Basic knowledge of gender lens investment
According to 2X Global
Phạm Phương Linh introduced and edited
What? – Gender lens investing
Gender lens investment (GLI) has been around for more than a decade. It's about integrating gender factors into the investment process to achieve better financial and social outcomes. The investment process can incorporate one or more of these lenses. 2X Global has outlined five criteria and how to measure them in investments.
Investors who incorporate a gender lens recognize that financial systems benefit men and women, especially women of color, differently. At the same time, the active participation of financial systems is a tool to promote gender equality. The integration of these diverse "lenses" is a recent development in investing, driven by the advocacy of the JEDI (Justice, Equity, Diversity, and Inclusion) community.
*JEDI is a Justice, Equity, Diversity and Inclusion Community of Practice dedicated to advancing the equitable inclusion of gender, race and ethnicity in global investment decision-making. It contributes to increased demand and investment opportunities for diversity, facilitating a broader transition towards a more equitable and sustainable financial ecosystem.
Why – Reasons for choosing gender lens investment
Gender lens investment is not only meaningful to create social impact but also brings great financial benefits and minimizes macroeconomic risks.
- Positive macroeconomic data
- The European Investment Bank estimates that greater gender diversity in the workforce could lead to a potential 26% increase in annual global GDP and $160 trillion in human capital. This could also lead to improved productivity;
- Gender-diverse investment teams have net IRRs higher than 20% in global emerging markets;
- Cognitive diversity can make organizations up to 66% more productive.
- Benefits from having women in leadership and gender balance in the organization
- Over 10 years of investment, companies with female founders performed 63% better than companies with all-male founding teams;
- Only 12% of venture capital decision makers in the US are women. However, 69.2% of the best-performing funds in 2019 had female general partners (GPs);
- Publicly listed companies in Latin America with higher female representation deliver 44% higher ROI and 47% higher profit margins.
- Risks of not focusing on investing with a gender lens
- In a McKinsey survey of 1,000 companies in 12 countries, companies lacking diversity were 29% more likely to perform poorly;
- The cost of violence against women is 2% of global GDP, equivalent to 1.5 trillion USD;
- Investing public funds in child care and elder care services is a worthwhile investment and more effective in reducing public deficits and debt than austerity policies because it will promote employment, income, economic growth and promoting gender equality.
- Growth in private markets and venture capital (VC) funds
In private markets, gender-lens investing is defined by three distinct approaches: Access to capital, investing in female leadership, and investing in women-focused products and services.
According to data from Catalyst at Large and the Wharton Social Impact Initiative in 2021, there were 206 gender lens investment funds with a total capital raised of $6 billion, representing 49% growth compared to 138 funds in 2020.
About the field of gender finance
Gender finance is a relatively new field that examines the influence of gender on financial systems and how they can be used to promote gender equality. Gender finance is an ecosystem that includes:
- Accessing to financial services: explores why the gender capital access gap exists and how the right financial products and services can address the specific needs and challenges faced by women must face to face;
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Financial knowledge: improve women's financial understanding, providing them with tools and knowledge to manage finances effectively;
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Entrepreneurship: Gender Finance promotes investment in women-led businesses and provides them with the resources and support they need to succeed;
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Investment: integrating a gender lens into investment decisions, ensuring that investments create positive outcomes for both men and women;
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Social impact: measure and track the impact of the financial system on different genders, thereby promoting policies to close existing gender gaps.
In the global financial ecosystem, KisImpact & KisStartup focus on analysis from an investment perspective. Integrating a gender lens into investment decisions will create positive change both economically and socially. In particular, from the perspective of the financial sector, the goal is for more organizations and individuals to access capital and promote the development of this ecosystem.
