In Australia’s recent federal budget, the Australian Government announced that it would lift the finance cap of its Emerging Market Impact Investment Fund (EMIIF) from AUD40 million to AUD 250 million. EMIIF is a development financing mechanism for the Australian government focused on providing investment capital and technical assistance to financial intermediaries in the Indo-Pacific region. In a powerful demonstration of its commitment to addressing both gender inequality and climate finance, the expanded EMIIF will scale up investment to support gender lens investing and climate investments in the region.
Gender lens investing (GLI) integrates gender considerations into investment decisions to generate financial returns while advancing gender equality and women’s empowerment. By directing capital towards gender-inclusive businesses, investors can contribute to closing the gender gap, promoting women’s leadership, and unleashing the potential of women entrepreneurs. While gender lens investing has gained momentum in recent years, it is still considered a niche approach within the broader investment landscape. There is growing recognition of the importance of market-building efforts to share and learn from investors’ good practices and further expand this field.
The upside of gender investing: Why applying a gender lens is good for your business
On June 8th, EMIIF hosted a gender lens investing networking event in Singapore, gathering investors from across the region to explore the upside of gender lens investing.
With a keynote address and panel discussion with experienced fund managers who have adopted gender smart practices, the event was an opportunity to identify some of the concrete and practical pathways for investing with a gender lens in the region. Angus Kathage, Assistant Director for Private Finance for Development and Climate within the Australian Department of Foreign Affairs and Trade, highlighted that “at the core of the EMIIF mandate is gender equality. It’s baked into everything we do. We don’t do this just because it’s a good thing to do, or the right thing. But we see real upsides to applying a gender lens.” GLI is fundamentally good for business, good for economies and good for communities. “We really want to be a part of mainstreaming the process for GLI across the region.”
To grow the local industry, we need to start by demystifying GLI and sharing learnings from fund managers and how they grapple with implementing gender smart practices in their work. In her keynote speech Raya Papp, one of the Founding Partners of Sagana, articulated the business case for GLI demonstrating that it can mean something different in practice to every investor, at its core it is about “integrating a gender analysis into financial analysis to see things you otherwise may miss.” She spoke about the benefits of GLI with gender-diverse investment teams twice as likely to outperform their peers, with an excess net internal rate of return of 1.7 percentage points. Women consumers control over USD$ 3.2 tr in annual consumer spending. Globally, 1 in 3 high growth entrepreneurs are women. Ms. Papp highlighted that there are three ways investors can become gender smart: within their portfolio companies, within their own organization and within their investment process. “The key is really just to get started somewhere.”
Those new to the sector need not look far for guides, best practices, or industry standards which can inform their journey to gender lens investor. 2X Global, the world’s leading body for gender lens investing, is a membership and field building organization focused on unlocking gender capital at scale. Natalie Au, a 2X Program Manager, highlighted the growing number of toolkits and industry standards such as the 2x Criteria which can be used to inform those looking for “a set of criteria that investors can take action on in their portfolio.”
GLI is a journey, not a destination that investors should try to get to
It is important that we start normalizing conversations amongst investors around how and why they entered the field. There is no one size-fits-all approach in GLI. Rather fund managers should work with their teams to identify the right place to adopt gender-smart practices whether that be considering diversity inside of their organisation, identifying opportunities to integrate a gender analysis into the investment processes, or working with portfolio companies’ post-investment to achieve gender outcomes. What is important is that fund managers contextualise a gender lens for their investment approach.
A panel discussion with diverse fund managers provided clear insights into how different fund managers have approached this process themselves. Moderated by Milena Bacalja Perianes a GLI Advisor with Sagana, the panel explored the good, the bad and the value-add of why adopting gender smart practices can be good for business. Panelists included: Virginia Tan, Founding Partner of Teja Ventures; Jennifer Buckley, Founder and Managing Director of Sweef Capital; Rob Kaplan Founder and CEO of Circulate Capital; and Ralitsa Rizvanolli, Partner at Sarona Asset Management.
Below are four major takeaways from the panelists who spoke candidly about the struggles and successes of adopting gender smart practices.
1. Gender lens investing is not about compromising on market returns, but better understanding risk and identifying new opportunities.
Virgina Tan, Founding Partner of Teja Ventures argued that there is a tendency for those new to GLI to believe that financial and social returns are incompatible. “The minute that you talk about gender, people assume that you are social. You know, you are concessionary, but gender is not about being social, or not just about being social. It is really about how you’re driving better returns as well as better consumer outcomes.” Ultimately, utilising a gender lens is an opportunity to open new consumer markets that can be hugely profitable.
2. We need to start looking at the composition of our investment teams and diversifying who is in the room making investment decisions.
GLI is not just about directing capital toward women, but actively seeking to improve investment practices with diversity starting inside the fund. Ralitsa Rizvanolli, Partner at Sarona Asset Management and the manager of EMIIF, highlighted that EMIIF was designed with the intent of putting more capital into the hands of women whether through Fund Managers or investment committees. “This question around gender diversity at the fund manager level became really salient…it really matters who allocates capital. It kind of starts from there. And diversity [can be] gender diversity, but also other types of diversity. It’s so important because we each have our blind spots.” Funds should consciously look at their organisational structures to see where unconscious bias may be playing apart in affecting investment decision-making.
3. A gender lens is an opportunity to generate greater returns and differentiate oneself from the competition
Fund managers are often looking for opportunities to add value to their portfolio as well as differentiate their funds in a growing landscape. As Jennifer Buckley, Founder and Managing Director of Sweef Capital highlighted, “we’ve seen an increasing amount of wealth coming into the hands of women and also a younger people who tend to want to orientate their wealth to be more values aligned.” A gender lens can be a valuable tool in opening conversations with LPs, as well as potentially accessing different sources of capital. “We’re a growth capital fund but we’re offering something different from what the other fund managers are. And that differentiation is important. From a business perspective we’ve seen it has been an opportunity.”
4. Gender is one of many perspectives that could inform an investment thesis or the underlying processes which lead to investment decisions
There are a multitude of ways in which a fund can integrate gender considerations as one element of a broader investment strategy. Rob Kaplan, Founder and CEO of Circulate Capital emphasized that gender has enabled his team thinking and help expand their investment approach, rather than limit it. “I think that holds back a lot of the work in this space is thinking about it in silos, as opposed to the intersections and the overlaps. climate strategy should be a gender strategy, a gender strategy should be a climate strategy.”
Gender lens investing is a rapidly developing industry and Asia could be paving the way
Conversations like this are critical to mainstream gender smart practices and catalyze more investors to see the upside of investing with a gender lens. As Rizvanolli indicates, “ESG is now mainstream and that took 18 years. Right now [GLI] is around five or six years old. In ten years’ time it will look different with a lot more gender-labelled products. But we need to have more conversations to mainstream [gender].”
Compared to other regions there is still much to be done in the Asia-Pacific region to increase awareness among investors and expand the number who allocate capital with a gender lens. EMIIF will continue to invest its capital with a gender lens and hope others will join in its mission.