Gender-smart investing is just that: smart | 2X Global
INSIGHT by Hedda Pahlson-Moller, CEO of TIIME, and Sana Kapadia, Director of Strategy at 2X Global, and Cécile Sevrain, co-founder & Head of Impact Measurement and Management at TIIME (original link to article HERE)
Gender lens investing (GLI) is the integration of gender factors alongside financial analysis to support stronger financial, social and environmental outcomes. Gender-smart investors recognise that financial systems engage with and benefit men and women differently, and are actively committed to using finance as a tool to promote gender equality. As the field has matured, there is greater emphasis on gender and a broader diversity frame.
Diversity is not just how our marvellous world is comprised, it is also the most powerful tool we can leverage to achieve the following laundry list of objectives.These goals would be preached in any MBA program around the world, but unfortunately rarely attributed to gender factors – for now…
〉Fosters innovation and creativity
〉Enhances decision-making processes
〉Improves organisational and financial performance
〉Broadens talent pool and increases employee satisfaction
〉Better connects with diverse customer bases
〉Supports the design, creation and adoption of more gender-smart products and services
What kind of diversity do you ask? All kinds. If we start with a simple analysis for some long overdue progress, our population is split approximately in the middle by gender – so it’s an obvious point of departure. It’s not just about putting more women at the decision making table, but also pausing to ask, ‘why have they not been here all along’ – and follow up with, ‘how do we keep improving?’ After all these years of persistent gender inequality, isn’t it time to reverse the burden of case-making by asking mainstream investors to justify their weddedness to legacy approaches and allocations?
| Let’s look at the numbers
While the moral imperative is a driver in its own right, there is no shortage of evidence-based business and economic reasons supporting the significant ramp-up of gender-lens investing and practices. For instance, gender-diverse teams have 20% higher IRR in emerging markets or this McKinsey study that outlines companies lacking in diversity were 29% more likely to underperform. If you are craving more data, check out a whole list here.
In fact, there is an excellent book full of arguments and case studies on exactly this: The XX Edge: Unlocking higher returns and lower risk by two wonder women who have paved the way for GLI: Patience Marime-Ball and Ruth Shaber. They summarise efficiently and compellingly, the obvious drivers:
“ 〉Expanding the use of diverse talent in financial decision-making optimises returns, grows the overall economy, and extends more opportunity to everyone.
〉Optimising human talent leads to more innovation and results in expanding financial returns for investors.
〉Women’s leadership skills are currently underutilised across all capital markets. Women represent only a small fraction of the individuals making the financial decisions that impact domestic and global economies.
〉This underutilization leads to inefficiencies and missed opportunities in the markets.“
–Extract from The XX Edge: Unlocking higher returns and lower risk by Patience Marime-Ball and Ruth Shaber
| How big is the gender finance field today?
Gender lens investing (defined by the opening statement and continued in more detail below) has about $20 billion under management, with the field only getting stronger, wider and deeper. Most notable is the steady and persistent growth. Furthemore, the 2X Challenge, launched at the 2018 G7 Summit, significantly surpassed its original 2018-2020 target to mobilise $3bn in gender lens investments and raised more than US$11bn. Then in 2022, the second round of the 2X Challenge has again exceeded its target and collectively raised gender lens investments totaling US$ 16.3 Billion, benefitting 473 businesses across all global emerging market regions. This brings the total investments under the 2X Challenge since 2018 to US$ 27.7 Billion. Furthermore, there is a diversified flavour of instruments and asset classes through which gender-smart capital is being deployed as observed by the momentum in public markets, gender bonds and other sustainability bonds.
