sectors, and countries. Streamlining these diverse measures, combined with an enhanced dissemination of GLI knowledge, will be key to unlocking such investments so that they are pushed to the mainstream of the impact investment market.
Meanwhile, public-private partnerships can also be formalised to boost GLI. Government platforms such as the Stock Exchange could consider parameters of gender equality before listing entities and the private sector can assist the government in designing platforms or instruments that facilitate gender impact investing strategy.
Conclusion
At its core, GLI should not be reduced into a mere regulatory compliance. Rather, it could be an opportunity to unlock women’s economic power and drive market development to achieve financial returns and facilitate value creation while delivering a quantifiable impact for gender parity that in turn will improve global GDP.
The investing industry can capitalise on the opportunity accorded by GLI to help the global economy achieve sound economic recovery and a consistent growth of GDP.
Akanksha Khullar is an independent scholar working on gender issues.
Endnotes
[1] Sam Meredith, “Russia has cut off gas supplies to Europe indefinitely. Here’s what you need to know,” CNBC, September 6, 2022.
[2] Mark Sweney, “UK food prices soar by record 10.6% as Russia-Ukraine war pushes up costs,” The Guardian, September 28, 2022.
[3] David Malpass, “The Crisis Facing Development,” (speech, Stanford Institute for Economic Policy Research (SIEPR), Stanford University California, USA, September 28, 2022), World Bank.
[4] “WMO releases ‘tell-tale signs’ of extreme weather conditions around the world,” UN News—Global Perspectives and Human Stories, December 23, 2o22.
[5] Moohita Kaur Garg, “Zero-Covid, a crumbling real estate market and more: Chinese economy and the challenges it faces,” WION News, October 5, 2022.
[6] “World Economic Situation and Prospects: September 2022 Briefing, No. 164”
[7] United Nations Department of Economics and Social Affairs, World Economic Situation and Prospects 2022: UN Warns Global Economic Recovery is losing Steam, United Nations Department of Economics and Social Affairs, 2022.
[8] United Nations Department of Economics and Social Affairs, World Economic Situation and Prospects as of mid-2022, Global Economic Monitoring Branch, United Nations Department of Economics and Social Affairs, 2022.
[9] “Factbox: Big banks see global economy slowing more in 2023, with likely U.S. recession,” Reuters, December 15, 2022.
[10] Hira Saeed, “5 Social Entrepreneurs and VCs share why Gender-lens investing is important for the ecosystem,” Miller Center for Social Entrepreneurship, February 11, 2019.
[11] Gender Lens Investing Initiative, “Gender Lens Investing Overview, Fall 2017 – Spring 2019,” Global Impact Investing Network.
[12] David Bank, “Women Are Hot…Investments,” Huffpost, October 24, 2013.
[13] Sarah Kaplan and Jackie VanderBrug, “The Rise of Gender Capitalism,” Stanford Social Innovation Review 12, no. 4 (2014).
[14] “National Australia Bank sells rare A$500 million gender equality bond,” Reuters, March 17, 2017.
[15] “National Australia Bank sells rare A$500 million gender equality bond”
[16] “Launching ‘ the G7 2X Challenge: Financing for Women’ with Development Finance Institutions from G7 countries: Joint initiative to increase investments for the promotion of gender equality,” Japan International Cooperation Agency, June 11, 2018.
[17] Morgan Stanley, Sustainable Signals Asset Owners See Sustainability as Core to the Future of Investing, Morgan Stanley Investment Management,
[18] Elizabeth Dilts Marshall, “Goldman Sachs to companies: Hire at least one woman director if you want to go public,” Reuters, January 23, 2020.
[19] Institutional Limited Partners Association, “Diversity in Action Signatories,” ILPA, https://ilpa.org/ilpa_diversityinaction-signatories/
[20] Gabrielle Olya, “Everything You Need To Know About Gender Lens Investing (and Why You Should Be Doing It),” Yahoo News, December 3, 2022.
[21] “Money making women-focused funds raises eyebrows,” Business Insider, September 12, 2015.
[22] Emily Thomas, “Why Gender Diversity May Lead to Better Return for Investors,” Morgan Stanley, November 21, 2022.
[23] “Why Gender Diversity May Lead to Better Return for Investors,”
[24] International Finance Cooperation, Moving Toward Gender Balance in Private Equity and and Venture Capitals, Washington D.C., World Bank Group, 2019.
[25] “Why Gender Diversity May Lead to Better Return for Investors”
[26] “Economies that work for women, work for everyone,” UN Women, January 22, 2018.
[27] Reema Souraya, “Why Educating Girls is the Answer to Sustainable Deelopment,” United Nations Girls’ Education Initiative, October 12, 2018.
[28] “Moving Toward Gender Balance in Private Equity and and Venture Capital”
[29] Suzanne Biegel, Sandra M. Hunt, and Sherryl Kuhlman, Project Sage | Tracking Venture Capital with a gender lens, The Wharton Social Impact Initiative, University of Pennsylvania, 2017.
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Akanksha Khullar is a Visiting Fellow with the ORFs Strategic Studies Programme where her work focuses on the intersection of policy advice and academic research ...
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