Gender Lens Investing 2.0: How Foundations Can Address the Roots of Gender Inequality by Investing Across Asset Classes

This article is the second of a two part series on Gender Lens Investing by Cornerstone Capital. Click here for part 1.

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For far too long, gender equity had been viewed by many foundations as a distinct issue, detached from their core funding areas. The same can be said for many impact investors. Yet increasingly, impact investors including major financial institutions, pension funds, development organizations, and even some foundations are recognizing that gender considerations are central to the realization of many – perhaps even most – social and environmental outcomes. It is no longer an option to think of gender as unrelated to the social and environmental objectives that are central to community, economic and environmental progress.

In developing the Sustainable Development Goals (SDGs), the UN recognized that:

 

 

As we discussed in a recent article for Mission Investors Exchange, Gender Lens Investing 2.0 – How Foundations Can Address the Roots of Gender Inequality, Cornerstone Capital Group analyzes the gender alignment of investments in public equity portfolios in relation to the Sustainable Development Goals, including SDG 5: Gender Equality. We do so using Cornerstone’s Access Impact Framework^TM, which connects granular environmental, social and governance (ESG) factors to the SDGs and helps investors understand the interconnected nature of the SDGs through the theme of Access.  When analyzing SDG 5, we incorporate traditional gender lens themes with an analysis of seven “access themes” that align to it most closely. The seven themes are: 

These access themes are related to a number of other SDGs as well, though it is worth noting that our model assigns SDG 5: Gender Equality, the highest number of relevant access themes compared to other SDGs. This highlights the disproportionate impact of issues such as health care, education, and clean water on the lives of women and girls, given their traditional roles as family caretakers, as well as the importance of telecommunications systems in providing digital access to women entrepreneurs as they seek financial independence.  Using these seven access themes, we design impact investing strategies that holistically integrate gender-related themes into investments across multiple traditional investment asset classes (e.g., public equities, private equities, real assets, hedge funds, fixed income).

 

As is true with grantmaking, there are instances where a targeted intervention focused on a particular theme will provide the greatest impact. However, broader investment approaches can also be effective — and may be the only available way to address the gender-related challenges we explore in this essay. For example, funders interested in reproductive health may simultaneously make grants to quality reproductive health clinics while also making grants to increase the general availability of quality healthcare for women. In different ways, these two strategies will have positive impacts.  Similarly, there are targeted investment solutions focused on women and girls, and broader investment strategies that also have positive impacts. 

 

We believe approaching gender lens investing from the perspective of access not only helps investors think more deeply and holistically about the complex dynamics of social change, it also opens up a diversity of investment opportunities beyond the traditional gender lens investment products. To illustrate how this approach can be applied across asset classes, we look at a sample of the access themes and how they relate to Gender Equality: access to financial services; fair treatment and equal opportunity; healthcare, and clean water and sanitation. The examples below illustrate specific investment options that are available in various asset classes¹. 

 

Access to financial services is a key pathway to advancement for women, whether to control household decision-making or by enabling entrepreneurship².  Studies have shown, for example, that mobile financial services can help improve one’s earning potential. One study showed that access to mobile cash services helped women-headed households increase their savings by more than a fifth³. Such outcomes contribute to reducing extreme poverty among women-headed households⁴.

 

There are several ways to invest in access to financial services for women, as shown in Figure 1. Some of these are not gender-specific, yet they illustrate how increased access to low-cost, accessible financial services and innovations will bring the above benefits to women.

 

Figure 1. Investment Opportunities in Different Asset Classes Related to Access to Financial Services and Gender Equality

Equities	Fixed Income	Alternatives
Funds that consider corporate policies in support of diversity and fair treatment as part of their investment evaluation, including financial services companies.   Thematic funds that seek to invest in innovative financial services, products and companies.   Funds with economic advancement for individuals as a theme may include sector-focused funds and diversified funds in emerging markets.	Funds investing in agency bonds that benefit women and girls through access to loans for housing, transportation, and businesses	Private debt fund lending to underserved populations, including greater-than-average lending to women.   Venture firms investing in electronic payments and related technologies with global platforms.   Private equity fund making growth equity investments in women-led businesses in emerging markets.   One fund applies a proprietary gender lens approach to make equity and quasi-equity investments in women-led businesses in the Philippines, Vietnam and Indonesia.   Another fund invests capital in under-banked markets and provides access to financial services for rising middle-class communities around the world; its portfolio serves millions of micro, small and medium-sized businesses and individuals.   A women-focused and women-managed private equity fund that makes direct equity investments in women-focused financial institutions.