More actors are utilising a gender lens in their methodologies – and gender-smart investors are increasingly moving away from silos and bringing gender into existing conversations: whether ESG, sustainability or broader impact approaches. In practice, this means bringing gender analysis into all investment themes – whether in climate, tech, health, financial services, consumer products or infrastructure – to consider how gender is playing out across an investment’s products, employee base, customers, and supply chains. It also means considering how gender can be leveraged to achieve better financial and impact outcomes.
| Multi-faceted Lenses – additional considerations
Like any lenses, there are variations (on design, bi-focals, shadings, shapes and every other derivative). Beyond the numbers, there are multiple threads and trends both in and out of the GLI movement that are worthy of note. In this effort to bring awareness to the overarching and ever-expanding field, here are a few key threads to keep in mind and recognize:
In developing the field, it became evident that gender could not be looked at stand-alone and there is now plenty of research on key intersectionality with issues that both unlock potential solutions for multiple challenges. A few of the most potent combinations to be considered:
> Gender and Climate
Evidence shows the critical role women have to play in climate change mitigation and adaptation. For instance, the results obtained for a panel data of 3,928 companies over the period 2010–2020 confirm that companies with a greater women board representation (both in number and in percentage) are more proactive in terms of investments in climate change innovation. (source: Science Direct)
However, not only is there an underrepresentation of women in particular in decision making positions and movers of capital but they are also at the forefront of suffering disproportionately from the effects of climate change. As a result, applying a gender AND a climate lens when making investment decisions has the power to create more resilient and equitable societies – whether one leads with climate or gender. Integrating gender and climate finance agendas can unlock huge untapped opportunities, and integrating gender analysis into the investment process and across the value chain can support better business, social, environmental and investment outcomes. If you are looking to get started, check out this Top 5 set of resources to get you started on your gender-smart climate finance journey.
> Racial equity and JEDI
The issues facing gender are echoed across diversity challenges. We will not be able to do justice (heavy pause) to racial equity and other aspects of social exclusion, under-representation and marginalisation in this limited article, but there is obviously a growing amount of literature and research on the echoes and overlap. If you think that women are discriminated, imagine being a woman of colour, a non-binary person or a woman with any type of disability…Check out this phenomenal toolkit on JEDI investing, and dive deeper into this topic of about being more aware of who is investing, who receives investment, which investments make it into portfolios, how investments are structured and how all those decisions are made.
> Power Dynamics
Our friends at Criterion Institute website have been deeply embedded in challenging finance for the last two decades. The work of Joy Anderson and colleagues at Criterion has informed the gender lens investing space of the fundamentals of systems change and the underpinning issues to shift finance:
“Traditional finance models are underpinned by a deeply held cultural value in Western and ‘wealthy’ nations that those individuals who hold the most capital are the power holders, or deserve to be. Thus, traditional finance models typically start with investor risk profiles as privileged above the risks of potential investees, building out each process from criteria setting to deal negotiations around minimizing risk to investors. Power dynamics show up in investment processes in many ways. For example, in most cases, knowledge of traditional investments is privileged throughout the scoping, investment readiness, and dealmaking processes, while knowledge of the social need and/or cultural or community systems is not. Analysing power structures across a variety of investment processes is the first step to understand and redshift power dynamics.” Go check the Criterion Institute website for more details on their work.
> ESG backlash
ESG and impact investing have been weathering the storm of challenges to the very purpose or validity of its existence. While seemingly absurd to question the influence of non-financial elements in the performance (and very survival) of a company, the challenges have helped to hone the arguments and data to justify the field.
For those primarily driven by risk mitigation, there are clear and obvious risks to companies’ financial performance from sexual harassment and gender-based violence, COVID and healthcare.
While ESG is more process-oriented and impact is evaluated by the value creation of products and services, there is a clear opportunity to go deeper on gender issues to accelerate the shift. For instance an ESG-based venture fund could explore responsible exits from the onset to ensure the entire investment process and lifecycle starts with the end in mind, supporting more equitable value creation.
> Local context
Not to be forgotten or undervalued, gender issues (and in a broader stroke, diversity) must be understood in its own context: geography, social economic background and so on. What might be critical or relevant in a certain part of the world or culture, might not be the case everywhere (which is actually one of the mantras of impact investing but this is for another time). It is important to be sensitive and aware of context and proximate.
| So, what next?
Financial system needs a shake-up and make-over (pun intended). Repeating patterns and expecting different outcomes is not a path change. We need a reframe. Given how integral frames are to our personalities and lifestyles, preserving them becomes a priority. Our frames shield us from intrusions by selectively filtering information.
“Investing is not a zero-sum game. Untapped investment opportunities can be found at the intersection of gender and finance. Nevertheless, many investors still base their investing decisions on the notion that the total amount of the world’s assets is fixed and that if one investor is gaining, another must be losing.“
–Extract from The XX Edge: Unlocking higher returns and lower risk by Patience Marime-Ball and Ruth Shaber
Reaching the next leap forward, should gender be subsumed by impact investing and ESG or remain an approach that thrives as its own field? It’s BOTH – not OR. The integrated approach where gender is integrated into a broader agenda of social impact and inclusion is important and a lever for change, with enough room for improvement and scale. This includes undertaking enhanced gender analysis, going beyond counting women on boards and senior leadership and better understanding how gender and diversity cuts across the value chain. Further sharpening the gender lens in ESG will help to normalise gender as one of the considerations smart investors should be looking at when evaluating market opportunities and risk.
You know what else needs to be next? You. Awareness about this issue and moving into curiosity, interest and education will be the most critical next phase. We need allies. We need action. Every incremental step counts. If you need to start with counting heads in your own team or portfolio, then so be it – it’s a reasonable start. You have to see the problem to be able to address it.
And there is SO much helpful material and tools out there to assist your journey – from due diligence frameworks and toolkits and reporting with benchmarks. There are endless case studies and inspirational stories. Take a look here for just a taste:
〉The Investor Guidance Note aims to guide Investment Officers in their analysis of gender data and outlines examples of gender-specific opportunities throughout the value chain.
〉Additional guidance and tools for conducting gender due diligence can be found in Private Equity and Value Creation: A Fund Manager’s Guide to Gender-smart Investing.
The next phase must put us well past the ‘why’’. We should even have gone past the ‘how’ and just be in a competitive loop on how to improve outcomes. But changing paradigms is a patient and complex business. It requires data, stories and plenty (plenty) of repetition. We need to emphasize the need for education and training. We need to work with the next generation of talent and decision makers to give them AGENCY – not just empowerment. This is about ‘future-proofing’ and going beyond sustainability towards more equitable outcomes for all. What will the next narrative of the field be about? After all, as Thomas Berry the theologian, wrote “we are in between stories now…The old story is no longer effective…yet we have not learned the new story.” What will be our story as gender-smart investors and a broader finance field… let’s write one that helps us meet society’s biggest challenges and creates prosperity for all.
This article is written during a delicate time of concern and love for our dear friend, Suzanne Biegel, who has been investing with a gender lens for the last 20 years and catalysed the gender finance field fearlessly. She is nothing short of a guru to us all in the gender-smart investing arena. Please read her story and visit
Heading for Change is a donor-advised fund (DAF) launched with a $1M endowment that makes catalytic investments and provide grants at intersection of gender and climate so as to advance long-term positive impact for women and girls, nonbinary individuals, and our planet.
Suzanne Biegel | © Amanda Clarke
XX Edge book - by Ruth Shaber and Patience Bell:
and HERE is a video introduction to the XX Edge book
The field of gender lens investing is growing. A new report by Wharton Social Impact and Catalyst at Large (Suzanne Biegel) analyzes data from over 200 funds and shares key numbers and trends: https://www.wharton.upenn.edu/story/new-gender-lens-investing-research-insights-from-project-sage-4-0
GenderSmart merged into 2X and here is the library for all intro material: https://www.2xglobal.org/new-to-gender-lens-investing
Criterion Institute has done the foundation and philosophical work for gender/power dynamics (gender-based violence etc) over the last decades: https://criterioninstitute.org
Here is the story of Suzanne Biegel who started GenderSmart and ran the Wharton SAGE study mentioned above: https://www.headingforchange.org/suzannes-legac