Fair treatment and equal opportunity are themes that can be woven into an investment portfolio across asset classes. There are funds designed to solve community challenges, encourage women’s leadership in business, and foster economic advancement for women. Investments that address this access theme include some that focus on fair treatment and equal opportunity broadly, and some that focus specifically on products and services for women.

 

There are several ways to invest in access to fair for women, as shown in Figure 2. Some of these are not gender-specific, yet they illustrate how access to fair treatment may bring the above benefits to women.

 

Equities	Fixed Income	Alternatives
Funds that invest in quality companies with strong female representation in leadership positions or that work to advance women in management.   Investment managers that engage with portfolio companies across sectors to improve working conditions for women, study and close the gender pay gap, and ensure fair treatment in the companies’ supply chains.   Funds whose managers use shareholder advocacy and policy engagement to promote improved economic and social outcomes for women and girls.   Thematic funds that seek to invest in products and services benefiting women and girls, such as health and wellness, consumer products and financial services.	Funds investing in corporate bonds of companies with strong female representation in leadership positions or that work to advance women in management.	A private debt fund that benefits women and their families through loans to women entrepreneurs.   Private debt funds investing in companies that employ primarily women, working with companies to improve employee treatment, and making long-term investments to benefit indigenous communities.   Women-led venture capital firms investing in women entrepreneurs and/or companies solving critical problems that affect women and girls.   Impact venture capital firms that employ a gender lens to invest in companies with female leaders using technology in health, education and economic inclusion.

 

Healthcare and Gender Equality

The healthcare needs of women and girls in many global regions outstrip the healthcare they receive⁵, especially when it comes to reproductive health⁶. Women lack adequate access to healthcare due to distant service locations, cost, and gendered stigmas associated with seeking treatment, which contributes to the persistence in health inequalities^7,8. These access issues are compounded as gender norms from region to region may mean women do not have control over household financial resources  or cannot seek care without partner or employer permission⁹. When women have access to healthcare, the benefits multiply. For example, women who receive services to avoid unintended pregnancy have greater educational opportunities and are better able to enter and remain in the workforce, thus improving economic outcomes for their families and communities¹⁰.

 

There are several ways to invest in access to healthcare, as shown in Figure 3. Some of these are not gender-specific, yet they illustrate how access to fair treatment may bring the above benefits to women. 

 

 

Equities	Fixed Income	Alternatives
Investment managers that use shareholder advocacy and policy engagement to work for improvement in healthcare access for women and girls..   Thematic funds that seek to invest in healthcare and consumer products and services benefiting women and girls.	Government bond funds (municipals and/or agencies) that finance healthcare programs and facilities and can focus on specific geographies.	Venture fund that invests directly to positively impact the health and well-being of women and children with a primary focus on early intervention and prevention measures.   Real estate fund that invests in healthcare facilities for healthcare providers with a proven track record of both clinical and financial success working with underserved and developing communities.   Venture capital fund focused on reproductive healthcare solutions for women.

 

Clean Water, Sanitation and Hygiene and Gender Equality

Equities	Fixed Income	Alternatives
Thematic funds focused on the environment, health/ wellness, or water specifically.   Funds/managers engaged in shareholder advocacy around issues of water quality and access.   Thematic funds that seek to invest in innovative technology, services, products and companies. Funds with technology as a theme may include sector-focused funds and diversified funds in emerging markets, for example, that utilize increasing and improving access to technology as part of an investment thesis and investment criteria.	Green bond funds that invest globally in organizations, companies and projects working to improve the environment, including water access and sanitation.   Municipal strategies that focus on environmental projects including water infrastructure and sanitation.   Broad ESG bond funds.	Venture and growth equity funds exist that invest in environmental and water technologies, waste minimization, and waste-to-energy, etc.   Real assets funds focused on waste and water technology and infrastructure projects.

The investment products listed above are just a sampling of the many strategies that are now available to gender lens investors. And there is abundant evidence today that foundations can invest in alignment with their mission and values without necessarily sacrificing financial returns. 

 

It is particularly exciting to see the creativity that can be exercised in developing gender lens investment approaches that enable foundations to align their investments with grantmaking. In some cases, a blended capital approach where grants are used to support enterprises that are not investment-ready, can have the most impact. From economic and community development to education, environment, and many other social and environmental issues, there are gender lens investment strategies emerging virtually weekly that can help foundations ensure that their investments sync directly to their values and programmatic priorities.  Now all we need is for a critical mass of foundations and other impact investors to support this growing and essential approach to increasing gender equality through maximizing all of the tools in their financial toolbox.

 

 

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